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Nine Simple Trading Rules You Need to Know

Fusion Markets

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If you want to cross the line between being an investor and being a trader, there are some things you should keep in mind. The rewards are higher, but there is much more at stake. You could lose hundreds, if not thousands of dollars in a day. I have been trading on MetaTrader for years. I have watched people gain and lose fortunes multiple times. Throughout those years, I have come up with essential truths to always keep in mind when trading:  





1.   Trading is both easy and difficult.  


There is a misleading simplicity when it comes to trading. As long as you diversify, stick to your strategy, never go all in, and always secure your profits, you can stick around for very long. 

However, trading becomes difficult because of the human aspect and our hidden biases. We tend to get greedy and blinded by small gains or by big losses. We tend to abandon our long-term strategies because of what we see in the short term, and this is where Rule Number 2 comes in… 

 

2.   Psychology is everything   


Trading is not all about watching the charts and the news 24/7. There is a more significant, underrated aspect of trading: your mindset. How sure are you that you can stick to your strategy even though you just lost $4,000.00 yesterday? 

Forex trading will expose you to the highest highs and the lowest lows. Throughout all these, you have to keep a stable mentality and not let impulsive decisions take control. You can have the best strategy in the world, but if you can’t learn to handle your emotional state, you won’t go far.   

The better you are at controlling your emotional impulses, the more successful you will be in trading and finance in general.  


3.   Everything in moderation, including moderation   


The money you are trading should never comprise all your assets. As they say, only trade as much as you are willing to lose. In the world of trading, you will come across individuals with stories of overnight riches because they went all-in. But that can only last for so long.  

Try to resist the temptation of being greedy and remember that wealth is not built overnight. It requires consistency and time. 

Of course, there will be exceptions when you have to break this rule, especially if you see huge opportunities present themselves in the market. However, the general rule still stands; practice moderation in most things, including trading.  


4.   Risk and reward  


Trading is a high-risk, high-reward game. While you might get caught up in the rewards, it's also important to be grounded by the risks. 

The fact that you can make $10,000.00 in two hours also means that you can lose $20,000.00 in the same two hours. If you are a beginner, you might want to stick to low-cost trading for now so that you also risk less money. 

Once you begin gaining experience, you can then start moving to larger trade sizes or expanding into different asset classes.  


5.   Leverage is your best friend and your worst enemy  


To leverage means to trade using borrowed money. It can be your best friend because you can earn more than you ordinarily could if you get a good trade. However, it can also be your worst enemy because if you are on the wrong end of a losing trade, you end up losing more than you might be capable of paying. 


As a general rule, avoid leveraging yourself too hard (think 1:500 leverage), especially if you are a new trader. Most traders getting started should think between 1:30 and 1:100 to get the hang of it. 


6.   Understand what game you are playing  


By now, we’ve already established that trading has risks. Forex trading, while playing by slightly different rules, is no exception. No matter what kind of trader you are, you should always understand and mentally prepare.  

Before you even make your first trade, even if you are trading with low-cost brokers like Fusion, you have to accept that while you can make money, you can also lose money. 


Too many think that trading is a get-rich-quick scheme, and all they must do is sign up on MetaTrader or any Australian forex broker, make a few clicks, and watch the money roll in. These are the kinds of people who end up losing money in their first week. 

The truth is, trading may be quite lucrative for some, but it requires hours and hours of studying, just like if you’re training to be a pilot, you aren’t expected to fly the fastest fighter jet before getting some practice.  


There are complicated analytical methods like technical analysis and fundamental analysis that professionals use to determine the value of a stock or a foreign currency. This way, they know exactly when to buy or when to sell. 

If you really want to get into trading, be it stock trading or forex trading, you have to put in the work and start learning. Remember, real money is at stake here.  


7.   Be responsible for your own trading.  


You might come across plenty of gurus and recommendations online, but at the end of the day, the only person gaining or losing money, is you? 

Remember that whatever happens to your trades will only affect you. It will not affect anyone else's portfolio, so there is no use blaming others if you lose money. 

Similar to #6, remember that different players in the market play different games. Your friend Michael who introduced you to forex might be a scalper taking short-term trades, whereas you might feel more comfortable as a long-term trader, which doesn’t make one better than the other. You do need to know what game YOU are playing, though.  

If you take responsibility for your trades, it is more likely that you will treat your failures as learning experiences to do better next time. Failure is the best teacher, and that leads us right to Rule Number 8….  


8.   The best investment: Your own learning   


Indeed, the best investment you can make is in yourself. If you are beginning to dip your toes into the world of finance, you might want to stay away from the markets (for now) and start investing in books and learning materials to give you an edge. Or practice slowly with a demo forex account or a small live account to test.  

The gains you can make from trading and investing may last you a week or a month, but the gains you make from investing in your own education will last you a lifetime. 

The more knowledge and information you have when you trade, the more likely you will be making successful trades in the future.   


9.   Don't be crazy  


Trading will give you plenty of temptations. You might think that you can buy low now and sell at a really high price tomorrow, so you want to pour in your life's savings all in one go. 

