How To Make Money from Stocks, Forex or Cryptocurrency Trading

By Julius Alagbe

Do you want to know how to make money from Stocks, Forex or Cryptocurrency Trading? The rules are the same: buy low, sell high.

But it is not that simple if you don’t play your game right. Forex, stocks, and cryptocurrency can make you some good money, and then they can break you if you have not learned the basic rules.

There are two types of investors. The ones that want to invest to protect their wealth and those that want to make money. Wealth managers always profile their clients differently based on these targets.

High networth individuals have made enough to scale them through life and still leave something substantial for their families. On the other hand, the second type of investor wants to achieve financial freedom.

From the beginning, their focuses are not the same. High networth investors would prefer government papers, and they often shy away from taking a much higher risk. But those seeking financial freedom or building wealth from the investment ecosystem would prefer to take a much higher risk.

And that is where there is risk.  Risk has a twin brother, though they always move together. Its name is reward. Most of the time, reward is shy ‘guy’ until it gets used to being around. You will be able to know when the reward moves, when it gets stuck, and how and why stuff happens.

Now that you have made up your mind, it is important you know that the road is not always smooth. You gain when your calculation is succinct and with a higher degree of confidence level, undistorted by non-factual expectations.

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You lose when you exaggerate your expectation without factual variables. You don’t get greedy with your forecast; as a matter of fact, financial accountants have a similar explanation not to overstate revenue expectations.

What do you do when you don’t know what to do?

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If you are new to investing, the probability that you will make a mistake is high when you start the journey all alone. If you don’t have financial advisers, you might shoot blank. If you don’t read, you might misstep.

Your investing skills will be tested against what you know, what you think you know, and what you should know.

Information is as important as the journey you want to embark on. Take, for example, if your target is to achieve financial freedom, you don’t have a business building a fixed-income securities portfolio. Your return is determined immediately you stake a bet.

If you do stock. Two things will happen to you. You may lose, and you may gain. If a stock price is declining after you have bought some, a savvy investor won’t panic as long as the company remains a going concern.

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Buy more of the same stock. You will be better afterward than when you don’t buy more. If the stock is gaining, it is the wrong time to buy more, really and truly. Why?

The stock will peak at a point on retreat. If you enter a position and the stock begins to pick up, if you get to know just in time, you can boost your holdings. But don’t ever forget the law of gravity.

The level of information an investor has will always be an advantage. As a new investor, go after information, and don’t forget to look at the numbers. A company that maintains strong earnings growth, pays dividends, and has low keyman risks will do better in the stock market than its opposite.

Wait a minute, if you have N100,000 to invest, your kind of stocks should not be high-priced stocks. The market has set an invisible bar to distinguish shareholder buyers. If you go after a stock that is N5000 per share, you might just get 2,000 units for your money.

These high-priced stocks don’t move as much as the low-priced ones.

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In the stock market, volatility is the business. There are stocks that haven’t moved in three months. Their dividend can’t give you financial freedom either. Why would you do that?

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Any stocks that have billionaires as influential shareholders should not attract your attention. It is important that you know that people don’t hold stocks for the same reason as you do. You are a shareholder, truly, but you are not an insider.

The insiders do business with the company. They do contract, and some sit on the board to set direction. They are not necessarily holding the shares because they want dividends or capital appreciation; they are there to hold the company by jugular.

1. Fixed income securities

Deep-pocket investors don’t love to take more risk; I mean, they are okay. Still, they don’t want inflation to reduce the value of their wealth. More often than not, they have a preference for dollarised investments. That is why the majority of investment banking firms have foreign currency-priced mutual funds. That investment option is not for hustlers; it is for the rich class.

What are they really looking for? Wealth protection. In the course of doing that, they still make more. Why? Money is a tool for making more money. Banks boosted their earnings performance with huge investments in government securities. Some big lenders made most of their earnings via treasury bills, bonds, and money market placements.

There are banks that made N1 trillion from these—why do you think this is possible? They have access to depositors’ funds to hunt for high-yield government borrowing instruments. When the yield on naira assets is 20%, imagine what a N1 trillion investment will do.

If your pocket is not deep, I mean you have no intention to protect any wealth—you must be willing to take risks. If you buy Treasury bills, bonds, or other fixed-interest securities assets, you do not take any risk.

ii. Trading Forex

Forex is a dangerous place to start for newbies. It can easily drain your resources, but if it does not, you can rise overnight. Trading currency is fantastic when you are well grounded. If you take it as a gamble, you are more likely to get burned.

Anyone selling you this idea won’t have to tell you the truth, but you just need to find out by yourself. How many people succeed as forex traders versus those that failed?

Don’t be scared; you can learn how to play any game. Forex is risky but has high reward. It is always better to enter with your eyes open and your mind alert to a lot of variables that can boost your upside chance and reduce the chance of running losses.

Greed and sentiment have roles to play while you are entering the forex market as a newbie. Don’t invest all you have here until you have tested the deepness of the ocean.

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Play with a demo account for a long time—checking and learning using fake money to trade is the first step to take. Read news and understand basic rules of demand and supply. Understand the countries and their currencies; learn to study your trade pairs.

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You must know when to bet on your currency pairs and how to stop loss. Your profit target per day should not be big compared with the elephants in the market. You have to see yourself as an ant seeking to eat crumbs as a beginner. Once you overrate your trading strength, something will happen.

iii. Trading Cryptos

Market traders are yet to come to terms with which is more volatile between forex and cryptos. They are both huge, but forex is far ahead because global investment banking firms and other bellwethers are there.

Signals and fundamentals, in addition to sentiment, determine price movements to a greater degree. It is the same for stocks and forex too. The top 10 cryptocurrencies are quite volatile. When they move, investors either laugh or cry.

There are times when you do both. Investing here is as simple, and you can actually follow the bandwagon and still succeed. Some financial experts have concluded that the crypto market works more like gambling with some features of stocks and forex trading.

Most of the retail investments are driven by sentiments. Nothing more. It works because they are almost always correct that demand for Bitcoin will always be there, even when there is no particular reason for them to believe so.

To be continued….

culled from Marketforces Africa