Buy or sell assets on financial markets, with the aim of generating profits”; This could be a simple and clear definition of Trading activity.
If financial gains embody the final objective common to all Traders, they represent the last layer of a pyramid made up of multiple good practices.
Training, choice of strategy, risk management and psychology are all essential assets for a profitable Trader to generate real gains on the financial markets!
WARNING
Trading is only suitable for informed customers capable of understanding the functioning of complex financial products (Futures, Options, CFDs, etc.) and of supporting high risks, including losses greater than deposits.
Understanding Trading
Unlike traditional trading (which can be seen in cult finance films such as Wall Street ) carried out on physical markets or over the phone, online trading offers fast and flexible access to global financial markets.
It involves speculating on the value of assets, such as stocks, currencies, commodities, and indices. Traders can buy low and sell higher, or vice versa via short selling.
Online trading platforms , such as ProRealTime or MetaTrader, offer intuitive user interfaces, analysis tools , and seamless access to multiple markets.
The main markets for trading online include:
- The currency market (Forex)
It is the largest financial market on the planet. The average daily trading volume exceeds 6 trillion dollars, according to the BIS (Bank for International Settlements) . - The stock market
It allows you to buy and sell shares of listed companies. - The raw materials market
This includes gold, oil, and many other natural resources. - Stock market indices
This includes in particular the S&P 500 or the NASDAQ; the latter reflect the performance of the most powerful listed companies.
Traders use specific jargon:
- Pip
This is the smallest unit of movement of a currency pair in Forex, usually equal to 0.0001. - Spread
This is the difference between the buying and selling price of an asset. - Margin
This is the amount needed to open a Trading position. It represents a fraction of the total cost of the position. - Leverage
It allows you to control a large position with relatively little capital, and amplifies both profits and losses.
Finally, let’s look at two examples of winning trades made in the financial markets.
On Forex first of all, let’s imagine a purchase of 100,000 EUR/USD at 1.1200, then a sale at 1.1250. The profit made is then 50 pips.
Finally, on the stock market, imagine buying 10 shares at $100, then selling at $110. The profit made is then $100.
Choosing your Trading Strategy
Choosing your Trading strategy is a fundamental step for any Trader. Three approaches are used by many investors: Day Trading, Swing Trading, and Scalping.
Each has its specific characteristics, advantages and disadvantages, adapted to different trading styles and objectives:
- Day Trading
This strategy involves buying and selling financial assets during the same day. Traders thus benefit from small market fluctuations. It requires constant attention and great responsiveness. The main advantage of this strategy is not being exposed to the risks of market movements overnight. However, it is time-consuming and requires rapid analysis capabilities. - Swing Trading
This approach focuses on longer-term trends, lasting a few days to several weeks. Swing Traders seek to profit from “swings,” or market fluctuations. This strategy requires less time than Day Trading, but requires a thorough understanding of market trends. - Scalping
Scalping is a very short-term trading method, where positions are held for only a few minutes or even seconds. Scalpers make many small profits from minimal price movements.
This technique requires intense concentration and the ability to act quickly. Although potentially lucrative, it is also risky and relatively stressful.
| Strategy | Temporary horizon | Benefits | Disadvantages |
| Day Trading | Short (day) | No risk associated with the night market Quick profits | Demand for time Relatively high risk |
| Swing Trading | Medium (days to weeks) | Less time in front of the screen Profits on trends | Requires solid market analysis Risk linked to nightly fluctuations |
| Scalping | Very short (minutes) | Multiple profit opportunities Speed | Very risky and stressful Requires extreme reactivity |
The role of psychology
In Trading, discipline and management of emotions are essential to make rational decisions and avoid costly mistakes.
Discipline refers to the ability to follow a structured Trading plan, without being influenced by impulses or emotions.
Effective emotion management, on the other hand, involves remaining calm in the face of market fluctuations and resisting the temptation to make hasty decisions out of fear or greed.
