Tired of working the same old routine at your job? Well if you are then this article will serve you well. working is something we all must do at some point in life; however, only having one stream of income is quite tedious and insignificant in the regard of hoping to be financially free one day, So on the positive side, we here at NBT want to widen the path and help show you hard working people, how to work and make a little extra income on the side, that’s fun and will keep you from falling into boredom and depression.
Finding your Work to Play or study ratio is key to staying positive and lessening your risk of becoming resentful about your job.
1 The Foreign Exchange Market
The Forex Market is a global market for exchanging national currencies against each other. FX is similar to how stocks trade; however, one difference is that your trading a currency pair (2) rather than one contracts for options or 1 stock. If this is confusing, well keep reading you will understand soon.
How big is Forex?
FX markets exist as spot (cash) markets as well as derivatives, the fx market offers ( Forwards, Futures, Options, and currency swaps. One cool fact about this market, maybe that it trades over 5.3 billion daily, if that is liquid then I don’t know what else to say.
If you are just now dabbling your agile fingertips into trading, well brace up because Forex is no easy agenda, but with consistent dedication and learning you should be able to handle your ways through this large market; On the other hand, Some market participants use FX to hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, among several other reasons.
What about Risk?
Risk is a word that is not usually fun to think about; on the other hand, it is very important to understand how risk works in this market and what to do to minimize your losses while preserving your gains. Trading currencies are undoubtedly complex and risky, here is a list of what to do to stay afloat in the market.
7 Ways to LOWER RISK in Forex
- Keep your leverage low, ( leverage is a powerful tool in an investment )
- Set correct stop losses and take profits when you see them.
- Trader higher time-frames
- Look for a reason to not trade.
- Avoid trading around big economic announcements
- Trade markets with low correlation
- Set realistic goals!
2 Penny Stock Trading
Ok next up on the list, we bring you probably one of the most volatile and risky trading methods out their, but we have hope in you and if you research diligently while demo trading then you should be fine.
What are Penny Stocks?
They are low-priced shares that majority of traders are pumping up, and then selling once it hit its peak, That isn’t a very concrete definition so here is another one to give a better perspective. Small cap stocks are common shares of small public companies that trade for less than one dollar per share.
Pennies on the Dollar!
This type of trading is fun and can be quite successful; nevertheless, if you’re just tapping your toes in the world of trading, we here at NBT recommend learning and studying first while you demo trade on the side. The vast world of investors who trade on the over- the-the counter (OTC) markets, will likely lose money; on the other hand, investors buying from well-known companies on regulated major U.S stock exchanges will be at a stronger standing point of success, because these are no-nonsense companies, with proven business models.
Risks to Reward?
You should only invest in penny stocks with money your willing to lose or from funds, you can afford to lose, and should only tap the waters of low-priced shares once you have gained some knowledge beforehand. Brace up because this type of trading has large waves of potential volatility that are found in the investments trading at the lowest prices.
How to avoid losing trades
It’s pretty simple to avoid large losses in any market your trading whether it’s Forex, Options, Futures, or Crypto. Start by being patient and learning before you hop in the boat and even when you are about to trade, practice first on an exchange that allows you to trade fake money ( Paper Trading). Even though it may get boring or whatever your reason may be; On the other hand, we can confidently say you will be glad you did when you mess up on a trade and your account took a big loss, at least then your not losing because the account is trading live.
Market Tip: Buy What you Know!
The heading for this paragraph couldn’t be more accurate; even though there may be other stocks in the market that are flying high, thanks to the news, it typically is too late and you miss out on the building launch, too avoid this issue, Focus on the industries you either work in or have some experience in, If your a chef focus on culinary stocks, or if you’re a plumber, you might consider buying into energy stocks. In summary, avoid the hot stocks that everyone talks about, and focus on the companies you already know.
If you’re not confident in the types of businesses you want to invest in, then start by looking at companies that already have a proven business model and track record. Here is a quick list of good stocks to invest in ( Ford, Coke, Bank of America, JPM, and Apple ) Study the business, not the stock price. The best way to learn is by studying on websites like Ameritrade and also remembering to demo trade first.
3 The Derivatives Market
Another type of Trading method that is very liquid but can be very risky, if not properly trained is options trading. Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they choose not to, that is a short paragraph from Investopedia. Options are used by advanced traders or institutions to hedge their client’s accounts usually during a recession.
Why Trade The OP-Market?
Options unlike other instruments in the vast sea of markets, allows a large sum of leverage and liquidity; to begin with, The Chicago Board of Options Exchange (CBOE) is the largest exchange in the world, offering options on a wide variety of single stocks, ETFs and last but not least Indexes. This means that traders can form option strategies ranging from buying or selling a single option to very complex ones that involve multiple simultaneous option positions.
The following are basic option strategies to get you started. This will be a quick display list; however, in the future we will have a beginners guide for option trading.
Buying Calls ( Long Call)
- Are “bullish” or confident on a particular stock, ETF or index and want to limit the risk
- Want to utilize leverage to take advantage of rising prices
Buying Puts (Long Put)
- Are bearish on a particular stock, ETF or index, but want to take on less risk than with a short-selling strategy
- Want to utilize leverage to take advantage of falling prices
- Expect no change or a slight increase in the underlying’s price
- Are willing to limit upside potential in exchange for some downside protection
This is the preferred strategy for traders who:
- Own the underlying asset and want downside protection.
More Option Strategies from Investopedia!
- Covered call strategy or buy-write strategy: Stocks are bought, and the investor sells call options on the same stock. The number of shares you bought should be identical to the number of call options contracts you sold.
- Married Put Strategy: After buying a stock, the investor buys put options for an equivalent number of shares. The married put works like an insurance policy against short-term losses call options with a specific strike price. At the same time, you’ll sell the same number of call options at a higher strike price.
- Protective Collar Strategy: An investor buys an out-of-the-money put option, while at the same time writing an out-of-the-money call option for the same stock.
- Long Straddle Strategy: Investor buys a call option and a put option at the same time. Both options should have the same strike price and expiration date.
- Long Strangle Strategy: Investor buys an out-of-the-money call option and a put option at the same time. They have the same expiration date but they have different strike prices. The put strike price should be below the call strike price.
The Great OP-T Summary
Options offer great strategies for investors to make some pennies from trading underlying securities. There is a variety of complex strategies in the derivatives market; nevertheless, options have many different positions for anyone to learn and grow some experience. Basic positions for new traders include buying calls or puts and Selling covered calls or buying protective puts. There are great advantages to trading options rather than underlying assets, such as downside protection and leveraged returns, but there are also disadvantages like the requirement for upfront premium payment. The first step to trading options is to choose a broker.
But what if I am Broke?
Choosing a broker can be quite a tedious task, as they all look appealing its crucial for you to research and choose wisely. The main objectives you’re looking to avoid are, Hidden fees or really high commission fees that are charged every time you trade. Here are some good brokers for beginners!!
- Robinhood ( Easy to use platform, although transactions are slower)
- We Bull ( More advanced then robin hood but can be hard to use at first)
- TD Ameritrade ( Great Learning Center)
- Tasty Works ( For Option Traders )
- Babypips ( Offers great Forex Education program)
The Bottom Line
Trading is fun and dangerous, be mindful of what you’re doing in each trade, and look for reasons not to trade. Many people think its a get rich quick thing, but actually, it’s quite difficult and that’s why 90% lose in this market, understand how the game works, by first being patient to learn and study, maybe take classes, before jumping in this vast sea of trading. I wish all you traders a great time, and stick around because we will have more posts coming out soon!!!