Welcome to the first episode in ourcomplete course on how to trade Forex! Hello, I'm David Jones from capital.
comand we thought it would be very useful for our clients and non clients (andviewers of our YouTube channel) to put together a complete course from start tofinish on how to trade Forex.
So whether you're a beginning trader or you've beentrading for a few years, I'm hoping there's gonna be something for everyonein this.
We're assuming no knowledge whatsoever, even though the focus is onForex, the foreign exchange markets, the principles we'll be talking about, wecan apply them broadly to all sorts of markets.
So even if your interest is inthe oil price or the Dow Jones, I think there will be something for everybody inthe contents of this course.
So we're gonna start off first of all justdefining exactly what do we mean by “trading”.
You know people talk abouttrading a lot but let's just define what we actually mean when we talk abouttrading financial markets.
So let's start right with the basics.
When we talk about trading what do we actually mean? Well traders are typicallylooking to profit from price changes in a market, whatever that market is, over ashort period of time and when we say a short period of time that can beanything from the next few seconds (maybe even shorter than that) up to a number ofweeks.
So it's a fairly broad time scale that we have there.
But I think anythingfrom, you know, the next couple of seconds up to maybe a couple of months we couldclassify as trading.
They may use a whole host of different methods.
They mightlook at technical analysis – looking at charts.
They look at fundamentals, possibly the effect that breaking news has.
Let's say interest rates, companyannouncements, political news, all of this can have in a market and also, you know, broader market sentiment, to help them make their buy or sell decisions.
When itcomes to trading, when it comes to financial markets, it probably does breakdown into two camps.
Trading and investing.
So how is tradingdifferent to investing.
I think the main difference here is the timeframe.
Investors are usually looking at holding their positions.
Let's say it's a sharefor months, at the very sort of shortest time frame, but often many years.
Whereas, whereas traders are not taking a multi-year view on a market.
They're beingmuch more short-term, whether there is the next few seconds, the next few days, the next few weeks.
I think the time frame is really the big obviousdifference here and also the way that these different camps interact withmarkets is going to be different.
The sort of products that they use.
Ifyou're an investor and you think the share price of Apple is going to riseover the next five years, you're probably just going to buy Apple shares.
But manytraders will use leverage to make their trading funds go further to magnify howmuch of a certain market they can buy.
So leverage or margin trading magnifies thepotential profit that can be made.
But of course with that hand in hand goes therisk of making greater losses.
Popular leveraged ways of trading includecontracts for difference – CFDs, futures and also spread betting.
Soyou can see if we split people broadly into investing and trading, time frame isreally the big difference here.
But now let's take a look at the sort of marketsthat people find suitable for trading, that lend themselves well to looking atthem from a short-term perspective.
So when it comes to trading what are thesort of markets that traders like to trade.
It's quite a broad brush here butlet's start off first of all: foreign exchange – incredibly popular market.
Sothe various currency markets.
For example the pound against thedollar, the euro against the dollar, the dollar against the Japanese yen.
Allthese different combinations.
So foreign exchange markets, very popular becausethey normally can be fairly volatile.
Understandably traders want a marketthat actually moves around.
And to try and profit.
And because theforeign exchange market sees such massive volumes during the day, the costof doing business, the cost of getting in and out, is relatively low compared toother markets.
Stock market, indices are always popular, not surprisingly becauseagain like foreign exchange stock market, indices such as that the US Dow Jones, the German DAX, the UK's FTSE 100, these can be volatile.
They can movearound and plenty of traders, perhaps come from an investing background, sothey're familiar with individual shares.
I think that's another reason that stockmarket indices tend to be quite popular traded markets.
Then we have commoditiesmarkets.
So the two main ones I've picked up on here – the price of gold and oil.
Oilagain in recent years has been an incredibly volatile market.
We've seenreally big swings either day to da, y week to week , month to month over all sorts oftime frames.
So commodities, when they start moving, you know, we can see somebig market swings.
So this is another reason that these sort of markets arepopular with individual traders.
Perhaps not as popular but still worthy ofmention – large company shares for example in the U.
, the tech stock Apple, here in the UK BP shares for example.
You know whichwill move as the oil price is moving around, so again some traders will focuson just trading individual shares.
They'll have their expertise in thatparticular market and that's a market they'll stick to, perhaps.
Rather thantrading these other different asset classes.
And finally, not as popular atthe time of recording as it was in the the end of 2017/the beginning of 2018but crypto currencies.
We had that massive run up in the likes of Bitcoin, ripple, ethereum in 2017.
And then that bubble bursting in 2018.
So there wasplenty of volatility back then.
Attracted lots of traders but with the volatilitydropping off in, sort of, recent months, I think traders are focusing on othermarkets.
At the beginning of the video we split people into two camps: investorsand traders but we can sub-divide traders.
there aredifferent categories of traders, so let's go through that and maybe you'll see anapproach that you think fits in with your own particular style.
So let's havea look at the different categories of traders out there.
So we've already splitpeople up to being investors and/or traders but we can also split tradersdown again, we can categorize them a bit further.
So let's just take a look: so daytrading.
day trading is typically in and out during the trading day and notholding any overnight position.
So the true day trader starts with effectivelya clean sheet every day.
So our day trader, he or she, is trying to capitaliseon market movements throughout the trading day.
But end the day what's knownas “flat”.
With no open positions and start again the next day.
So this is.
we knowit's the most short term form of trading that most of us will be familiar with.
The next timeframe up is swing trading where somebody holds a trade forprobably a few days to catch the next swing in the trend.
So again they arefairly short-term focused, not as short-term as the day trader but they'reseeing a market that's maybe gone up for a couple of weeks has sold off for threedays it starts going up again and they're looking to catch that next swingin the marke.
Position trading is probably where we start to overlap withthe idea of investing, you know.
A short term investor might look at a two orthree month position in the market.
A position trader is looking to hold aposition for weeks and maybe months.
So they're looking for a more substantialmove than a swing trader.
So that's the end of our first episode, really.
Justsetting the scene when we're talking about trading next time around we'regoing to delve deeper into the world of foreign exchange and look at exactly howcurrency trading works later in the series we'll be looking at differenttechnical analysis techniques, trading the news, looking at fundamentals andmanaging risk all of this sort of thing.
So to never miss out just make sureyou're subscribed to the channel by clicking the subscribe button down there.
If you click the alarm bell notification you get a push message every time weupload the next section of the course.
Of course to have access to our tradingplatform and track these markets in real time, to try out trading using a demoaccount or with real money – if you download our app for Android or iPhonefrom wherever you get your apps and go to our website capital.
com, you can findout more about the company and access our desktop trading platform.
But untilnext time around we'll wrap things up there if you have any questions orcomments please leave them in the messages down below I do read them alland I'll try and answer any questions down there.
But from me David Jones andcapital.
com – good luck with your trading!.