Stop. 

Trading requires discipline, and there's no reason to go crazy all in one go because of speculation. There is much to learn in the world of trading. 

You will be in here for a long time, so take it slow and enjoy the ride.  

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Why You've Got a Bigger Advantage than Professionals
Fusion Markets

You’ll often hear in the media or from professional market participants that retail clients “shouldn’t try to compete with the professionals”.


Ignoring the condescension here for a moment (“the adults will take it from here”) it is my firm belief after ten years of trading that this isn’t always true.


Sure, any beginner will find it challenging at the beginning to trade successfully, but you can’t expect to play like Roger Federer after one match of tennis, can you?


Charlie Ellis, the man who oversaw the $24 billion Yale endowment fund in the US once, said “watch a pro football game and it's obvious the guys on the field are faster, stronger and more willing to bear and inflict more pain than you are. Surely you would say ‘I don’t want to play against those guys.”


But Charlie is wrong in a few ways.


Yes, professional traders and institutions have many advantages at their fingertips. They get news faster than you do. Their trades go more quickly than yours. They pay far less than you do. You get the picture.


But it’s not all doom and gloom. Here are a few reasons why:


Time


No, not in the sense that you have more actual time to trade than them.


You probably don’t.


You’ve probably got a full-time job.


You might have kids or ailing parents to look after.


Trading is like a side hustle for you.


BUT your time horizon is different from theirs.


You can hold a trade for days or weeks without a Manager yelling at you “Why the hell are you selling euros, you dummy… the market is going up”. You might enter a trade on gold and plan to hold it for months.


A professional fund manager or trader might not have that luxury due to quarterly reviews, investor pressure or whatever else.


Professional Risk


Professional or Career risk is one I picked up from famed value investor, Howard Marks. In his book “The Most Important Thing” (one of my favourite investing/trading books of all time – buy it!) he talks about how in the GFC there was so much pressure on investors to not look silly by calling the bottom of the market or “catching a falling knife”. No one wanted to be the guy in the office who was buying Citibank at $1 per share!


Similar to my time point above, you don’t have that problem.


You don’t have your colleagues questioning you why you’ve bought or sold some instrument. Or a boss that is screaming at you and putting you into an emotionally defensive position trying to justify your actions.


Will you lose your job for selling USDJPY? No.


Does a professional trader get fired for always missing targets or taking on too much risk? Yes.


You need to work out what you’re happy with in your trading goals and go for them.


It’s entirely up to you what you define as success. The Pros don’t have that luxury.


Benchmarks


Which brings me to my next point.


Most professional traders and investors have a benchmark. If you’re a fund manager you’ll send out your monthly report to your investors saying “here is how much we made/lost.. and here is what the benchmark did”.


If you miss that benchmark, get ready for investor withdrawals. As a professional, you’re judged on your performance. Simple as that. The more investors leave. The more you have to sell. The more you sell, the worse your performance!


What’s your benchmark? You get to set your own. Happy with 1% a month? Awesome.


What about $100 a month so you can buy your wife dinner? Happy days.


Or $5,000 a month so you can pay off your mortgage? Even better.


It comes back to autonomy and your desires. No one else decides that but you.


Fees and Expenses


Believe it or not, you do have a HUGE advantage here, especially if you’re trading with a low-cost broker (hello, Fusion!)


If you’re a professional investor/manager, you’ll often have a significant research team, a very fancy office with lovely views, staff bonuses, visits to various investment conferences etc.


Not to mention all that travel to see your clients and investors!


Putting that aside for a moment, if you choose a good broker, you’ll pay zero spread and a small commission that is not far off what the pros trade. They’ve got $100,000,000 though, you’ve got one thousand!


So, ignore the haters telling you to stay out of the market because its only for the big boys.


However, let me be clear.


I’m not saying trading is easy and (unlike some) and that you can soon retire on the beach. It’s not. Trading FX, in particular, is a highly challenging exercise.


But don’t just assume because there are so many professionals in this that you can’t succeed or you’ll never be good enough. You have to play your own game, and for me, that’s the best part. I set my own rules as to what I consider success. That’s something the pros will never get.  


If you’d like to start trading and use your advantages to outperform the pros, Sign Up to Fusion Markets and get your feet wet with our demo account. When you're ready start a live account to start making real-time trades.

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24.02.2022
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Ethereum Trading: All You Need to Know
Fusion Markets

What is Ethereum?  


You may have heard of Ethereum being compared to Bitcoin, but Ethereum isn’t actually the digital currency itself. Instead, Ethereum is the technology that can run various financial services like payment systems, identity software, security programs, and of course, cryptocurrency trading.  

But how does this technology work?  

Like Bitcoin, Ethereum also uses blockchain technology, but there are quite a few differences on the deeper, more technical side. Blockchain technology is the foundation that supports all of Ethereum’s services.  

The biggest feature of Ethereum is that it is a programmable blockchain. This means that you’re free to use the technology according to your own needs. Whether you need it for payments, software, or even Bitcoin, you’re free to do that!  


