Should one have a significant amount before they can start trading? We have provided you all the answers you need to know.
In recent years, trading and buying securities have become popular worldwide, from Nigeria and South Africa to Vietnam and China. Today, significant funds are not required to work on the exchange — it is enough to have an Internet-connected device. But what about money? Should one have a significant amount to start trading? Is it possible to begin without it at all? Let us figure this out.
1 Can a Beginner Make Money on the Exchange?
A beginner can make money on the stock exchange. However, it is worth realizing that Forex trading is not a game. To start making money on the stock exchange, a beginner needs to learn the art of trading, understanding the laws of the market, master technical and fundamental analysis. And even after acquiring all the necessary skills, it will not be easy for many to make money on the stock exchange since one needs to have a certain mindset for this type of activity.
Great success in the investment business is achieved just by those who study seriously and analyse the market for trading. Finding out whether it is possible to make money on the exchange, you should possess the following qualities:
- ability to analyse;
These character traits cannot be learned from books, so not everyone who knows a lot can make money in the market.
2 Ways to Make a Profit on Stock Exchanges
There are two main ways to make money on the stock exchange, i.e., trading and investing. As such, there is no border between them, it is too blurred. Most experts agree that trading is about short-term and medium-term deals within a day or week, while investments imply a longer-term approach. Another group of experts believes that investments are aimed more at passive income (dividends), and not at the resale of the asset.
The trader's task is to get a few per cent in a few minutes, hours, or a couple of days, and then exit the deal. When investing money for a short time, you need to have a trading strategy. The volatility of an asset is of decisive importance for a trader because they earn on fluctuations, and the stronger they are, the more earnings on the stock exchange.
How traders work
In their daily activities, speculators use technical analysis of prices using various methods (patterns, channels, levels, waves, etc.). The second option to make money on the stock exchange is to track news and market reactions to them. Unlike investors, traders try to take a quick profit from the release of important news, and not evaluate it in terms of the long-term attractiveness of an asset.
For them, it is crucial to select a reliable broker. For instance, those who have opted for the ForexTime MetaTrader 4 broker in Nigeria
can utilize top trading platforms and, even more importantly, make use of various educational materials provided by the broker.
Unlike traders, investors are focused on long-term returns. The longer the asset makes a profit, the better. As a rule, the term of holding a position takes from 1 to 10 years, but it is not the limit.
How investors work
In their activities, investors use the analysis of key indicators of companies (growth in profits, expenses, etc.), in other words, fundamental analysis in long-term realities. To buy an asset at a better price, an investor can use the techniques of technical analysis to identify average or better prices, but it is usually overlooked. Thus, investors are more likely to buy a stake in a business than a stock. They expect to receive dividends and higher prices, which will ultimately yield substantial profits over the long term.
Long-term strategies are less prone to high risks. Therefore, based on the results of a particular year, investors often receive a minimum profit. On average, you can earn about 15-50% per annum on the stock market. It is worth noting that investors use much larger amounts than traders, so the risks of investors should be lower.
How Much a Beginner Can Earn on the Exchange
Doubts about whether it is realistic to make money on the exchange on the Internet have been dispelled. However, how much income can a novice trader expect? Under good circumstances, a novice investor can earn about 20-50% in the stock market in the first year (experienced ones can make a profit in the region of 100% per annum or more).
However, several conditions must be met for this:
- continuous training;
- trading predisposition;
- the presence of strict discipline in compliance with risk management and analytics.
As you can see, money is not an obligatory condition to be met to start trading. There are other crucial aspects a beginner should pay attention to. While trading can be started with a minimum investment.