The foreign exchange (forex) market is the most liquid financial market in the world, with over $7 trillion traded daily. Despite its enormous size and accessibility, forex trading can be intimidating, especially for beginners. Price movements are fast, analytical tools can be complex, and decisions often need to be made in real time.
That’s where forex signals come in. If you’ve been wondering what forex signals are or how trading signals work, this guide offers a clear explanation, complete with examples and practical advice for UK-based traders.
Forex signals are trade alerts that suggest when to buy or sell a specific currency pair. These signals are generated either by human analysts or automated systems based on technical or fundamental analysis.
A standard forex signal includes:
Forex signals serve as decision-making tools, helping traders respond quickly to market opportunities. While they do not guarantee profits, they provide structure and reduce the emotional component of trading.
More broadly, trading signals refer to any indicator or alert suggesting a potential buy or sell opportunity. These can apply to various asset classes, including equities, ETFs, commodities, and cryptocurrencies.
Forex signals are particularly valuable due to the 24/5 nature of the currency markets and their high volatility. Timely alerts allow traders to act more efficiently, especially those who cannot monitor charts continuously.
There are several types of forex signals, each with advantages and best-use scenarios depending on your trading style and experience level.
Manual signals are generated by professional analysts who study price charts, economic events, and technical indicators such as:
Automated signals are generated by algorithms or trading bots that scan the market and issue alerts based on predefined criteria. Manual signals offer human judgement and adaptability, while automated ones provide speed, consistency, and scalability.
Free signals are widely available online but often vary in quality and may lack clear risk management guidelines.
Paid signals are typically offered by professional providers and include:
UK traders are strongly advised to use providers regulated by the Financial Conduct Authority (FCA).
Example: If the Bank of England raises interest rates, a signal may recommend buying GBP in anticipation of currency strength.
Forex signals can be delivered through various channels, including:
Many UK traders prefer Telegram due to its speed and interactive features.
These two methods are often confused:
Copy trading is more passive, while signal-based trading offers greater control and learning potential.
The forex signal industry is largely unregulated, so caution is essential. In the UK, always choose FCA-authorised providers or those partnered with FCA-regulated brokers.
Key features to look for:
Use independent reviews and trading forums to compare services before subscribing.
To use forex signals effectively:
Signals should enhance your decision-making, not replace it.
Signals can help those new to trading by offering examples of how professionals structure trades. For instance, a beginner might learn how a typical EUR/USD signal sets stop-loss levels based on historical volatility.
Those who don’t have time to analyse charts throughout the day can use signals to stay active in the market without full-time monitoring.
More experienced traders often use signals to confirm their own analysis, for example, entering a trade only when both their system and a trusted signal agree.
Signals help monitor multiple currency pairs simultaneously. A trader focused on GBP/USD may still receive profitable opportunities in USD/JPY or AUD/NZD without having to watch those charts constantly.
When receiving a forex signal, don’t treat it as a blind instruction. Consider the following:
A good signal should complement your thinking, not override it.
While useful, forex signals come with certain risks:
Only invest money you can afford to lose, and always maintain personal responsibility for your trades.
Yes. Forex signals are legal, but paid services should come from FCA-authorised providers or those partnered with regulated brokers.
They can be, especially if they include clear entry/exit points and brief explanations. But it’s crucial to understand the logic behind each trade.
Clear entry, stop-loss, and take-profit levels, a short market rationale, and a transparent track record – these are signs of a reliable signal.
Sometimes, but be cautious. Free signals often lack proper risk control. Always test on a demo account and evaluate results independently.
Forex signals can offer valuable guidance, especially for beginners looking to gain confidence and structure. They help traders act more decisively and spot opportunities they might otherwise miss.
However, signals are not foolproof. Use them as part of a larger strategy that includes education, analysis, and disciplined risk control. The most successful traders treat forex signals as tools to support, not replace, critical thinking.
Choose reputable providers, start small, and always stay in control of your trading decisions.
The ability to profit when markets fall can be a powerful addition to a trader’s toolkit. That’s why understanding how to short a stock – also known as short selling – is essential for anyone looking to trade more dynamically. While traditional investing focuses on buying low and selling high, shorting reverses that logic. It carries risk, but when used wisely, it can open up strategic opportunities in declining markets.
This guide will explain what short selling involves, how the process works in practice, and how UK traders can use it responsibly – with practical examples and a clear look at the risks.
Shorting a stock means betting that a company’s share price will fall. It involves borrowing shares from a broker, selling them at the current market price, and then buying them back later at a lower price. If successful, you keep the difference as profit, minus any associated fees.
In simple terms, shorting a stock involves:
If the share price rises instead, you’ll need to repurchase them at a higher price – resulting in a loss.
In the UK, most short positions are executed through Contracts for Difference (CFDs). Choose a regulated broker authorised by the Financial Conduct Authority (FCA) that offers short selling via CFDs or margin trading. Reputable brokers can be compared on our recommended UK platforms guide.
Identify a company you believe is overvalued or vulnerable to negative sentiment. Use a combination of technical and fundamental analysis:
Using your CFD platform, select the option to “sell” or “go short”. You don’t take ownership of the shares – instead, you enter into a contract reflecting the price movement.
Set stop-loss levels and limit your position size. Most platforms offer tools to manage leverage and monitor potential drawdowns.
Track price movement, news, and technical levels. When the stock reaches your profit target or stop–loss threshold, close the position by repurchasing the CFD.
Trading via CFDs gives access to short-selling opportunities, but leverage significantly increases risk:
Ensure you’ve read and understood the risk disclosures from your FCA-regulated broker – including margin requirements, potential for unlimited losses, and automatic liquidation – before initiating a short trade.
Shorting is used for more than just speculation. Investors in the UK may short stocks to:
When managed well, shorting can add flexibility and downside protection to a portfolio.
Imagine a UK tech firm posts disappointing earnings. You expect the share price to fall from 200p to 170p. On your CFD platform, you short 1,000 shares at 200p. The stock drops to 170p, and you buy back the shares to close your position.
Result:
Had the price risen to 230p, your loss would have been £300.
Short selling is not suitable for everyone. Consider these alternatives:
These strategies allow bearish exposure while limiting risk.
Before you short a stock, be aware of these common risks:
Shorting demands strict risk management and emotional control.
It means selling borrowed shares in the hope of buying them back later at a lower price. You profit from the difference – if the price drops.
When you open a short position via a CFD or spread betting platform, your broker arranges the borrowing automatically. You don’t take ownership – you’re speculating on price movement.
No. Short selling isn’t permitted in Stocks & Shares ISAs or SIPPs. These accounts are designed for long-term investing, not leveraged trading.
Safer alternatives include inverse ETFs (which rise when markets fall), bear funds, and put options. These limit potential losses and don’t require margin accounts.
Short selling can be a powerful way to profit during downturns or hedge existing positions. But it requires confidence in your analysis, emotional discipline, and a clear understanding of how leverage and margin work.
If you’re an experienced trader with a solid grasp of risk controls, shorting may be a useful tool. However, if you’re new to markets, consider starting with inverse ETFs or professionally managed bear funds.
The key is to understand not just how to short a stock but when it makes sense and how to do it safely within your broader investment strategy.
Unless you’ve been living under a rock for the past few years, you’ve probably heard of artificial intelligence (AI). AI has taken the world by storm. This revolutionary technology uses complex algorithms to analyze copious amounts of data, enabling machines to “learn” and make predictions or decisions like humans. From self-driving cars to robo-lawyers, AI is everywhere!
However, beyond the hype, this technology presents a lucrative investment opportunity for investors, large and small. If you’re looking to make a killing from AI, here’s a detailed guide on how to invest in AI.
Before we dive into the nitty-gritty of investing in AI, it’s a good idea to understand what AI is, its bearing on the current market, and its impact on the global economy.
As mentioned, AI technology allows computers and machines to simulate human learning, comprehension, and decision-making. This simulation of human intelligence extends the capability of normal machines to perform tasks traditionally reserved for sentient human beings. These include tasks involving creativity, problem-solving, critical thinking, and autonomy.
AI and machine learning tools have been widely adopted across multiple industries, allowing faster, more efficient, and more accurate operations. From smart assistants on our mobile devices to autonomous cars and advanced robotics in the manufacturing industry, AI is transforming the world as we know it.
