Unlike traditional investing, trading has a short term focus. The trader buys a stock not to hold for gradual appreciation, but for a quick turnaround.
What is Forex Trading, and How Does It Work?
It’s unlikely that you haven’t heard about forex trading. Forex trading has been booming exponentially over the past decade or two. Today, you’re likely to find advertisements for forex trading applications, courses, and similar things all over the internet. But that wasn’t always the case. Governments, banks, and financial institutions have been trading foreign currencies for a long time. However, forex trading wasn’t accessible for non-institutional traders for the longest time. But technological advancements and the internet have changed that.
The foreign exchange market is the most valuable and liquid financial market worldwide, dwarfing other financial markets like stocks, commodities, metals, etc. According to BIS, forex markets had a daily turnover of over $6.6 trillion in 2019.
Considering how valuable the forex market is, it’s no surprise that many people gravitate towards forex trading. However, before delving into forex trading, consider learning more about how forex trading works to ensure you don’t incur avoidable losses.
What is Forex Trading?
Forex is a portmanteau of foreign currency and exchange. Forex trading refers to buying, selling, and exchanging one currency for another. People often need foreign currencies for different reasons, including tourism, business, etc. Let’s assume you’re a US citizen vacationing in Greece. You’ll likely need Euros to buy goods and services while touring Greece. Likewise, if you’re dealing with a Chinese corporation, you might need to purchase Chinese Yuan to pay for their goods and services. Hence, exchanging foreign currencies is crucial for most individuals and businesses.
How Does Forex Trading Work?
Forex traders exchange foreign currencies to profit from price fluctuations or interest rate differentials. Typically, forex trading works through currency pairs. Forex traders buy and sell currency pairs to generate returns. So, what are currency pairs?
Currency pairs measure one currency’s value against another. Currencies have exchange rates that determine their terms and position against another currency. For instance, the Euro to US Dollar is currently trading at $1.12. That means if you wanted to purchase the 1 Euro on the forex market, you would need to pay $1.12 for it.
You’ll be interested to know over 170 currencies exist on the forex market. However, statistics show the seven most popular currency pairs account for approximately 68 percent of forex trading volume. Typically, the most popular currency pairs include the US dollar because of its ubiquity and global acceptance; and the Euro because of its collective strength stemming from the EU and EEA.
Forex has some distinct features that make it unique compared to other asset classes like stocks, indices, and commodities. Traders can profit from forex trading in two ways, including through exchange rate changes and interest rate differentials. Traders profiting from exchange rate differentials will purchase a currency with a higher exchange rate and short the currency with a lower exchange rate. A notable example of traders benefitting from exchange rate differentials is when they would short the Japanese Yen for the British Pound Sterling before the 2008 financial crisis. Currency exchange rates primarily vary based on the market forces of supply and demand.
Get Started in Forex Trading with Trading Mentor
Trading Mentor is one of the best online mentoring platforms around. The website numerous online trading training courses, making it the best trading platform for beginners.
If you’re looking for the perfect trading mentor to help you with your stock, forex, or crypto trades, consider checking out our website today.
Here’s Why It’s Important to Hire a Trading Mentor
Trading in the forex market is very challenging, especially for new people. If you don’t have the right guidance, tools, and understanding of the market you may not make as much profit for the time investment.
This is why you need help from some of the best forex trading mentors from Trading Mentor. forex trading can be an amazing career option got people who can make successful profits. It also provides for a passive way to earn income from home.
Let’s discuss some important reasons why you need an expert’s help before you start trading.
The best mentor for stock trading or forex trading will help you find opportunities that you need for trading with the best traders. Mentors have years of experience in the trading industry and can take full advantage of the market.
The online trading training courses at Trading Mentor will also help you understand weekly market shifts and trends. This will allow you to look for the best trading opportunities to capitalize on.
You can also become a part of a larger trading community where you can find people who’ll share engaging ideas about the market. All this information will prove profitable for your trading journey.
Putting Everything Together
The biggest challenge for a forex trader, in particular, is that you’ll have to think about trading strategies, money management, account management, and several other things. This can make trading appear overwhelming. However, there’s a faster route to successful forex trading—hiring the best forex mentors. A mentor will help you develop a strategic plan that can help you in various ways.
You can track trading progress, determine goals, make adjustments, and more along the way. Mentors also know how the intricate trading systems work and which brokers are the best for your trading conditions.
What’s more, mentors will help you become an effective trader by helping you understand the ins and outs of trading. However, you need to look for a reliable mentor that can help you become an independent and confident trader. Luckily, at Trading Mentor, we have several experienced people ready to teach you.
Shorter Learning Curve
Having someone save your money by helping you define goals and correcting your trading mistakes can be priceless especially if you are new to trading. To learn how to become a successful trader in the market, you need dedication, time, effort, and high-quality education.
