What is Trading All About?
There is a big difference between the trader's mentality and the investor’s. Trading and investing are two dramatically different things, yet they have a common goal – the accumulation of profits. While they are different, one is not better or worse than the other. They are merely different. Typically, we consider trading as the method to achieve current income, while investing is designed to develop long-term wealth or assets.
A trader is very much like a merchant. We attempt to buy inventory, stocks in this particular case, at a low price and then advertise them for sale at a higher price. Sometimes the trader buys poor inventory – it is not wanted or is possibly even damaged – forcing the trader to turn the inventory over quickly for a loss. This is just like your local grocery store. They buy bananas, advertise them and, hopefully, the customers come in and buy up all the bananas. The store makes a tidy profit and they try it again.
Sometimes the bananas are spoiling and the store must sell them very fast to save some of their investment. They place them on discount and move as many as they can, trying to constantly cut their losses.
In that last sentence, we find the key to trading – merchant or trader, profitability lies in “trying to constantly cut their losses.” As a beginning trader (or even as an old pro), you must adopt this concept if you wish to be successful. Learning “how not to lose” is much more important than learning how to make money.
Online Trading Academy understands this risk management approach to the markets and it is our hope that the following information will enable you to find and use decent "decision support" tools, guide you to consistent profits, and help you to understand the tremendous importance of risk management and capital preservation. Any endeavor in the markets is a high-risk activity. You can lose all of your risk capital and more if you are not properly educated and constantly vigilant. Again, we point out that the information offered here, while very valuable, must be considered only the beginning. Formal education, practice, experience and continuous observation of the ever-changing financial world are the starting line. Trading is a lifetime of learning.