According to Forbes, the AI market is currently valued at $214 billion and is projected to be worth a staggering $1.339 billion by 2030. Some experts liken AI’s impact on the world to electricity in the 19th century or the Internet a century after. What’s certain is that artificial intelligence has proved immensely beneficial, especially in critical sectors of our economy. With so much value, the technology presents a golden opportunity for eagle-eyed investors, especially as interest in the sector grows.
The International Monetary Fund (IMF) posits that about 40% of the world population is currently exposed to artificial intelligence. AI and machine learning tools have made considerable waves in different facets of the global business and financial landscape, fundamentally transforming their very essence. As for the future of AI, the technology shows considerable promise as more industries warm up to the technology and potential applications increase. Still, we should be careful not to overestimate its role.
The prospect of increasing productivity and boosting efficiency has spurred confidence in AI investment UK, and rightly so. Tech giants, unsurprisingly, have been at the forefront of these AI investments. The big 4 of tech (Alphabet, Meta, Apple, and Amazon) have already spent a combined $60 billion in property and equipment for their AI infrastructure, with the likelihood of spending even more in the coming years.
There are two primary methods of investing in AI in the UK: investing in AI stocks individually or buying AI exchange-traded funds (ETFs). Both ways are equally profitable, depending on your approach. Below is a brief breakdown of the AI investment methods mentioned.
Buying or trading AI stocks is the easiest way to invest in AI. AI stocks are no different from other publicly available stocks, and you can trade them through brokerage accounts on the UK’s major stock exchanges. All you have to do is pick top AI companies with strong growth potential in the AI industry to invest in.
The recent AI boom means there are plenty of AI stock options at investors’ disposal, from popular blue-chip stocks to riskier AI startups. The profitability of different stocks varies depending on traders’ investment strategy and risk tolerance. There are no risk-free stocks, and what may be a gold mine for one investor might be a sinking ship for another. As such, it’s absolutely vital to have a robust investment strategy and consider the AI company’s financial situation, management team, and relevance in the industry.
It’s also worth noting that individual AI stocks are more volatile than stocks and thus have a greater potential for loss but can be just as profitable. That said, some of the best AI companies to invest in include:
Besides investing in individual stocks, you can invest in AI ETFs. Think of an ETF as a basket of different stocks from diverse markets. When you invest in an ETF, you’re not investing in an individual stock but rather a collection of stocks related to a particular sector, theme, or niche.
ETF investors have a major advantage over individual stock investors because they can spread risk over multiple investments. ETF AI investments in the UK also have a higher potential for returns since investors can capitalize on the growth of multiple AI companies. What’s more, ETFs are managed by professional fund managers with extensive knowledge and experience in selecting and managing profitable stocks.
Given the novelty of AI, there aren’t that many prominent AI ETFs to invest in. However, if you’re looking to take the AI ETF investment route, consider the following options:
There’s no shortage of AI investment stocks and ETFs in the UK. However, even the most promising AI companies don’t guarantee profits. Investors must conduct comprehensive research and carefully evaluate investment opportunities to maximize their investments. Here are a couple of tips for picking the right AI companies to invest in.
First things first, you’ll want to have a firm grasp of what you’re investing in. AI has been a buzzword in tech and many spheres, but how well do you understand it? Before investing in AI, learn all you can about the technology and its industry. Pay close attention to the market’s current state, growth potential, and industry trends and developments. This information will help you identify companies with the most impact and a high potential for profitability.
ETFs generally center on specific asset classes, niches, industries, and themes. You should learn about the AI company’s or ETF’s focus area before opting for it. Doing so will help you determine whether the company or ETF aligns with your investment strategy or personal beliefs. Consider their target market, area of specialization, growth potential, competition, and other relevant factors.
If the niche checks out, it’s time to turn your attention to the numbers. Research the company’s/ETF’s financial performance and note crucial metrics like cash flow, return on equity, revenue growth, etc. For ETFs, look at the ETF’s assets under management (AUM), capital gains distributions, and similar indicators.
The proficiency of the management team is especially important when investing in ETFs, but it also applies to individual stock investments. For AI ETFs, look at the managers running the fund. Do they have a strong track record? Are there any past controversies, and does the team have the relevant expertise and experience? For individual AI stocks, look at the company’s board composition and their vision for the company.
Profits are not a given when investing in AI. Investors must establish and implement solid risk management strategies to minimize their losses. The most notable risks of investing in AI include:
Yes, AI funds are a good investment, depending on how you approach them. Its growth potential and applications in multiple sectors make it a worthwhile investment. However, conducting thorough research and implementing proper risk management when investing in AI is vital in avoiding losses.
Yes, making money with AI is a breeze if you invest in the right AI stocks or ETFs. Alternatively, you can start an AI-powered business or create and sell AI-powered solutions. The money-making opportunities are endless with AI investing.
Investors can use AI to enhance their investment strategies by leveraging predictive analytics to predict market movements. They can also use it to analyze sentiment data from news, publications, and social media to determine market sentiment. Some investors even use AI for algorithmic trading.
The benefits of investing in AI include a huge return potential, given the technology’s growth trajectory. AI investments UK are also diverse, covering a wide range of industries and allowing investors to contribute to developing world-changing technology.
Now that you know how to invest in AI, the ball is in your court. It’s on you to do your homework and determine the best AI companies and ETFs that match your investment strategies and goals.
AI investing in the UK can be profitable if you play your cards right. So, learn about the most profitable AI companies, their growth projections, and their impact on different industries. That way, you can make well-informed decisions on what AI stocks and ETFs to invest in. We wish you the best of luck with your AI investments.
Bitcoin, a crypto asset that once cost less than $1 per coin, is now worth tens of thousands of pounds. Today, to buy one Bitcoin, you must be willing to spend around $50,000. According to expert predictions, the price of one BTC will rise to nearly $100,000 by 2030.
Since Bitcoin’s price is never constant and can fluctuate wildly within a few days, you can trade this asset and earn handsomely. This activity has already made many savvy investors millionaires. You just need to buy this crypto and sell it once the price spikes to a certain level. To help you trade Bitcoin seamlessly, we’ve broken down how to buy and sell Bitcoin UK below.
To buy and sell crypto, you need marketplaces known as crypto exchanges. In a nutshell, a crypto exchange is a platform that allows individual traders and institutions to buy and sell digital assets to other parties. You can use FIAT to buy Bitcoin or swap other cryptos for this digital asset on most reputable exchanges.
Speaking of reputable exchanges, you shouldn’t use the first exchange you find online to sell or buy BTC UK. We insist on that since some service providers don’t implement essential security protocols. By failing to do so, they make their clients’ accounts more vulnerable to issues like hacking. Furthermore, some exchanges have super-high fees, limited coin availability, laughable customer support, and many other shortcomings.
To ensure you always have seamless experiences buying and selling BTC, dedicate sufficient time to researching and evaluating each crypto exchange before signing up. Also, compare different service providers based on the following:
After identifying a good Bitcoin trading UK platform, visit the company’s official site. If you’d like to buy and sell this crypto using your mobile device, download the right app from the official store using the links provided on the official site. You should always get trading apps from official platforms like Google Play, the App Store, and the Microsoft Store because many third-party sites have malware-infected apps.
Use the app or official site to open a new Bitcoin trading account. Click the signup or register button and submit the requested information. The details you’ll have to share will depend on the exchange you choose. However, in most cases, you’ll be required to submit a working email address and your name, then secure your account with a strong password.
Complete the initial registration process then verify your account. Reputable FCA-regulated providers that offer the best way to buy Bitcoin have comprehensive KYC procedures. In other words, they require you to provide essential personal information and verify everything with valid documents.
Wait for your service provider’s team to verify your account. They will notify you if everything is in order or if you need to fix pertinent issues. After successfully verifying your account, determine the safest and most convenient way to top it up. While doing so, keep in mind the funding methods that your chosen service provider supports.
Common funding methods most Bitcoin trading platforms support include bank transfers, e-wallets, and credit/debit cards. Since most bank transfers expose you to low fees, they are ideal for people looking for the cheapest way to buy Bitcoin. The other alternatives are for crypto traders who prioritize instant deposits and quick withdrawals.
After choosing and setting up your preferred funding method, go to the deposit section and top up your account. Pay close attention to the service provider’s minimum deposit requirements to avoid unnecessary complications. Give the funds sufficient time to reflect in your account. Contact support immediately if the transfer fails or you notice any other discrepancies.
