The essence and differences of trading
Trading is active trading on the stock exchange in various financial instruments (stocks, currencies, futures, etc.) in order to make money on short-term price fluctuations.
Unlike long-term investing, where the goal is passive income over many years, a trader seeks to make money on price movements both up and down.
The period of holding a trading position varies from a few seconds to several weeks.
Trading requires constant investment of time searching for trading ideas and making transactions, which for many becomes a full-time job.
Technical analysis as the main tool
The main method of choosing assets in trading is technical analysis - studying price charts to predict their further movement.
For analysis, a candlestick chart is most often used, which shows the range of price movement for a certain period of time (timeframe).
A green candle means a rise in price over the period, a red one means a fall, and the “shadows” of the candle show the highs and lows during the selected time.
Key Concepts of Technical Analysis
Trend — the general direction of price movement, which can be upward, downward or sideways (flat).
Support and resistance levels - these are price zones, upon reaching which the direction of price movement is likely to change.
Indicators and oscillators (for example, moving averages, RSI, MACD) - additional graphical tools, which help determine the strength of a trend or find buy and sell signals.
Patterns and figures (e.g. head and shoulders, triangle, double top) are repeating combinations on a chart, foreshadowing a reversal or continuation of the current movement.
Implementation of a trading strategy
A typical analysis algorithm includes sequential trend determination, setting levels, adding indicators and searching for graphic figures.
Experienced traders recommend making a trade only when the pattern is fully formed and the price went beyond its boundaries in the expected direction.
For those who do not have time for independent analysis, there are social networks for investors (for example, “Pulse”) and auto-following strategies, where trades are made automatically based on the ideas of experienced market participants.
It is important to keep in mind that technical analysis forecasts are not 100% guaranteed, and trading always involves risk.