Most people don’t get the time to study forex trading or develop techniques of their own. A mentor can significantly reduce the time you need to understand the trading of different currencies. They will also help you realize the mistakes you are making and how they are affecting your trading success.
To trade like the best, you need to learn to trade with the best. Learning anything from an experienced individual such as a trading mentor will give you the head start you need to start a trading career.
If you’re looking for an online mentoring platform, for diverse trading market knowledge, Trading Mentor can help. We offer a vast range of some of the best online trading training courses where you can learn several skills directly from the experts. Alternatively, our platform also welcomes new mentors wanting to share their insights about the different trading markets. Contact us today for more information about our online mentors.
Major Historical Events and The Beginning of The Stock Market
The stock market may feel complicated and vague to operate in. This is especially true when you consider how stock trading for beginners may not work out in their favor. This is why it’s recommended that you study a few online trading training courses before stepping into the market.
Trading mentors can help you identify the best trade opportunities, which can significantly increase your profitability as a trader and reduce losses. But before you learn to trade stocks, it’s important to know where it all started to realize the market’s significance and growth.
Let’s discuss everything important about the stock market, its origin, and memorable historical events that made it the market we know today.
The Idea of The Stock Market
The stock exchange was developed to be a digital or physical space where traders invest in shares or stocks of publicly traded companies. The pieces of every share are driven by supply and demand. This means that the more people buy these shares, the higher the price for those shares.
On the contrary, the less a share is sold, its price will also be less. Today, stock markets are in the majority of the countries across the globe, but the market first emerged in Amsterdam during the 17th century.
Major Historical Events in Brief
Belgium, which used to be called Antwerp became the center of international trade back in the late 1400s. Merchants would come here to buy the goods anticipating a price spike to earn profits. Later in 1611, the very first modern stock trading system was developed in Amsterdam.
The very first publicly-traded company stock was from the Dutch East India Company. It stayed public for several years as the only company with exchange and trading activities. Afterward, in 1700 a group of merchants signed a Buttonwood Tree Agreement where the men would buy and sell bonds and stocks daily, which came from the NYSE. At the beginning of 1790, Philadelphia Stock Exchange was formed, which helped the development of the USA’s financial industries and its expansion in the west.
The Dow Jones Industrial Average was created in 1896 and initially consisted of 12 components that were industrial organizations. The US stock market crashed after an entire decade of the “Roaring 20s” when the prices were inflated because of leveraging in 1929. Later in 1941, S&P was introduced. However, trading began on the US stock exchange in 1971 with the introduction of Nasdaq.
The First Stocks
Trading goods can date back to ancient civilizations. In the earliest times, businesses combined finances to take a ship across the sea and reach other continents or countries. Individuals or trading groups usually executed the transactions.
During the Middle Ages, the merchants would assemble in town to exchange goods from across the globe. What’s more, as the merchants were from various countries, establishing a money exchange became necessary.
Belgium or Antwerp at the time became the international trading center, and merchants would buy goods at certain prices, expecting them to rise. Anyone who required funds would borrow them from wealthy merchants at high rates. The merchants would also sell bonds that were backed by interest rates.
As a new trader, are you interested in learning advanced concepts, including historical analysis of the stock markets? Online stock market courses for beginners at Trading Mentor can help you out. Learning through a professional trading mentorship program will eventually help you make more profitable decisions and realize trading opportunities effectively.
The World’s First Stock Market
What started in Antwerp was soon innovated and improved in Amsterdam in 1611 when the Dutch East India Company began to trade their stocks publicly. The company did this for raising capital and decided to pay dividends on their stocks to every investor. For several years, this was the only company publicly traded on Amsterdam’s stock exchange.
Other companies also took a similar approach, and investors started to buy even more stocks. However, some investors were blinded by the idea of dividends and didn’t research the company they were investing in. As a result, in 1720, the investors started to sell all their shares impulsively. As no one was buying any stocks or shares, the market crashed.
Another worth mentioning scandal involves England after the South Sea Bubble. Even when the market crashed and the investors were concerned, the idea of trading stocks was already established for the future.
The US Stock Market
While the first stock market was started in Amsterdam, the US incorporated the idea of stock markets in the late 1700s. This happened when the group of merchants developed the Buttonwood Tree Agreement. Under this agreement, the merchants would meet every day to sell and purchase stocks which ultimately became the origin of the NYSE.
The Buttonwood merchants were considered the creators of the biggest stock exchange in America, the Philadelphia Stock Exchange. This was the US’s first-ever stock exchange that was founded in 1790 and had a major impact on the development of financial institutions throughout the US.
Trading began in 1971 on another stock exchange in America called Nasdaq. Later in 1992, Nasdaq was merged with the International Stock Exchange which was based in London. This merger also became the world’s first intercontinental securities market.