You can also top up your wallet with another crypto asset and swap it for Bitcoin. If you choose this method, pay close attention to the address you use and double-check it because the slightest error can lead to costly losses.
After funding your account or loading it with crypto, you can now buy Bitcoin. Just click the designated button for buying crypto or find the right trading pair. Choose a pair that matches your account’s primary currency if you go with the latter. The right pair should be BTC/GBP if your primary denomination is GBP. The same applies if your preferred method is crypto. Just look for the right crypto pair, like BTC/ETH, depending on the asset in your wallet.
Keep your Bitcoin in a secure wallet for as long as necessary. If your primary objective is to profit from this digital currency, wait for its price to rise to your preferred level, then sell it. To ensure you gain maximum returns from this golden asset, establish the best prices to buy and sell BTC beforehand and stick to your strategies.
Besides buying and selling the actual BTC, you also speculate on this asset’s price changes through Bitcoin CFDs. These instruments allow you to trade without owning the underlying asset, i.e., Bitcoin.
Let’s discuss where to buy Bitcoin in the UK. As mentioned, we highly recommend using reputable exchanges that are regulated by the FCA in the UK. Also, for optimum safety and hassle-free experiences, you should buy and sell BTC on exchanges that offer unparalleled security, outstanding customer support service, and a splendid collection of digital assets.
With hundreds of UK crypto exchanges available today, finding the most suitable service provider can be an uphill task. But this task is indispensable since you might commit to a lousy provider or join a platform run by criminals if you are not careful. That said, you don’t have to spend too much of your valuable time and effort vetting and assessing all of the crypto exchanges; we’ve done that on your behalf.
The InvestingGuide team spent countless days researching, assessing, and testing the crypto exchanges that Brits have access to. Numerous factors guided us on this vital task, from regulatory status and security to assets and fees. These helped us pick the best Bitcoin trading platforms in the UK, which we’ve reviewed on our site. Pick one of our recommended brands to make your life easier and avoid traps set by questionable companies.
Bitcoin is the most valuable cryptocurrency today. Presently, 1BTC costs over $52,000. Owing to its priceless nature, Bitcoin is often targeted by savvy cybercriminals. To avoid losing your BTC to theft, you must learn how to store your assets securely.
Keeping your Bitcoin secure requires using one of the best Bitcoin wallets UK. Our experts have vetted countless products, compared them against each other, and recommended the best solutions on our platforms, so finding a secure BTC wallet should be easy.
Before concluding this important topic, here’s something you should know. There are different types of Bitcoin wallets. For starters, you can either go with hot wallets, which are based on the internet, or cold wallets, which allow you to keep your assets and private keys offline. If you don’t want a software-based wallet, you can acquire a hardware wallet, which is a physical device that helps you optimize the safety of your BTC. Hardware wallets are ideal for people with large amounts of crypto.
If you choose to work with a software wallet, you can either go with a custodial or non-custodial product. With a custodial wallet, a third party, like a crypto exchange company, is responsible for keeping your assets and private keys safe. Conversely, a non-custodial wallet gives you full control over your BTC and private keys.
Yes, you can Bitcoin with cash. You can use cash to purchase BTC from one of the hundreds of Bitcoin ATMs in the UK. You can also visit a reputable ATM and find a seller who’s willing to meet and exchange cash for BTC.
Yes, Bitcoin is legal in the UK. Britons can buy and sell this crypto asset without incurring any negative legal consequences.
Buying 1 Bitcoin in the UK today will cost you approximately $51,600. However, since cryptocurrencies are volatile, this number can either increase or decrease dramatically in the future.
You can’t buy Bitcoin directly from conventional UK banks. However, you can use funds in your bank account to buy BTC using a reputable centralized exchange or peer-to-peer platform.
We’ve introduced you to essential hacks that will help you trade BTC seamlessly, from a step-by-step guide to buying this crypto to the best Bitcoin trading UK platforms. Now, it’s time to head out and try your luck at Bitcoin trading. But before you do that, we urge you to research and learn the risks associated with this venture. Also, you should familiarise yourself with tips for avoiding costly mistakes that inexperienced crypto traders and investors often make.
Newbie traders often incur significant losses, with numerous culprits to blame. As a newbie, emotions like greed may get the best of you and encourage you to make impulsive decisions that magnify potential losses. To make matters worse, since you lack adequate experience, you may try to recoup your losses by overtrading, which is highly guaranteed to worsen the situation.
Having said that, we have some good news. You can use automated trading solutions to curb losses often catalysed by issues like emotional decision-making and overtrading. We’ve broken down the fundamentals of automated trading below.
Automated trading goes by different names, including auto trading and algorithmic. These concepts refer to a trading strategy that involves using special software programs to execute financial trades based on predetermined rules.
Richard Donchian, an infamous American trader and renowned pioneer in the field of managed futures, introduced automated trading in 1949. This legend introduced the first publicly managed futures funds that relied on a rule-based, systematic trading strategy. This concept made a groundbreaking contribution to what we know as automated trading today.
There are many types of automated trading today, including:
In summary, automated trading solutions use specially designed computer algorithms to execute trades automatically in different financial markets, eliminating the need for human intervention.
Here’s an extensive breakdown of how automated trading works:
Before automated trading kicks in, the trader creates specific rules and parameters that the algorithm will use to execute trades automatically. These elements help the trading software make the best decisions based on aspects like historical price patterns, technical indicators, and market conditions. Then, the trader uses the right programming language to code the entire strategy into a usable program.
If you are a beginner and have yet to become an expert software coder, don’t worry. You can skip manual strategy development by choosing pre-built automated trading strategies and algorithms. Additionally, you can avoid this task through automated copy or social trading.
Backtesting refers to using historical data to gauge a trading algorithm’s effectiveness and performance. In other words, once you have what seems like a fitting strategy, the next thing to do is test how profitable or risky it is using past price movements.
While backtesting, you have to analyzed crucial performance metric like the percentage of successful trades and the total loss/profit after all trades. Then, use the data to fine-tune your algorithm and enhance its performance.
Automated software must be connected to a trading platform to work effectively. So, after fine-tuning your solution, pick a reputable platform that supports auto trading and link the two. There are many incredible platforms that support auto trading, from TradingView and cTrader to MetaTrader 4 and MetaTrader 5.
Since security is paramount in online trading, ensure that the platform you choose to connect your automated software is licensed by the FCA in the UK. It should also have the financial products you wish to trade and have an excellent online reputation. Use Trustpilot, Google Play, and the App Store to gauge every platform’s reputation and track record before committing.
To attain maximum success, automated trading software must monitor financial markets closely in real time. It must keep up with different aspects, especially price movements and market conditions. Since such elements can change rapidly, every automated trading solution must implement real-time monitoring for prompt response.
In addition to the aspects we’ve mentioned, the best automated trading systems monitor a user’s account balance, the performance of all open positions, and realised/unrealised profits. They also keep their users informed with timely, relevant alerts and notifications.
After the predetermined parameters trigger a signal, the automated trading system sends an order to the connected trading broker. The latter then executes the trade promptly. Automated trading solutions execute traders as soon as the pre-specified market conditions are met. These systems can also set stop-loss/take-profit levels and adjust every trade’s size based on key risk management parameters.
Having learnt the fundamentals of how to automate trading and how automated trading systems work, it’s time to discuss how to get started with this strategy. Here’s how you can dive in and reap amazing perks today:
We’ve focused more on covering the fundamentals of automated trading for beginners. Consequently, the information in this guide is primarily meant to help you get a foot in the door. To ascend to the next level and become formidable at auto trading, you must seek other resources, like free online courses, and use them to increase your knowledge base.
While educating yourself, don’t forget about the most crucial concepts. For instance, study different types of automated trading and their upsides and risks keenly. Additionally, further your understanding of key elements like market structure and technical analysis.
With adequate education under your belt, search for a good trading platform that supports algorithmic trading, like MT4 and MT5. You should also find a broker that offers your preferred auto trading platform and supports automated trading.
While finding the perfect broker, vet all UK service providers based on key factors like regulatory status, security, and reputation. To summarize, choose a broker that is regulated by the FCA, employs industry-standard security protocols like advanced data encryption, and boasts excellent reviews and ratings. Then, open, verify, and fund your trading account.
