The key to any successful stock trading consists of several components—practical trading, money management and analysis of existing risks.
At the moment, the exchange trading procedure has been simplified to the maximum, it is enough to reproduce just a few mouse clicks and you have already opened a deal on the exchange.
But trading itself has absolutely not undergone any changes, making money is just as difficult as with telephone dealing.
How to Track Profit/Loss Ratio
Some traders try to squeeze as much more out of the deal by using haphazard trading. As a rule, this approach always ends in failure.
You have to imagine how much you can earn and how much to lose before starting the deal.
For example, if you have $10,000 and open a position in one lot, the predicted profit is about 50 pips or $500, at the same time the stop loss order needs to be set at least 15 pips.
If the market situation does not allow you to do this, you will have to wait for a more opportune moment or reduce the volume of the transaction.
The best option for the ratio of profitability and loss ratio is 1: 3 or 1: 4.
It is clear that the market does not always provide such opportunities, there are situations in which the probability of a reversal at a certain point is quite high.
At such moments, it is better to wait and open a deal only after the trend overcomes a sufficiently strong level.
Pros and Cons of Long/Short Investments
Long Investments
Long investments are fundamentally different from investments with a shorter period. This is due to the fact that the investor does not expect that these assets will generate income from current operating activities, but rather an increase in the value of the asset in the future.
Often these investments involve retirement or some other type of financial planning, although of course not always.
Take a look at the key advantages of long investments.
Deals Can Do Good Results
It follows that a long-term investment strategy requires patience and excess free capital. But, as the example of Amazon shows, making a potential profitable investment in your financial future does not necessarily require a lot of funds.
Long-Term Promotions
What are the assets suitable for long-term investment? As expected, stocks, among other assets, are often considered suitable instruments for long-term play.
Of course, you should distribute your stock portfolio across a range of companies, which can help reduce your risk of capital loss.
Wide Range of Investment Opportunities
Buying real estate and government bonds are other examples of long term investment strategies.
While both of these tools are considered safe enough, they also carry risks. Property prices can plummet and it will take years for prices to recover, as we saw in 2007–2008.
The risk of investing in bonds is less pronounced and is limited only by the size of the profit associated with the respective interest rates and the relative value of the bond if the central bank raises interest rates.
There are two cons to single out as for the long investment, namely:
- More risk with a long investment horizon
- Long-term investments require patience.
Short Investments
An investor opens a short position in the hope of making a profit from a fall in market quotes. To do this, he borrows shares from a broker secured by cash, sells them on the market and waits for them to fall in price.
The investor is then expected to buy the same number of shares, but at a reduced price, and return them to the broker. And the difference between the selling price and the buying price remains with the investor as a profit.
Unlike the long one, a short position can only be opened for a short time. This is due to the fact that the investor is obliged to return the securities that he has borrowed, and not for free, to the broker.
Selling stocks from the investor’s portfolio is not a short sale. When an investor sells previously purchased securities, it is just closing a long position.
Exness: Tracking Profit/Loss and Easy Usability of Long Investment
According to the Exness experts, the risk is that the share price may rise contrary to expectations.
And the investor finds themselves in a difficult situation. They are to give the borrowed securities to the broker, and for this they are forced to buy them at a higher price than he sold earlier.
If you do decide to try to make money on a short sale, it is better to hedge your bets. Market experts advise you to set stop-losses and not borrow too much.
Thus, it is better to use all of the tools by Exness and track your profit/loss. Due to the easy usability of long investment, the trading process access given by Exnesscom will never get you disappointed.
