How does financial trading work? Recently, it seems that financial trading is becoming almost a trend and by now it is known that it is a great opportunity to earn money but you have to be careful.
In fact, not everything that is gold glitters: those who start trading without even knowing what it is risk losing money. Even more serious is the risk of losing money with scams that unfortunately are prevalent in online trading.
Don’t worry though. It is not at all difficult to learn financial trading (we will also report a complete and free guide) and you can avoid scams easily. The trick? Choose safe and reliable brokers such as as eToro or IQ Option.
How Financial Trading works
Financial trading is simple. The aim is to obtain a high profit by exploiting the variation in the prices of securities quoted on the financial markets.
We pay attention to its definition. We have not spoken of an increase in prices but only of the variation. How come? Because financial trading allows you to earn (if done well) in any market condition, not only when prices rise.
In short, the secret lies in the tool used to trade, CFDs. Acronym of Contract For Difference, it is easy to use and understand. A CFD has a price that is equal to that of the financial security you want to trade on.
So, thanks to CFDs you can make two basic transactions: buy or sell. Consequently, the purchase generates a profit in case the price of the security goes up, the short sale in case the price goes down. in detail, the short sale is a purely speculative operation, in conceptual terms is equivalent to selling something you have never bought to make a profit with the price going down. For more information, please see our CFD guide.
Advantages of CFD Contracts
In any case, let’s quickly summarize the advantages of using CFDs for financial trading:
- You earn in any market condition (positive or negative). The profit is proportional to the price difference.
- They are easy to use
- Usually, they do not charge fees and the best brokers are free of charge
- You can multiply profits with leverage.
Best brokers for Financial Trading
To trade CFDs, you need to use a broker. A financial broker is an intermediary who is in charge of managing a trading account and executing the operations required by the trader.
There are various types of brokers. We have already talked about CFD Brokers which are the ones that give the absolute best results, at least for beginners or those who want to trade with small amounts.
In fact, the choice of a broker is a very delicate process. Unfortunately, financial trading hides risks and pitfalls, such as suffering from trading scams (in recent years there have been many scams).
However, there is a safe way to protect yourself from scams and that is to trade exclusively with authorized and regulated brokers. These brokers, in fact, operate in compliance with the strict European regulations that protect investors and competent authorities carefully watch over them.
An authorized broker cannot cheat, even if it wants to. We have made a selection of the best brokers to do financial trading. To do so, not only have we chosen the safest and most reliable brokers, we have also taken special care in selecting only brokers that are easy to use.
eToro is probably one of the best financial trading brokers available today for beginners and those who want to invest very small amounts. In addition, eToro is not only simple and intuitive but also allows you to automatically copy all the trades of the best investors.
In practice, eToro has created a very powerful software system (called Copytrader) that allows you to find the best traders operating on the platform and copy all their trades automatically in real time.
The investors to copy can be selected based on significant parameters such as past profits and the level of risk associated with them.
Usually, beginners choose eToro not only because they can make good trades in the market right away, but also because they can learn to invest by watching what the best investors in the world are doing.You can register for free on eToro by clicking here.
Bullish and bearish financial trading
The trade can be bullish (if you bet in a rise of the quotations of the purchased Stock) or bearish (if you bet in a fall of the quotations of the Stock that has sold short).
Speculating upwards means to buy for example at 200 to resell, after a certain period of time, at 220 or 230. On the contrary, to speculate downwards means to short sell (without having) a Stock to repurchase it to lower prices.
I sell at 300 and buy back at 280 and earn based on the difference. When you sell short it is necessary to guarantee the operation the “margin”, a sum established by the intermediary that will serve to cover the operation in case it did not go well. In any case, to fully understand this mechanism is irrelevant. With the best brokers everything is very simple and automatic and you can then sell short by simply clicking a button.
Warning: a good trader should never be bullish or bearish per party taken. This is wrong, although unfortunately it is a rather common situation. In fact, you have to be bullish or bearish depending on market conditions.
There are various strategies of technical or fundamental analysis to make predictions about the price trend of a listed security. Technical analysis is based exclusively on the observation of charts. With a little experience you can get very good results. To learn more, see our technical analysis guide.
Fundamental analysis is based on the study of the economic fundamentals of a financial security. For example, in the case of a stock, it analyzes the balance sheet data of that company and the market outlook. For more information, see our guide to fundamental analysis.
Technical analysis and fundamental analysis are useless for those who use eToro: in this case simply choose the best investors to copy and they will then make predictions about the market!
Professional Financial Trading: How much can you earn?
How much does a financial trader earn? This is a very interesting and very common question which, unfortunately, does not have a valid answer. There are financial traders who earn a lot of money such as Warren Buffett who started from scratch and accumulated a huge financial wealth through trading.
On the other hand, there are those who earn absolutely nothing because for example they start trading using brokers who do not work or who cheat.
Those who work with serious and secure brokers have the opportunity to start earning money right away. Of course, they do not expect to get rich in 7 days. It is usually the scammers who make these promises and it is highly recommended to stay away from these scammers.
For those who want to become a good trader and start earning, there are two important starting points: reliable and secure brokers (the only ones who do not cheat) and a good guide to study from.
Finally, it is important that brokers offer the possibility to trade in demo mode (i.e. simulated) so that you can experience financial trading absolutely risk-free and go to the safe side when you start to invest real money.
Looking for books
To trade online you need preparation, knowledge of the markets and strategies.
There are many books that explain how to trade, to learn more you can read our guide to the best trading books.
It is essential to keep in mind that a book alone is worth nothing. It is best if it is written using simple language but contains the best strategies to earn money. If you do not immediately apply the concepts then studying a book on financial trading is useless.
Usually beginners can start with a good demo (all the brokers we have recommended offer free demos) to see if they understood correctly. The demo alone is not enough anyway: financial trading is not only about technique and strategy but also about psychology.
When you trade in demo there is no emotion, there is no fear of losing money and there is no greed. Only by trading with real money can you learn to master these emotions.
The great traders, in the end, are precisely those who know how to dominate themselves, not those who know who knows what strategy (which then strategies can be copied on eToro).
We conclude this paragraph on the best trading books remembering that the Investous ebook is one of the best trading books available today, it is completely free and does not waste time with theory: it is all practical, written in a language accessible to all. Click here to download it for free.
Professional financial trading
It is made with professional tools and a qualified approach. To earn money with financial trading you have to trade in a professional way. A beginner can earn money with financial trading but always acting in a qualified way and following rules.
First of all it is necessary to use professional trading platforms like eToro (click here).
Then invest in continuous training. Devote time and energy to financial trading: it is a daily commitment and involves sacrifice. It is necessary to select the sources of learning. Exclude financial forums. Read information on independent and authoritative websites. When you operate professionally, results come, always. Results do not come, however, without a minimum of preparation.
There are beginners who think they are earning without even knowing how the Stock Exchange works, which is why we always recommend starting by downloading this excellent free ebook that explains in detail how to do financial trading and earn.
The world of financial trading hides great opportunities to generate profits in the markets. The condition is to approach with seriousness and professionalism, essential elements for a good result.
In addition, good Financial Trading cannot ignore the use of a professional and regulated platform. The security of our funds must always come first!