After choosing the best trading platform and broker, you can either build your system or search for a fitting pre-build strategy. Building a custom strategy should be a top priority if you have the technical know-how. Why? This project will enable you to tailor each strategy to align perfectly with your trading style and goals.
If you don’t have sufficient knowledge or time to build a custom automated trading strategy, go with pre-built solutions. Before using any pre-built strategy, check its track record. Don’t forget to backtest all your strategies to avoid nasty surprises.
Backtesting lets you assess a trading strategy’s performance based on historical data. That said, historical data don’t always reflect current conditions in different financial markets. An automated strategy can perform excellently during backtesting and flop magnificently in live market conditions.
To avoid costly disappointments, use paper trading to test each automated strategy’s performance in real market conditions. You’ll be using virtual funds, so don’t worry about incurring devastating losses. And, if you identify weaknesses that didn’t manifest during backtesting, fine-tune your strategy accordingly.
If your strategy performs spectacularly during backtesting and paper trading, you can transition from the simulated environment to live trading. Since live trading is risky, remember to define risk parameters like position sizing and stop-loss/take-profit levels clearly. Also, spread risk at all times by ensuring diverse assets are in your portfolio.
We highly recommend allocating a small amount of money to each trade when introducing your strategy to live market conditions. That way, you can gauge its effectiveness and performance without risking major financial setbacks. Also, keep a close eye on each strategy to ensure you identify and address anomalies promptly before they cause havoc to your capital and overall portfolio.
Trading with automated solutions comes with several advantages and disadvantages. Here’s a comprehensive view of these elements:
Besides the pros and cons we’ve covered in the previous section, automated trading has numerous risks. For starters, you may overfit a strategy to perform exquisitely based on historical data. This issue will eventually undermine the system’s ability to adapt to new market conditions and cause extensive losses on your part.
What’s more, as a novice, you may fail to deploy an automated trading strategy with proper risk management protocols. That will force you to monitor all trades closely. Otherwise, you’ll be risking significant financial drawdowns.
Lastly, your automated trading system may fail to seamlessly integrate with your preferred trading platform or service provider. This can facilitate complications that might cause extensive losses, like execution errors.
Automated trading might be a good idea, depending on your trading goals and preferences. However, the perks of using auto trading are worth considering, from consistency to elimination of emotional bias.
Automated trading can be profitable. However, whether or not you profit from it will depend on multiple factors, including how effective your trading strategy is and your dedication to managing risk.
Here’s an example of automated trading. A trader may design an automated system that, based on predetermined rules, buys and sells specific company shares when their prices drop below or rise above a certain point.
To develop an effective automated trading system, you must first create a strategy that aligns with your trading style and objectives. Then, code the system with a programming language you’re familiar with, backtest it with historical data, and make the necessary adjustments.
Countless traders are reaping handsome returns from online trading, all thanks to automated strategies. But the opposite is also true. Thousands of traders struggle to earn consistent returns, even with auto trading in their arsenal. You can profit from or lose money to automated trading depending on your actions and decisions.
To ensure you attain maximum success and avoid frequent losses, backtest every automated trading system before using it in live trading. You should also monitor your strategy’s performance regularly while keeping in mind that algorithmic trading systems aren’t infallible. If you notice any pertinent issues, fix them before the entire situation turns into a financial catastrophe.
Spread betting is an excellent way for bettors and investors to earn from financial instruments without purchasing or owning them. But what is spread betting, and how can you make money from it? Spread betting allows bettors to speculate how the price of an asset moves and profit off of correct predictions. Participants can make considerable profits with no capital gain tax on their earnings.
In a recent survey in Britain, less than 1% of the respondents (0.3%) participated in spread betting in 2023. The same figure was recorded in 2022, showing no decrease or increase in spread bettors. If you want to hop on the spread betting bandwagon, here’s everything you need to know before taking the plunge.
Spread betting involves betting on the price movements of financial instruments like indices, options, and stocks. Instead of trading actual assets, spread betting deals with derivatives, which are financial contracts that gain value from their underlying assets.
For instance, instead of buying actual Apple stock, holding it, and selling it if the price climbs, spread bettors bet on Apple stocks increasing in value. They’ll then make money if stock prices rise and lose money if they do the opposite.
Spread betting involves speculating on the direction in which the price of an asset moves. Essentially, it’s making a bet on whether a financial instrument’s price goes up or down. Unlike trading, it doesn’t involve buying or owning the actual asset. Spread bettors make money when the asset’s value moves in the direction they bet. Conversely, they’ll lose money if the asset’s value moves in the opposite direction.
Spread betting is as easy as trading or investing in financial markets. Below is a quick breakdown of how to spread bet successfully.
The first step in spread betting is choosing an appropriate platform to facilitate your bets. There are plenty of UK spread betting companies to choose from, so it’s up to you to explore the available spread betting sites and pick a licensed and reputable trading platform.
While spread betting is mostly speculation, you can adopt certain strategies to make accurate price movement predictions, maximise profits, and minimise losses. Most trading platforms have educational resources where you can learn about these strategies, but you can also research the World Wide Web for the same.
Spread bettors can bet across various markets, including the stock, forex, indices, and options market. Markets move differently, so it’s a good idea to pick a market you’re familiar with. Also, stick to betting on one market and using the same spread betting sites until you’re comfortable enough to diversify.
The stake is the amount of money you want to risk for every point the asset moves. Higher stakes equal higher rewards but also more negative returns if the market doesn’t move in your favour. Beginners should set their stakes lower while learning the ropes to minimise losses. A £20 stake means you’ll gain or lose £20 for every point the asset price moves, depending on your position.
You can either go long (buy) or short (sell) your betting poison. Going long means you expect the price to increase; while going short means you expect it to decrease.
Smart bettors use different risk management tools to cut their losses. Some use stop-loss orders, which automatically close their positions if the asset reaches a specific price. This ensures that losses are capped at that price. Some also use take-profit orders, which close their positions after the asset reaches a particular price, taking the profit they made from the bet at that price point.
With everything in place, you can now place your bet and wait eagerly as the asset price moves in or against your favour. If you’ve done appropriate research on the asset and implemented appropriate risk management strategies, you’re likely to make a profit. However, you’ll likely lose your hard-earned cash if you place your bet on impulse or use emotion and ignore risk management tools.
To understand how spread betting works, you must first understand the key features of spread betting. Spread betting consists of three main features: the spread, the bet size, and the duration. Other elements in spread betting include the direction, leverage and margin. We’ll look at these key elements in detail to further your understanding.
Spread is simply the variation between two prices, rates, or yields. It seems simple enough, but its meaning varies contextually. The spread in stocks is the gap between the buy and sell price. In bonds, it’s the difference in yields between two securities.
All in all, the spread is the disparity between the buying (bid) and selling (ask) price. The spread is also what you’ll pay to open a spread betting position on the market of your choice. It often entails all the necessary costs of opening a position, including trading fees, eliminating the need for commissions and separate charges.
Trading platforms markup the buying and selling price by half the total spread amount. Let’s say the NASDAQ: QQQ has a one-point spread. This means the buying price is half a spread about the actual buying price and the selling price half a point below the selling price.
The best size is how much money you allocate to each trade/bet. The larger the bet size, the more money you’ll make if the bet goes your way and the more you’ll lose should it not.
For instance, if you bet £10 that Tesla stock will go up, you’ll get £10 for every point the stock increases. If it goes up by 4 points, you’ll earn £40, 5 points, £50, and so on. The opposite is also true if the stock plummets. For every point the stock decreases, you lose £10.
Duration is the amount of time your spread betting position remains active. Different platforms have varying spread bet durations, usually lasting anywhere from a day to a few months. Some of the most notable spread bet durations include:
It’s worth noting that bettors can close their bets whenever they wish in both types of spread bets. However, for quarterly bets, the position will close automatically after the end of the third month.
That said, spread betting has other features, such as the direction in which the market moves. Going long in spread betting means buying a position while anticipating its price increase. You’ll make money should the asset’s price increase and lose if it doesn’t. Going short, on the other hand, means opening a bet position and anticipating an asset price decrease. If the asset’s value decreases, you make the correct bet and profit from your bet. The opposite is true if the value goes up.
For instance, let’s say you decide to go long on the price of gold with a bet size of £50, anticipating a bullish trend. After opening your position, the price of gold rises by 3 points. This means you’ve made the correct bet, and the platform will deposit £150 into your account. If you went short, however, you would lose £150.
