The profitability and success of your trade depend on the choice of the appropriate tool. There are about 100 available tools and it is problematic to select the one that better suits you. Ideally, the tool should be liquid, fit your plan, and acceptable risks. From this perspective, the list of tools in demand may include options, futures, shares, currencies, and bonds. Let’s learn how they work in detail.
This is an agreement of sides under which they commit to purchase or sell an asset in the future at today’s fixed rate. Among the choices can be precious metals, goods, raw materials, and currencies. This is beneficial for both sides because their risks are reduced and there is a warrant of the transaction.
Beginners are advised to use this tool because here you can trade anytime with a minimum deposit, pay less commission, and quickly make income. It is only necessary to consider the difficulty in predicting the cost of an asset in the future and its risks.
This is probably the most common tool. Experienced participants are advised to begin with it. It is believed that this is quite simple to purchase and sell this security, make some income and possible dividends. In fact, you have to constantly monitor market news and stock movements to predict fluctuations in prices. To make it beneficial, you need a large deposit to purchase liquid shares. Also, you do not know the amount of dividends you will receive.
This instrument is very similar to futures, but there is a distinction — we get the right, and no further obligation to purchase/sell the goods at a fixed rate. For those involved in trading, one of the best tools is stock options. However, since such contracts have due dates, and it is necessary to think about how long the market will continue to move in your direction, as well as predict the expected movement volatility. So, this tool is not easy to master for a beginner.
This tool means the cost ratio of one currency to another. The most common pairs are EUR\USD, GBP\USD, JPY\USD, and others. Speculations on currencies are the most advertised tool for beginners, which attracts them with simplicity, instant earnings, and the minimal deposit. However, here are the highest risks in which your error guarantees losses.
Liquidity at the London session is higher than in any other since London occupies almost 38% of the total trading volume — more than New York (17%) and Japan (6%) in total. So, entering during the London session is a good start for newcomers.
This is an asset that guarantees the repayment of borrowed funds with interest after a certain time. When buying bonds, you make a profit in any case. You become a creditor to whom the company has certain obligations. This tool is good for long-term investments and requires significant funds because the interest depends on the number of bonds. Anyway, this is still a good solution for beginners.
There are no universal tools, that will work for everyone, so your decision should be based exclusively on your strategy, amount of deposit, and experience. Each of them can bring both profit and loss. So, it remains only to try each tool yourself and select the most suitable for you.