Would you like to work in the financial market as a trader, but don’t know how to trade? So take a look in this text, which I will start a series of articles on the life of a trader and technical analysis. Let’s start from the basic 👌For everyone who is a beginner in this market!
What is trading?
Trading means “to trade”. It is used for the practice of making investments in the short and medium term in the stock and cryptocurrency markets. Trading makes it possible to return in a few weeks, days and even hours. However, it is a very risky form of investment, as it involves volatile assets in variable money.
That is, if it is variable money, it means that you cannot guarantee how much you will profit, nor will you obtain profit or loss. So it is a dangerous market, which requires cold blood and a lot of, a lot of knowledge and dedication.
What does the trader do?
The trader is the professional who makes these exchanges, that is, trading. But what does the trader trade? Generally, this professional analyzes the financial market, mainly stocks and cryptocurrencies. Briefly, we can say that the trader exchanges:
- Stock: example: to exchange US $ 8,20 for a Sigma Labs INC (SGLB/USD) and vice versa;
- Forex: where you exchange fiduciary currency for another, how to exchange R $ 5.70 for US $ 1.00 and vice versa;
- Cryptocurrencies: where fiduciary currency is exchanged for a crypto-asset, such as US$ 55.000 for 1 BTC or even crypto for crypto, such as exchanging 1 ADA for 0.004 BNB.
Among so many other opportunities, such as futures markets, contracts, mini dollar and etc. Then, the trader will make an analysis of a specific stock or active crypto and draw its conclusion whether it is worth investing in that product or not. To draw this conclusion, the trader does two types of analysis:
- Fundamental analysis;
- Technical analysis.
What is fundamental investment analysis
Fundamental analysis is an analysis based on news and feelings about an asset. For example, a national airline announces the acquisition of another, larger, international airline. What is the feeling that will be aroused? “Wow! Is the national company buying that big one? Damn it! They’re really expanding, huh ?! They’re going to grow!“.
This feeling of “they will grow more” causes investors to buy the shares of that company today, so that after the company grows and the value of the company increases, the value of its shares will consequently increase. This way, those who bought the shares in the past, will be able to sell them now more expensive than in the purchase, pocketing the profits.
But this can happen suddenly, too, for example what happened to Petrobras’ actions recently, after the announcement by the Brazilian federal government to appoint a military man with no training in the area, to preside over the state company. In just two days after the announcement, Petrobras’ shares fell 25%. An estimated loss of R $ 100 billion in market value is estimated! 😱
Or, citing yet another good example of fundamental analysis in the crypto world, was when Elon Musk tweeted about Bitcoin and Dogecoin. This made everyone invest in both cryptocurrencies, taking prices to the moon!
Other types of fundamental analysis to learn how to trade
However, it is not just the news that is taken into account, the potential and credibility of the company as well! Bitcoin is an example of this and here on the website, we have posted two articles that are taken into account as fundamental analysis:
This type of analysis is usually done for long-term investments and we see more investors than traders in this market (although the trader is also an investor, but not every investor is a trader).
How to trade using technical analysis?
Technical analysis is an analysis based on the behavior of investors and traders. To do this type of analysis, we use much more logical reasoning and patterns than “feelings”. This is where that candlestick chart comes in, or as it is called: candlestick, which you can familiarize yourself with below:
Technical analysis does not show what will happen to the price of a particular asset, but it can give you a good idea! This is because the candlestick chart is nothing more than a record of the behavior of people working in this market. And according to this record and comparisons with older patterns, it is possible to predict the next movements of the graph.
But it’s just a notion, you can’t always get it right! There is no way to guarantee 100% assertiveness, as we only analyze a certain drawing on the graph and we think: “Look, the last time that (pattern) drawing appeared on this asset in this way, the price fell, so it is likely that same thing now! “.
FIRST ALERT 🚨
So here is an alert for you: people / companies that GUARANTEE a return of so many % per day or per month in the variable income market, such as stocks and mainly cryptocurrencies, IS SCAM! Probably a pyramid! Because there is no way to be sure, much less guarantee gains! There will always be losses, just the trader managing his risks! YOU CANNOT GUARANTEE GAINS IN THE CRYPTO MARKET!
Due to these earlier behaviors, analysts were able to set some patterns. And these patterns are those designs that are repeated periodically in candlestick, indicating that something will happen with the price of that asset. And from these behavior patterns, it is possible to develop and use indicators to help us look at the graphs.
Difference between graphical analysis and technical analysis
Technical analysis takes into account indicators, indexes and graphs to trade, and not news, as I explained above in the fundamental analysis. In fact, one thing we’ll talk about later, about Dow and Elliott Theory, is that prices and charts already absorb this news, but that’s for another text.
The graphical analysis, on the other hand, will take into account the graph itself, which can be lines, bars, candles, among others and the elements related to the graph, such as trends and behavior patterns. These patterns, these are the drawings that I mentioned in the previous texts:
Ascendant triangle, which I explain in: “Bitcoin (BTC) price analysis. $ 60k by Sunday?“
Bullish pivot, which I show the concept and how to identify one in: “Bitcoin (BTC) price analysis today, 07/03/21! Bulls forcing a pivot!“
Shoulder, head and shoulder, which I showed the double formation in this Bitcoin analysis here.
How to do trading in practice?
To learn how to trade, you need to know how to read a candlestick chart and understand all the psychology behind this type of investment. So here on the website we are going to publish a sequence of texts explaining the technical analysis, so that you learn to become a trader, even if you don’t know anything about it – yet!
As I post the texts here, I will link in this article, so you can learn step by step, ok? And if any links are missing here in this text, just go here in the column next to 👉 in the “trading” category and keep track of the posts, starting from the bottom up, ok?
To become a trader, you will need to know and have already done everything in this article here: “5 steps to start investing in Bitcoin – 2021“. After you have done all of these steps in this article, then it’s time to move on to the next few texts teaching you about trading! And for any questions, you can find me here in the comments or on the social networks below 👇
A virtual smack ❤