Margin in spread betting is the deposit you put down to open your position in your preferred financial market. Platforms have different margin requirements, but most will have two types of margins.
Leverage allows spread bettors to open positions with multiple times your Margin amount. With leverage, you can bet multiple times the amount to make more money. However, trading with leverage also means multiplying your losses like your gains.
A platform offering a 1:100 leverage on spread bets will give you 100 times the betting amount you deposit to fund your bets. If you fund your bets with a 10-pound margin, you’ll have £1000 to bet with. £20 will give you £2000 for your spread bets. The only downside to margins is that it also magnifies your losses, and you must use proper risk management strategies to avoid losing too much.
Spread betting involves multiple risks that could lead to losses. These risks include:
The main difference between UK spread betting and traditional investing is that spread betting doesn’t involve actually purchasing the asset. Instead, participants bet on the direction of the asset in question. This also means you don’t own the asset and don’t directly profit from it. Instead, you make money when the asset price moves in the direction of your bet.
Calculating profits and losses in UK spread betting depends on how many points an asset’s value moves. The simple formula for calculating how much you make spread betting is subtracting the closing price from the opening price and multiplying it by the stake you placed per point. You’ll assign positive and negative values on the closing price, depending on whether you went long or short.
You can think of leverage as a loan the platform gives you to increase your margin when opening positions. These platforms usually represent leverage in ratio form like 1:100 or 1:250. For the former, the platform will offer you 100 times your margin amount and 250 times for the latter. The higher the leverage amount, the more profit you get, but also, the more losses you’ll incur if your bet goes wrong.
There are several factors to look for when you want a top-tier spread betting platform. The first and most important factor is the platform’s regulation. Only choose a platform with licenses and regulations from top governing bodies like the FCA, FINRA, and others. Next, you’ll want a platform with a large variety of tradable assets, robust security features, tight spreads, and massive leverage. You should also check out reviews and testimonials online to find the most appropriate platform.
Spread betting is an excellent way to make an honest living or add to your current income, provided you find the right spread betting platform. Now that we’ve answered, “What is spread betting?” it’s up to you to find an appropriate platform and place your bet.
Remember, only bet on a single financial market and understand it fully before diversifying your betting portfolio with another market. Also, betting is just as risky as trading financial assets. Only bet what you’re willing to lose and use appropriate risk management strategies to reduce your losses. With proper research, practice, and risk management, you’ll be set to make a killing with spread betting.
A solid trading strategy sits at the core of all (or at least most) successful trades. This is typically a culmination of proper fundamental and technical analysis as well as prudent risk management. Sure, you can get away with a few impulsive trades, but if you’re gunning for success in the long run, then comprehensive technical analysis is an absolute must.
Technical analysis is a framework for predicting price movements using various tools and market statistics. Traders use this framework to single out lucrative market openings and execute profitable trades. Combining technical analysis with the right trading psychology and risk management can do wonders for your trading career.
Read on to learn everything you need to know about technical analysis, including what is technical analysis, how to use it, and the most effective technical indicators.
The exact definition of technical analysis is murky. Some consider it a collection of tools, while others consider it a trading approach, but the underlying principle is the same. Technical analysis uses past market statistics and historical price charts to assess an asset’s price and predict price movements.
It hinges on the concept that traders can use price movement patterns to predict price action with considerable accuracy. Technical analysis is grounded on a handful of key principles. Below are some of the most notable ones:
To conduct technical analysis, traders must picture price movements, and that’s where charts come in. Charts present an easy way to visualize current and past price movements. They use the information from the charts and analysis tools to spot recurring trends that are useful for identifying ideal trading opportunities.
Traders’ collective use of technical analysis is self-fulfilling in that they identify these patterns, execute orders, and self-reinforce price action. However, this is an oversimplification. In practice, it’s much more challenging and quite intricate. Moreover, although technical analysis is a figure-based concept, it’s also subjective and somewhat depends on the trader’s experience and intuition.
Time frames are also a crucial aspect of technical analysis since price movements are a function of time. The time frame ranges vary depending on the broker but are usually from one-minute to yearly intervals. That said, Your choice of time frame depends on your trading style and strategy.
There is no single best time frame(s). When starting out, try different time frames to get a firm idea of how the market moves and understand its structure. Still, it’s worth noting that brokers don’t restrict traders to one or a few time frames. Traders can change time frames on their charts whenever they see fit.
Admittedly, trading technical analysis is far from a walk in the park, especially for novice traders. The good news is that most of the concepts are related, and it’s easy to get the hang of it with a bit of practice and consistent trading. Using technical analysis effectively will take your trading to the next level and improve your chances of profitable trades.
Do the following to fit technical analysis into your trading strategy:
Trend describes the overall direction in which the price of an asset moves. There are three main types of trends in asset trading:
To incorporate technical analysis into your strategy, you must first understand the market’s general direction/trend. Only then can you decide whether to follow or go against the trend. Remember that each choice has its own implications and can result in either a loss or profit, depending on market conditions.
For instance, in the most basic trend-following trading style, traders will buy (go long) during an up-trend and sell (go short) during a downtrend. Technical analysis will help predict how the market moves so you can make a more informed decision on whether to buy or sell the currency.
With the trend on lock, the next step is to draw support and resistance levels. Support levels occur when the downward movement of an asset price slows down and starts showing upward movement. The opposite is true about resistance levels: an uptrend slows and either stagnates or starts descending.
Traders draw these horizontal lines on support and resistance areas to identify likely trend reversals. Support and resistance are useful in technical analysis and trading because they:
Still, it’s worth noting that the price doesn’t always change direction at the support and resistance levels. Sometimes, the price breaks out, meaning it crosses the support or resistance levels. This means the price keeps going down below the support level or up above the resistance level.
Successful trading boils down to finding timely entry and exit points. If you’re new to trading, an entry point is the price at which you execute your trade, and an exit point is where you close your market position.
Support and resistance levels are great for guiding traders on favorable entry and exit points, but technical traders can leverage various tools to do the same. Technical indicators like Relative Strength Indicators (RSI) and Bollinger bands, for instance, help you establish whether there’s enough momentum behind price movement for more calculated market entries and exits.
Remember that technical indicators don’t guarantee profitable trades but only show how the price will likely move. Plus, knowing how to use these indicators effectively requires plenty of practice. Professional traders use multiple indicators to inform their trades and make significant profits.
While you can make a huge killing with trading, the possibility of losing just as much money isn’t far-fetched. Sure, technical analysis can help you trade better, but this doesn’t mean you should throw risk management out of the window. Besides knowing how to use technical analysis in your strategy, you should also manage risk effectively.
The first aspect of managing risk is sizing your position accordingly. Only allocate an amount you’re ready to lose in any trade. Next, identify a reasonable risk-to-reward ratio. This is how much you can earn from every unit asset you risk on a trade. The key word here is “reasonable.” An overly high risk-reward ratio may cost you if the market doesn’t favor you.
A great approach to risk management is using an Average True Range (ATR) indicator. This nifty tool shows an asset’s price variation over a specific period. For example, if you set your stop-loss at 1 ATR for a one-week time frame away from your entry point, It means you’ll close your position if the market moves against you by an amount equal to the highest or lowest price over that timeframe, depending on whether you went short or long, respectively.
Earlier, we mentioned that fundamental and technical analysis were the backbone of successful trades. However, it seems that most traders put more emphasis on the latter than the former. This begs the question, what’s the difference between fundamental and technical analysis, and is one better than the other? Let’s have a brief look at both of them.
Fundamental analysis studies the intrinsic value (perceived value) of an asset. An asset’s intrinsic value describes its perceived value based on factors like its:
This intrinsic value is not the same as market value – which describes what market participants are willing to pay for the asset. Instead, it’s what the asset is supposedly worth and gives a benchmark for assessing the market value. Fundamental analysis is all-encompassing, examining aspects like an asset’s market condition, financial liability, public relations, etc.
Technical analysis, on the other hand, focuses on the current market value and is grounded on figures. Traders focus on this type of analysis since fundamental analysis and perceived value are among the factors incorporated into technical analysis. Remember, price movements in charts embody publicly available information, including an asset’s intrinsic value.
