Britain’s financial services industry is huge. With almost £120 billion a year being added to the UKs GDP by the industry, it’s clearly one of the most vibrant and growth-oriented in the UK.
It’s a complex and multifaceted sector, with one of its main sub-sectors being retail trading. That sub-sector attracts members of the public to be involved in trading of all varieties – and while there’s never any guarantee of any trading endeavour becoming profitable, it’s also true to say that many traders manage to build successful and sustainable careers.
From foreign exchange trading to exchange-traded futures and everything in between, there are plenty of options on offer.
For every trader who signs up with a broker there are several more who feel that trading is too complex, daunting or even frightening to become involved with. All legitimate, regulated brokers carry warnings explaining just how big the risks can be, and that is often enough to put risk-averse people off for life. But it doesn’t necessarily have to be a high-risk endeavour, and there are steps you can take to make your trading experience as trouble free as possible. This article will look at some of the reasons why many find trading daunting and how that can be mitigated.
The risks of leverage
Even the word “debt” can strike fear into the hearts of the most risk-averse – and when combined with the risks of the market and the trading world, it forms one of the most potent fears that put off many potential traders. Margin-traded, or leverage-based investment products, are essentially tradeable assets which see their potential value rise (or, indeed, drop) because of the debt they bring: the trader only really “owns” a small portion of the asset, but will cash in or lose out to a greater magnitude depending on how the investment performs.
Tying debts and investments together, though, is nothing new. Mortgages, for example, are prime examples of taking on debt in order to hopefully grow the value of an investment. It’s possible to benefit from leverage provided you start out small, and only take incremental decisions with which you’re fully comfortable.
Scammers and fraudsters
Anything which involves money is, sadly, vulnerable to fraud – and that’s not going to change any time soon. With stories like the case of Noerus Investments (a forex firm which allegedly scammed investors out of over £1 million) regularly in the news, it’s clear that there’s a real problem with fraud in the financial trading world.
But this isn’t a reason to avoid it completely, and there are ways to protect yourself at least in part from the risk of fraud. You should always, for example, check to see that your chosen provider is regulated by the Financial Conduct Authority (or FCA) in Britain or a legitimate international body – perhaps ASiC, or the Australian Securities and Investments Commission if your broker is in Australia.
Strategy and planning
Once you’ve made yourself comfortable with these aspects of trading, the next thing to work out is your strategy. Again, this can soon seem like a daunting process: choosing your preferred method of trading is something that doesn’t come naturally, and it often requires a lot of time-intensive research in order to ensure you’re trading in an informed way.
Take the ongoing debate between technical analysisand fundamental analysis. Some traders choose to take the technical approach, which means they rely entirely on both historic and recent price data for a given market.
This, they argue, takes into account everything a trader might need to know. Other traders, however, take the fundamental approach. That involves taking into account the wider market and looking at things which could affect its performance, such as economic events like interest rate rises or political events such as elections or leadership changes.
There’s no right or wrong answer, and the only way to get to grips with this process is to do your research. Fortunately, all sorts of services exist to help you out in this regard. 28 forex trading tips are available on FXExplained alone, while there are plenty of print books and eBooks designed to introduce you to the basics of trading strategies.
Trading isn’t an easy way to make money and anyone who states that is the case is not telling the truth! But that doesn’t mean it is not worth investing in trading of some kind. In fact, it’s possible to overcome any trepidation you have about trading by conducting thorough research, something that will build confidence.
Whether you’re put off by scams, are daunted by debt or can’t imagine yourself planning and strategizing, there are ways to combat all of those problems and get yourself well on the way to having a successful trading career.