While the NYSE was a physical stock exchange, Nasdaq had the option to sell and purchase stocks through a network of computers. What’s more, the NYSE and Nasdaq were also able to buy and sell stocks on the American Stock Exchange or stock exchanges present in other regions. These regions include San Francisco, Boston, and Philadelphia.
Further Developments in The US Stock Market
The Buttonwood merchants visited the merchants in Philadelphia to mimic a similar exchange model. This created the New York Stock and Exchange Board in 1817.
All the members had a defined dress code and had to earn their seats in the exchange. They also had to pay a fee of $25, which was raised to $100 in 1837. Following the events of the Great Fire in 1835, which wiped out about 700 buildings in the Lower Manhattan area, Wall Street incurred significant property losses.
However, Samuel Morse initiated a telegraph which allowed traders to remotely communicate with each other. Later in 1903, the NYSE opened its doors to several hundreds of stocks that were kept safe in underground vaults.
The stock market came back on its feet and grew about 50% high in 1928, even with the indications of an economic crisis. However, it dropped by 11% in 1929 due to the event called Black Thursday. This made traders panic selling the stocks, which caused a market crash and caused the Great Depression.
Ever since then, the NYSE has experienced various crashes, including the subprime mortgage crash of 2008. However, it’s important to realize that the foundation of the NYSE was established just by some trade merchants centuries ago. All the regulators, traders, and companies have heavily contributed to making them famous globally.
The NYSE is the largest stock market right now. The stock trades range from international to domestic levels. These also include exchanges with the Tokyo stock exchange and the London stock exchange. Some other prominent stock exchange markets are situated in South Korea, France, Germany, Canada, India, and China.
Stock Market Indexes
When studying the stock market, you may have heard about indexes named S&P 500 and Dow Jones Industrial Average. The two indexes are the most popular benchmarks that determine the performance of the whole economy or the market.
To best understand how these indexes can work to your benefit, especially as a beginner trader, you may want to study these. Trading Mentor’s stock trading courses for beginners will help you understand these indexes.
The platform’s best stock and forex trading mentors will guide you through every step of the trading process, minimizing trade risks and increasing your understanding of the financial markets. This will help you gain experience and make profitable decisions independently.
Charles Dow and Edward Jones came up with the Dow Jones Industrial Average back in 1896. This index included oil, tobacco, sugar, railroad operators, and gas companies. The stocks with a higher price per share influenced the index more than lower-priced stocks. The index was designed to serve as a representation of the economy.
Nowadays, several other industries are also included in this index, including consumer companies, financial companies, technology, healthcare, and more. General Electric was one of the original members of Dow. Proctor & Gamble was added to the index in 1932, which is in the benchmark to date.
On the other hand, the S&P 500 was developed by Henry Barnum Poor’s company in 1923. The index began tracking about 90 stocks back in 1926. However, the S&P was found as a result of the company’s merger Standard Statistics.
The S&P 500 is more of a weighted-cap weighted index. This means that if the company’s market value is greater, its influence is greater. The market cap and market value will be calculated by multiplying the price per share by the total outstanding shares. Both the S&P 500 and Russell 2000 have become major indicators for traders to invest in stocks even more than the Dow Jones Industrial Average.
Stock Market Cycles
Stock markets can fluctuate on any given day, and the US market has gone through major shifts in its history. The market has gone through significant movements that expanded and affected the market over days or even years.
If you want to learn more about how stock market cycles work, professional online stock market investment courses can help you out. Online platforms like Trading Mentor will help you learn the ins and outs of online trading for beginners so that you can thrive in the financial market and enjoy greater returns.
If investing in stocks doesn’t interest you, the platform also provides professional forex mentors online that will help you create strong trading foundations. You’ll be able to learn how trading for beginners works with highly experienced and skilled mentors.
The trading cycles for a stock market include accumulation, mark-up, distribution, and mark-down phase.
The first phase occurs when the market prices are low and traders start purchasing the stocks in greater quantities. The second phase is the mark-up where buyers will further increase the prices of the stocks as more and more buyers start purchasing them.
The distribution phase creates a mixed sentiment among the buyers and in the mark-down phase, the pieces will fall.
Over the centuries until the modern-day, markets that exist continuously evolve, and exchanges never stop. Nowadays, traders and retail investors can purchase stocks and shares for companies that can be traded publicly through a stockbroker. The shares can also hold bundles of diverse stocks rather than shares of a single company.
Starting your stock trading journey may seem challenging, but anyone can make profitable decisions with the proper knowledge and guidance. Trading Mentor is an online mentoring platform that offers forex and stock market investment courses to help you gear up and enter the overwhelming trading market.
The platform provides some of the best mentors for stock trading and forex trading from across the globe based on ratings, location, prices, and experience. What’s more, they also offer free information in the form of videos and articles to traders who are looking to self-study. If you are a trading mentor looking to teach beginners or a trader wanting to start your trading career, contact Trading Mentor today to get started.