Traders can opt for several technical analysis indicators to amplify their trades. Some of the most technical analysis indicators include:
Market sentiment can sometimes lead to the overbuying or overselling of assets, leading to rapid price fluctuations. The RSI measures an asset’s recent price changes, specifically how fast and how much the price changes. RSI extremes (high or low) indicate price volatility and likely price reversal.
The MACD indicator helps you establish the direction of the market trend. It consists of an MCD and signal line. The signal line shows the general market direction, while the MACD line is the difference between two moving averages. Combined, the two show trend momentum and are great for helping traders establish propitious entry and exit points.
Another excellent indicator for measuring trend momentum is the Average Direction Index. This is an easy-to-use indicator ideal for beginners. An ADX above 40 shows a high trend momentum, while an ADX below 20 shows low momentum and the likelihood of a sideways trend.
Bollinger Bands complement ADXs, giving additional insight into market volatility and potential price levels. While ADX helps gauge the strength of a trend, Bollinger Bands indicate the price’s relative position within a volatility envelope. When the ADX line approaches the upper Bollinger Band, the current trend will likely persist. Conversely, when it approaches the lower band, the market is weakening and likely to stagnate.
Yes, technical analysis works for the most part, but its effectiveness largely depends on the traders. Traders who use the right technical analysis indicators and exercise proper risk management are likely to reap big. On the flip side, traders who don’t use indicators properly and have unsound risk management strategies will make losses.
There is no “best” technical indicator for trading because trading styles and strategies vary. Explore different indicators and find one that suits your strategy for profitable trades. Some excellent indicators to try include RSI, MACD, Bollinger bands, and ATR, to name a few.
While some would argue that finding the right technical analysis tools is the most important thing in technical analysis, this is far from the truth. Rather, the most important thing in technical analysis is understanding how the market works (market structure) and technical analysis basics. We’re talking about everything from market trends to behavior patterns.
There are no set-in-stone methods for technical analysis. That’s because traders approach technical analysis differently. For instance, some traders focus on monitoring support and resistance levels, while others use momentum indicators to gauge the strength of a trend. Regardless, it’s important to establish a technical analysis formula that resonates with your trading style. You can always borrow a leaf from other traders and see what works for them.
While there’s no denying the technical aspect of technical analysis, it’s absolutely vital for success in asset trading. Beginners should take the time to understand how technical analysis fits into the grand scheme of things before they can incorporate it into their strategies. Successful trading combines technical and fundamental analysis with proper risk management and discipline. Do this conscientiously, and you’ll be set for success in asset trading.
Building a solid and potentially profitable investment portfolio is crucial for every investor. This is whether you are looking to achieve long-term or short-term investment goals. The best element about diversification is that you get to spread your capital across many instruments. This limits your chances of incurring massive losses. One investment gain may cover the loss incurred on another.
Sadly, building an investment portfolio to achieve goals continues to challenge many investors. You may decide to invest in a financial advisor. Alternatively, opt for the DIY method, but the bottom line is understanding the steps involved. This is where we come in to ensure you are fully prepared to manage your investments and maximise your chances of achieving success.
Start by making a list of your financial goals. This is whether you are looking to invest long-term, short-term, or both. Plus, set aside your capital and consider your life outlook and what you want to achieve. For instance, a young adult’s investment needs are different from a 55-year-old’s. The former may focus on short-term goals like purchasing a car. However, the latter may be looking to save for their retirement 30 years from now.
Additionally, consider your personality and risk tolerance when looking to create a portfolio. Decide on how far you are willing to go to potentially reap good returns. Are you willing to put up much money for potentially greater returns? Are you comfortable risking little capital for small and quick profits? Make a decision that will not affect your night’s sleep. This is especially when you start experiencing a short-term drop in your investment.
To maximise your experience and chances of managing a successful investment portfolio. In this case, you need a reliable broker. The broker should be secure, meaning it must have regulatory oversight from tier-one authorities. These include the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, and more. Plus, confirm other elements like fees, assets, support services, and investment tools availability.
It is also crucial to understand and select a broker with the right account for your investments. For instance, you can opt for an ISA and SIPP account with tax-free benefits. These are suitable for individuals looking for long-term returns in investments and retirement. There are also regular investment accounts (General Investment Accounts) with no tax-free benefits. Such accounts allow you to invest in various financial instruments short-term.
We understand how challenging it can be to find brokers with the above features. Therefore, InvestingGuide recommends some of the best investment brokers in the UK to choose from.
Once you have chosen your suitable broker, identify the right investment asset based on your knowledge of the financial market. You want an instrument you can easily strategise on and identify the best entry and exit points. Examples of investment instruments you can consider include:
Also known as equities, stocks represent units of ownership in publicly held companies. With stock brokers, it’s easy to purchase stocks or shares of various global companies, including the UK. Note that stocks tend to be higher-risk investments compared to other securities. However, investing in them offers a greater chance of high profits.
With a plethora of equities in the market today, it is crucial to make a suitable choice. This means you should conduct thorough market research and choose an option based on your risk tolerance. Plus, ensure you are familiar with the company shares you are looking to invest in. Consider elements like market cap, sector, stock type, price, and more.
If you do not want to put your money in stocks, ETF investments are an excellent alternative. ETFs are funds that track an index like the FTSE 100. They work like stocks but only differ when it comes to the number of equities involved. With stocks, you only purchase a single company’s equities, whereas ETFs expose you to hundreds of shares in a single basket. These funds also allow you to invest in multiple bonds, cryptos, and commodities.
The best element about ETFs is that they are risk-free compared to individual stock purchases. Since they allow diversified investment, we find them suitable for newbies because they carry low risk and are cost-efficient.
Bonds are other excellent instruments for building a potentially profitable investment portfolio. Investing in them turns you into a lender, whereby you get to lend money to a company or organisation. This is so that the issuer pays you back with an interest on the loan, which, of course, is your profit.
Investing in bonds is also less risky than individual stocks, as you are guaranteed 100% returns on your investment plus interest. However, not all bonds are created equally. Those with higher yields, like junk bonds, come with higher risks. You can select a bond by considering various elements like maturity period, coupon, type, interest rate, credit rating, and more.
Besides stocks, ETFs, and bonds, there are alternative investment assets you can explore. These include precious metals, real estate, cryptocurrencies, wheat, hedge funds, and more. Such securities have proven reliable when it comes to protection against inflation. However, they are highly risky investments that regular stocks and bonds. It is advisable to incorporate at least 20% of alternative asset investment into your portfolio to increase potential returns and reduce market volatility.
Like ETFs, mutual funds are investment tools that track a particular index. Unlike ETFs that focus on stocks, mutual funds are available for various asset classes. They are professionally researched and picked by fund managers, meaning they cost more than ETFs. Since they are managed by professionals, mutual funds are actively traded and are less tax efficient.
Managing a solid investment portfolio should also include cash investment. Many accounts are available for cash investments, including money markets, high-yield savings accounts, and certificates of deposit (CDs). Cash acts as “dry power” for investment opportunities and helps investors prepare for a recession. They are suitable for short-term investments.
Once you have chosen the right instruments for your portfolio, allocate your capital accordingly for each instrument. We understand that many investors will prefer putting their money into the stock market considering the higher potential returns it carries. While this can work in your favour, consider having a mixture of asset classes in your portfolio. Remember, various market elements influence ast price fluctuations and you want to reduce the risks of losing all your capital in case of a market downturn.
Simply put, conduct thorough market research to identify the best assets for your investment at that time. Learning proper asset allocation will also help you make the best decisions. And once you start investing and have open positions, ensure you track their performance. This will help you decide if your holdings require rebalancing, especially if the market has been volatile.
Diversification with an investment portfolio involves spreading your capital across various financial instruments. These include stocks, bonds, mutual funds, and more. The best element about portfolio diversification is that you get to limit the risk of incurring massive losses in a single investment. A gain in a single asset may cover a loss incurred in another security.
Additionally, having a diversified investment portfolio leads to more consistent and long-term growth. The assets reduce the chances of your portfolio getting affected by significant market volatility. Plus, diversification exposes you to numerous assets, allowing you to identify other strengths in the financial investment landscape.
Overall, choosing or building a diversified investment portfolio means understanding your risk tolerance. You should also have a budget and choose assets that align with it. Do not go all in with an investment since the markets can be unpredictable, and profits are not guaranteed. Always risk funds you are comfortable losing in case an investment works against your strategy.
