Three investment sectors, Energy, Home Construction in the United States and Precious Metals are predicted to do very well in 2013. Last year, they performed moderately with gold hitting an all-time high in 2011 and nearing that high again in 2012. The 2008 recession has countries and traders all over the world still leery. Although the economy and job market has hinted toward a comeback, other factors continue to shake up the financial sector. Individual traders are turning more toward their own methods of making a profit rather than relying on the professional advice of a financial expert. The internet has greatly contributed to the independence of traders.
Advantages of Online Trading
Online trading is available to virtually anyone, while reducing transaction costs. Discount brokers on the internet can now provide trades at a low cost while simultaneously incorporating high functioning trading platforms. Clients who use the platforms in place of broker dealers, wipe out the high commissions and fees. Independent traders have a wealth of market research tools at their disposal, as well as using strategies like the professionals. A successful trader will fully comprehend the potential risks and returns of each market. They are consistent in identifying the proper strategy and market. There are many methods of trading, each having its own risk. New independent traders read books and watch workshops to learn the art of trading.
Approaches for Independent Investors
The three basic investment strategies are fundamental analysis, technical analysis and buy-and-hold-the-market. Fundamental analysis focuses on value, the future earnings of a company and the dividends it will pay out. Investors for this approach seek valuable stocks that are priced low because they believe the price will later increase. This is the approach used by Warren Buffet.
Technical analysis is a method of forecasting the direction of prices through the study of past market data, primarily price and volume but also taking into considerations like Elliottwave Patterns etc. This is the approach used by many traders including Robert Prechter and Ino’s Adam Hewison.
The buy-and-hold-the-market operates based off a diversified portfolio. Here, the investor identifies a comfortable risk and builds a portfolio based on that risk. The buy and hold theory is a benchmark because it is the only strategy that can surpass the market value over a lifetime.
Alternative Options
Although risky, a Contract for Difference, if followed correctly, can have a remarkable effect. It gives investors the power to trade on share price movements while on a contract that goes short for a maximum return. Selling shares is simple, and CFDs are often used to make a profit as the markets fall. Investors pay a deposit to cover losses, instead of actually purchasing physical shares. In Forex trading, investors trade in currency. Trading costs are low and investors go long or short on currency, giving themselves the ability to profit from the strength and weaknesses of the currency on the foreign exchange market. Open 24 hours a day, seven days a week, Forex has openings for all traders at all times.
Yet another option comes in the form of spread betting. These accounts are easy to open, and investors can start trading the same day. Thousands of financial instruments are used in spread betting, such as stock shares, bonds, options, currencies and commodities. The trade entry is the initial position in a specific price area. Trade entries are for buying and selling. For example, if a currency pair falls beyond expectations, but appears ready to reverse direction, an investor should get ready to buy. On the other hand, if a currency rises beyond expectations and becomes expensive, an investor should prepare to sell. Investors in spread betting have the option of stop loss in order to manage their investment capital, and keep losses at a minimum.
See Also:
- Who is Bob Prechter
- What is Technical Analysis?
- Who is Adam Hewison
- Non-Traditional View of the Markets
- 3 Rules that Govern Impulse Waves
Recommended By Amazon:
- The Mathematics of Money Management: Risk Analysis Techniques for Traders
- Risk-Opportunity Analysis
- Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)
- Trade Your Way to Financial Freedom <– This is the best book I’ve ever read on Risk Management ~ Tim McMahon, editor
About the author:
Brett Chatz was born in Johannesburg, Gauteng, South Africa. He attended the internationally accredited University of South Africa, where he completed the prestigious Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. In concert with the primary degree, he completed several Bachelor of Arts courses, most notably English poetry and literature. Nowadays Brett contributes informative essays for the globally renowned spread betting and CFD trading provider, InterTrader.com.
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