Some of the world’s biggest companies are using blockchain in various ways, which shows how flexible the technology is. BMW, the renowned automaker, is using the Ethereum blockchain to track materials across its supply chain.  

De Beers, the biggest diamond mining company globally, is using the Ethereum blockchain to track diamonds from mining to selling. HSBC is also using the blockchain to conduct foreign exchange trades on its FX Everywhere platform.  

The blockchain can be used on just about any technology that requires information to be logged and verified.   

But if you’re here reading this article, you’re probably more interested in investing in cryptocurrency or buying cryptocurrencies. That would be ETH or Ether.  

  

What is the difference between Ether and Ethereum?  


If Ethereum is the technology, then Ether is the cryptocurrency that runs on that technology. However, for most people, “Ethereum” and “Ether” are used interchangeably to refer to the digital currency instead of the technology.  

The shorthand for Ether is ETH, and just like Bitcoin, ETH is a form of decentralised finance or “defi.”  

This means that the digital currency is not centrally regulated by one authority. Instead, all the computers on the blockchain do the work of validating each and every transaction on the network.  

Ether is up there with Bitcoin as one of the most highly traded cryptocurrencies globally, along with Ripple XRP and Litecoin and others available on Fusion Markets’ platforms.   

  

The benefits of trading Ethereum  


As with any digital currency, the biggest benefit of trading Ethereum is the lack of centralised regulation because of blockchain technology. This means that making fraudulent transactions on the network is extremely difficult and almost impossible.  

However, one thing that makes Ether different from Bitcoin is that the supply of Eth is limitless.  

Let’s break it down a little bit.  

The way Bitcoin works is people are constantly “mining” for Bitcoin. However, there is a predefined limit for the amount of Bitcoin that can ever be in circulation. Once all the available Bitcoin has been mined, that’s all the Bitcoin that will ever circulate.  

The Bitcoin mining rate slows down over time, so the prediction is that the last Bitcoin will be mined at around 2140. That’s over a hundred years from now, but it’s still a definite time that will arrive.  

For most people, the problem with the limited supply of Bitcoin is that it can create issues like high inflation levels in the future.  

The supply of Ether does not have the same limitations that Bitcoin has. Thus, it can be more stable in its fluctuations, and this effectively works as a hedge against extreme inflation.  

Ether is also less volatile, at least when compared to Bitcoin. So if you’re looking to invest or trade in cryptocurrencies, but you want to minimise the volatility, Ether may be right up your alley.  

  

Risk Management when it comes to Ethereum  


Despite the lower volatility levels of Ethereum, it is still a cryptocurrency. This means that unlike more traditional investments like stocks and forex, its price is still quite volatile in comparison.  

So, when trading or investing in Ethereum, it’s essential to employ risk management practices.  

First, only use as much money as you’re willing to lose. This is a basic precept for investing or trading in general, and it applies to Ethereum as well. The price of ETH in 2021 may be high, and it may look like it will continue to rise, but no one can really predict the next price movement.  

Second, diversify. Don’t put all your eggs in one basket. If you want to trade cryptocurrency, make sure to allocate your funds across multiple digital currencies. That way, if the price of one plummets, you still have your holdings in other cryptocurrencies to rely on.  

Third, do your own research. Don’t rely on social media gurus or finance forum posts that tell you when to buy or sell. Cryptocurrency is a fairly new concept, and it’s pretty much still in its infancy stages.   

If you’re investing in ETH, make sure that you understand it, how it works, and what the technology behind it is.  

A good investment is one where you believe in the product you’re investing in.   

While it’s true that no one can really predict how the price of the cryptocurrency will move, it’s much safer to put your money in investments that you’ve done research in instead of just blindly following what you see on social media.  

Finally, make sure to monitor your own physical and mental health while trading cryptocurrency. The markets run 24/7, and you don’t want to be looking at charts all day while ignoring your own well-being.   

Taking care of your mind and body allows you to make better, more rational trading decisions, dramatically reducing the risk.  

Risk management is a fundamental skill that any reasonable investor or trader should have. There are plenty of risks when it comes to ETH and cryptocurrency in general. Risk is unavoidable, so the best thing we can do is to manage and minimize it.  

  

The Future of Ethereum  


Despite cryptocurrency being a new concept and Ethereum being fairly more recent than Bitcoin, its rise in the charts shows that it’s here to stay.  

The main selling point of Ethereum is how its blockchain technology compares to Bitcoin, and with the number of people investing in or trading ETH, it’s clear that there is widespread acceptance and trust for ETH.  

Will ETH keep its place as one of the top cryptocurrencies in the future? The truth is, nobody knows. Governments are still only beginning to recognise and regulate cryptocurrencies, so the future of ETH is, as a whole, uncertain.  

But for some people, that uncertainty is what makes ETH such a good investment. Hopefully, this article has helped get you started on the basics of trading ETH. 

 


Ethereum Trading
Crypto currency
Education
22.10.2021
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