Most importantly, choose a suitable brokerage firm for your diversified investment portfolio. Not only should the broker feature your preferred instruments, but it must also be highly regulated. For beginners, start your investments with a small capital and take advantage of brokers’ learning resources and demo accounts. Also, remain patient and track your performance to understand the areas that require improvement.
There are various low-cost brokers in the UK that allow you to start building an investment portfolio with as little as £50. You can also choose to invest in low-cost instrument securities like ETFs and mutual funds, which are already diversified. Alternatively, utilise a broker’s demo account to make an investment portfolio. This is without spending your hard-earned cash. However, do not expect real money profits either with demo accounts. Demo accounts help you familiarise yourself with how managing a diversified portfolio works. Of course, this is before venturing into live trading.
There are numerous portfolio analysis tools in the market today, and the best will align with your needs. For instance, Morningstar has proven reliable when it comes to in-depth market analysis. It is suitable for comprehensive insights into risk, returns, and sector allocation. You can also take advantage of brokers’ free investment management services. They help you to identify the right securities for your investment portfolio.
It all depends on how long you are holding a position. For long-term investment, reviewing your portfolio quarterly or semi-annually is a good practice. You should also consider reviewing your portfolio during major life events. These include periods of income changes or when having retirement plans. However, understand that this could affect your financial strategy. Additionally, investors should assess their portfolios after significant market shifts. You simply need to avoid reacting too quickly to short-term market volatility. This can lead to emotional decision-making and unnecessary costs.
Failing to diversify your investment is one common mistake to avoid when building a portfolio. Investing in a single instrument increases the risk of losing all your capital should things work out against you. Also, avoid chasing the performance of an asset but instead focus on long-term strategy and potential gains. Choosing an asset simply because of high performance can be risky. Most importantly, do not make decisions or choices based on emotions but on your risk tolerance. Lastly, have a budget and calculate potential returns before opening a position.
Learning how to build an investment portfolio is not a walk in the park. You must be willing to conduct thorough market research to identify the right instruments for your skill level. If your strength is on a given asset class, ensure your holdings are spread across various sub-classes and industry sectors.
While portfolio diversification reduces the risks of incurring massive losses. In this case, it is not a sure-fire way to manage profitable investments. Always strategise before opening a position and track the open ones to ensure everything works out as expected. Plus, invest with a reliable broker hosting the right tools for skills and strategy development. Approaching the market cautiously will help you make the best decisions that will maximise your experience and potential.
Like most things in life, asset trading can be daunting at first, but for many traders, it’s usually a mix of excitement and apprehension. It’s hard not to get excited about the prospect of making loads of cash from the comfort of your home or even during a subway ride. However, it’s also normal to feel apprehensive since trading can seem overly complex and hard to grasp more so for beginners.
Fortunately, most trading platforms offer demo accounts so that newcomers and novice traders can learn the ropes by trading on simulated markets with virtual cash. Since you’re not using real cash, you can get familiar with markets and charts and dabble with different technical analysis tools.
If you don’t know how to open a demo account for trading, worry not; we’re here to help. Keep reading to learn everything you need to know about demo trading accounts and how you can open a demo trading account and kick off your trading journey.
It’s not uncommon for beginners to ask, “What is a demo account in trading?”A demo account, or demonstration account, in full, is a trading account that lets users trade without using their hard-earned cash in simulated market environments. This is not necessarily a “real” account, but you’ll get all the functionality and tools that are available in a live trading account. With a demo account, you can:
However, what sets demo trading accounts apart from ordinary ones is that traders don’t use actual money. Instead, the brokerage firm provides practice funds that you can trade with. This means users don’t have to deposit and risk their money trading without adequate trading knowledge.
Demo accounts are a safe way for beginners to practice trading and refine their skills. Unlike ordinary accounts, bad trades don’t result in actual monetary losses, and profitable trades don’t result in capital gains. These platforms are meant to give you a feel of what trading involves and give newcomers a taste of the different financial markets and instruments.
Demo accounts gained traction due to the popularity surge of online asset trading. Brokerage firms would use demo accounts to woo clients into opening ordinary accounts after getting the hang of asset trading. The accounts gave users access to live market trades, allowing them to execute trades whenever they want.
The key features of a demo trading account include:
Besides the above, demo accounts also offer a host of features to advance your trading journey and put you in the same ranks as trading aficionados. We’re talking features like:
Getting started with a demo account is a breeze. In fact, the most difficult part of doing so is choosing the right broker from the plethora of options. Below is a step-by-step guide on how you can open a free demo account.
Picking from the multitude of brokers eager to give you access to global financial markets bunch is challenging, but you can’t go wrong with a broker that checks the following boxes:
Now that you have the trading platform on lock, your next move is to visit the broker’s website by simply typing the trading platform’s name in the search box and hitting “enter.” On the results page, be wary of imitation websites that might dupe you into unintentionally opening an account with them if you’re lucky. If luck isn’t on your side, these sites will ask for your payment info and steal your money. Don’t fall prey to them, and check the website’s URL to be sure you’re visiting the broker’s official site.
Next, click the “Open a Demo Account” button or URL. This will redirect you to the demo account page, where you can learn more about this type of account. It’s easy to mistake a demo account for a live one. Remember, accounts that ask for payment info when registering are live accounts.
To register provide basic credentials like your full name, phone number, email address, and voila! You’re done. Enter truthful information so that you get the most out of the platform and transition seamlessly to a live account when it’s crunch time.
While most trading platforms are web-based, users can also download them on their mobile devices or personal computers. For smartphones, head to Google Play (Android) and App Store (iOS), search for the broker’s name, and then download the app. Have a look at reviews and developer information to avoid bootleg apps. For PCs, head to the broker’s website and download it straight to your PC.
With everything in place, all that’s left is to log into your demo account using your email address and password. Confirm your credentials by checking your inbox and clicking the confirmation link, and you’ll be good to go!
Demo trading accounts are immensely beneficial for both beginners and advanced traders. They provide a flexible, risk-free platform to grow your trading skills and test different strategies. Here are some notable benefits of using demo accounts:
The user interfaces of trading platforms may seem overly complex when starting out. Demo accounts give you the leeway to play around with the platforms’ functionalities, features, and trading tools. Sooner or later, you’ll get acquainted with the interface, and you can practice trading and perfect your skills before transitioning to a live account.
Do you want to refine your trading proficiency and understand financial markets and price movements? If so, then demo accounts are just what the doctor ordered. You see, unlike live accounts, demo accounts eliminate the pressure and risk factors associated with live accounts. That way, you can analyze markets, use technical analysis tools, test different strategies, and execute orders without risking your money or breaking a sweat.
Utilize demo accounts to try your hand at different financial markets to find one that best suits you. Trade stock, commodities, indices, forex, ETFs, and other financial instruments. What’s more, analyze price movements across markets, establish correlations, and test different strategies to make a well-informed decision when building your trading portfolio.
While it’s true that you can reap big from trading financial assets, profits are not guaranteed. Bad trades can result in significant losses, emphasizing the need for proper risk management and tried-and-test strategies.
The possibility of losses can make trading for live account owners pretty stressful. However, traders using demo accounts don’t have to stress about losing money since they use virtual currency. The stress-free conditions allow traders to refine risk management before moving to live accounts.
Demo accounts are great for learning about financial markets and enhancing trading skills and knowledge. However, these accounts are not without their drawbacks. Some of the notable downsides to demo trading accounts include:
Traders who use demo accounts for too long may develop false confidence and become complacent. When bad trades have no implications on your pockets, you tend to take more risks than you should. Over time, you could develop bad habits that could be detrimental to your trading once you transition to a live account.
Intermediate and experienced traders develop a “healthy fear” from executing ill-timed trades. This fear makes them more risk-averse, which ends up working for the best over the long haul. Developing this healthy fear with demo accounts is hard since you don’t lose actual money and thus can’t associate any negative emotions with losses. This could work to your disadvantage when you start live trading.
It’s common knowledge that trades should let profitable trades continue and exit losing ones quickly. However, doing so in a free demo account for trading is daunting since traders don’t incur monetary losses. So, while traders can have good entry points, timely exits can be challenging. Trading on live accounts later on can become a huge challenge and result in considerable losses.
Trading on a free demo trading account is absolutely important for beginners and lays the groundwork for a thriving career in trading. These accounts give beginners an idea of how markets work, stepping away from the theoretical aspects of price movement and actually getting involved in practical trading.