So, to avoid the psychological traps linked to Trading, it is better:
- Establish a Clear Trading Plan
Defining clear rules for entry, exit and risk management of each trade helps minimize impulsive decisions. - Keeping Realistic Expectations
Understanding that Trading involves risk and that it is impossible to win on every trade helps maintain a reasonable perspective. - Be patient
Waiting for the right opportunities instead of forcing trades can significantly improve results. - Keep a Trading Journal
Documenting each trade and including reasons for entering and exiting a position, helps analyze mistakes and successes for continuous learning. - Recognize and Accept Losses
Accepting losses as an inevitable part of trading helps avoid disastrous emotional decisions such as “revenge against the market.” - Train yourself and stay informed
Continuous education on the markets via one of the best current Trading training courses is a valuable help to improve and remain objective in relation to practice.
Building an Effective Trading Plan
A Trading plan serves as a roadmap for the Trader. It provides structure and discipline, essential for avoiding impulsive and emotional decisions.
To write a Trading plan, start by clearly defining your financial objectives.
These objectives must be “SMART”, that is to say:
- Specific S
- Measurable
- Achievable
- Realistic
- T emporally defined
Think about your time horizon, your return expectations and your risk tolerance.
Next, assess your risk profile. This involves understanding your ability to tolerate market fluctuations and how comfortable you are with the possibility of losses.
Example of a Trading plan:
| Element | Description |
| Financial goal | Increase capital by 20% over 1 year |
| Risk profile | Moderate, willing to risk 2% of capital per trade |
| Trading Strategy | Day Trading on Major Currency Pairs |
| Entry criteria | Buy/sell signals based on technical indicators (like moving averages ) |
| Exit criteria | Profit of 10 pips or stop-loss of 5 pips |
| Risk management | Do not risk more than 2% of capital on a single trade |
| Assessment | Monthly review of the plan and adjustment if necessary |
Risk management: key to profitable trading
Risk management involves implementing strategies to protect capital, maximize profits and minimize losses.
With this in mind, stop loss and take profit orders are two essential tools:
- Stop loss
This is an order placed to sell an asset when it reaches a certain price, so as to limit potential losses. For example, if you buy a stock at €100, you can place a stop loss order at €95 to limit your losses to €5 per share if the price falls. - Take profit
It is a set order to sell an asset when its price reaches a specific level, so as to ensure a profit. If, in the same case, you set a take profit at €110, the sale will be automatically triggered at this price and your gain of €10 per share will thus be secured.
Diversification is another key risk management strategy. It consists of spreading investments across different assets, sectors or markets to reduce overall risk.
If you don’t place “all your eggs in one basket”, you mechanically mitigate the impact of adverse movements on a single investment.
For example, investing in stocks, bonds, and commodities can protect you against fluctuations specific to a single market.
Best Practices from Successful Traders
Continuing education is crucial in Trading. Markets are constantly evolving, and staying up to date with the latest trends, tools and strategies is essential.
Quality resources can be found in the best trading books , online courses, webinars, and seminars. Specialized platforms such as Investopedia , Bloomberg , and the CFA Institute also offer valuable and reliable information.
Identify and avoid scams
The world of Trading is unfortunately also affected by scams. It is essential to be wary of promises of quick and easy gains. Guaranteed returns, pressure to invest quickly, lack of transparency… So many signals that should alert you!
Always seek independent reviews and testimonials before investing in any platform.
Likewise, familiarizing yourself with local and international trading regulations is important. Organizations like the Securities and Exchange Commission (SEC) in the United States or the Autorité des marchés financiers (AMF) in France protect investors and offer resources to identify the most reliable companies.
Build a network
Building a true Trading Network provides support, guidance and valuable insight. Participating in specialized forums, social media groups or local investment clubs can help share experiences and strategies.
Exchanging information with other Traders (for example through Social Trading available on many platforms today) allows you to discover new techniques and avoid common mistakes.
Making money through Trading requires more than just knowledge of the financial markets.
Choosing a suitable strategy, taking risk management into account, controlling your emotions and building an effective trading plan are all crucial steps to succeed as a beginner investor .