A demo account for trading is the best way for beginner and novice traders to get hands-on experience with different trading platforms without risking their funds. Budding traders can easily get discouraged when they lose real money early on, making them abandon the venture altogether. A demo account allows room for mistakes so traders can learn from them and sharpen their skills.
The key difference between demo and live trading accounts is that the former uses virtual currency while the latter uses real currency. Demo accounts also have minimal emotional impact since traders can’t profit or lose actual money. Live accounts, on the other hand, have a profound impact on users’ emotions since traders can make significant profits or equally lose the same amount.
Most trading platforms will require users to enter their name, email address, and phone number to open a demo trading account. Some brokers, however, only require a name and address. Users must also create a strong password to protect their accounts.
Yes, demo accounts allow unlimited access to various financial instruments, including stocks, indices, commodities, forex, and even crypto. Traders with demo accounts can explore various financial markets and diversify their portfolios as they wish.
Demo accounts have all the features and functionalities available in live accounts. However, they can give users a false sense of confidence and remove the emotion from trading since it doesn’t involve any risk. Plus, with unlimited liquidity, traders don’t get a true picture of what trading entails.
Traders can polish their skills in a risk, and pressure-free environment using demo accounts. These accounts mimic actual market conditions and provide all the necessary tools and information, but you don’t have to make a deposit. As such, traders can explore various tools and test strategies without risking their capital.
There’s no denying the utility of demo trading accounts, especially for beginners looking to find their footing. These accounts are pretty much live trading accounts minus the risk of losing money. They’re incredibly beneficial for amateur traders, but experienced traders can also use them to test new strategies or try their luck trading other financial instruments. The best part is most brokers offer free registration for demo accounts and tons of educational resources to help you get a handle on trading.
So what are you waiting for? Open a demo trading account today!
Trading in the financial space requires a clear understanding of the market and the terminologies used. Pips are among the most common terms you will meet in trading. Although they are commonly applied in forex trading, they can also be used in other forms of derivatives trading. So, what exactly are pips, and how are they used in trading?
If you are getting started with trading, reading this ultimate guide will enlighten you on everything about pips in trading. From understanding what they are to their pros and cons, we are here for you.
Before we discuss how pips are used in trading, let’s first answer one of the commonly asked questions by traders: “What are pips?” In forex trading, a pip measures the smallest movement of value in currency pairs. It stands for “percentage in point” or “price interest point.” Pips help traders calculate their potential gains or losses through spreads between the bid and ask prices.
Simply put, a pip is not a value on its own but is used to measure the movement of a financial instrument. Every pip move that favours you means a profit, while the one against you translates into a loss. They are used to set a spread of a specific asset to ensure you plan and budget accordingly.
As mentioned earlier, pips are used in forex trading and present the smallest price change in a currency pair. A pip is priced out to the fourth decimal place and is equivalent to 1/100 of 1% or one basis point.
For instance, if the EUR/USD pair moves from 1.1050 to 1.1051, that represents a one-pip movement. This applies to all currency pairs except those involving the Japanese yen (JPY). The JPY currency pairs are quoted to two decimal places. When calculating a pip in forex trading involving a currency pair like USD/JPY. In this case, focus on the second digit after the decimal point.
Let’s say a Japanese Yen currency pair moves from 120.03 to 120.04. In this case, understand that it is a single pip movement. Therefore, if you enter a position on a pair involving this currency and close the trade when the price reaches 120.23, your profit would be 20 pips (120.23 – 120.03).
Overall, it is crucial to understand the value of a pip in a currency pair. This is because it represents how the value of a currency pair fluctuates. As a result, you will be able to easily track your positions and know how they affect your profits or losses. Plus, pips will help you set risk management controls like stop-loss and take-profit orders.
The value of a currency pair varies depending on which currency pair or trade size you are exploring. It all depends on which currency is the base and which one is the quote/counter. For instance, in the EUR/USD currency pair, one pip is valued at 1 USD per 10,000 EUR traded. The quote currency pip is fixed at 0.0001.
To calculate the pip for this currency pair, you will calculate the trade value/lot size by 0.0001.
Pip Value = Value Traded x Quote Currency Pip
$1 = 10,000 x 0.0001
In instances where the USD is the base or first of the currency pair. In this case, you may convert the pip value into your base currency using the exchange rate. You will divide the size of a pip by the exchange rate, then multiply with the trade value or lot size.
Let’s look at the USD/CAD currency pair, for example. If the exchange rate is at 1.3601. In this case, you will calculate the pip value by dividing 0.0001 by the exchange rate. You will then multiply the results by the standard lot size (say 100,000 USD bought against the CAD at 1.3601 and sold at 1.3602).
Pip Value = Trade Value (Pip Size ÷ Exchange rate)
$7.3524 = 100,000 (0.0001 ÷ 1.3601)
Your profit in the trade above will be 1 pip or $7.35.
When it comes to currency pairs involving the Japanese Yen, they are quoted in two decimal places. In a USD/JPY currency pair, the value of a pip is at 1/100 divided by the exchange rate. Therefore, if this forex pair is quoted as 140.53. In this scenario, one pip will be 0.01 ÷ 140.53 = 0.00007116. When multiplied by a lot size of 100,000 USD, the pip value will be $7.12.
Pips are used in various ways when it comes to managing trades in a currency market. They are applied in every position you open and close. As a trader, understanding how pips are used will help you approach trading strategically while maximising your experience. Here’s how pips in trading are used.
As mentioned earlier, pips are used to measure a trade’s value. A pip itself doesn’t have a value, but it is determined by a particular trade and the currency exchange rate between a forex pair you are exploring.
Besides measuring a trade’s value, you can use pips to calculate potential profits or losses. This will help you strategise and budget for your next activity. Plus, it will be easier to track your activities and learn from your mistakes.
Risk management controls like stop-loss orders allow you to mitigate the amount of loss you may incur in case a trade works against your strategy. Using pips, it’s easy to set your limits so your positions can close at the right anticipated time.
While pips are beneficial to traders, they also help brokerage firms set spreads for forex trading activities. Plus, it will be easier for them to adjust the spreads to the current value of the instruments being explored.
Pips in forex trading carry numerous benefits rather than drawbacks. As a trader, understanding these pros and cons will help you find the right trading approach. Here’s what you need to know.
The value of 10 pips depends on the currency pair and trade size. For instance, if you are trading the EUR/USD pair with a standard lot size (100,000 units). In this case, a single pip would be worth approximately $10 (0.0001 x 100,000). Therefore, 10 pips would be worth $100. For smaller trade sizes, like mini or micro-lots, the value of 10 pips would be smaller. This would be around $10 for mini-lots and $1 for micro-lots.
Pips are directly tied to profit and loss in forex trading. They represent the difference in the number of pips between the entry and the exit price. Simply put, pips determine how much profit or loss a trader has made. For example, if a trader buys EUR/USD at 1.1100 and sells it at 1.1120, they gain 20 pips. If they traded one standard lot, that would result in a $200 profit. But, if the price moves in the opposite direction. In this case, you will incur a 20-pip loss, equating to $200 lost for a standard lot.
Pips are the foundation of calculating profits, losses, and overall trade performance. Since they represent the smallest measurable movement in currency pairs. In this case, they help gauge the potential impact of market movements on their trades. Without this knowledge, you wouldn’t understand how much you stand to gain or lose in any given trade.
A pipette is a fractional pip, typically representing one-tenth of a pip. In forex, pipettes are displayed as the fifth decimal place in most currency pairs. For example, if EUR/USD moves from 1.10503 to 1.10504, that movement is one pipette. They are also shown as the third decimal place in pairs involving the JPY. Pipettes provide more precision for traders. This is in high-frequency trading strategies where very small price movements are crucial.
Understanding pips in forex trading is crucial. Remember, they serve as a universal unit of measurement for price movements in currency pairs. Whether you are managing risk or setting take-profit or stop-loss levels. In this case, pips will help you make the best decisions. You can also apply them in tracking profits and losses for effective planning.
We understand that this concept may seem complex at first. This is especially when factoring in different pip values across currency pairs and trade sizes. However, mastering this element of forex trading can significantly improve decision-making. Overall, pips help maintain clarity, consistency, and precision when making trading decisions. Although there are some pitfalls to pips in trading, the advantages far outweigh the disadvantages.
