Trading is making decisions based on data: How to unlock profits

For those interested in the world of finance, trading is an activity that requires knowledge, experience, and careful emotional management. This article will guide you through trading from the perspective of experienced investors so you can understand what trading is and how it can generate income.

The true meaning of trading and how it differs from traditional investing

Trading is not just buying and selling assets. Trading is the art of reading the market and dynamically assessing prices. Traders do not wait for assets to appreciate long-term; instead, they look for opportunities to profit from price fluctuations up and down within each day or even each hour.

The financial markets offer a variety of assets—from shares of leading companies like Microsoft (MSFT) and Apple (AAPL) to foreign currencies such as USD versus JPY, or commodities. However, trading always involves risk—no strategy guarantees 100% profit.

Three types of traders: Day Trading, Swing Trading, and Long-Term Trading

Trading systems vary depending on methods and timeframes chosen by traders.

Day Trading: Profiting within a single day

This is a fast-paced trading style where traders open and close positions within the same day or even within minutes. It requires less capital but can yield high returns through leverage.

Advantages:

• Quick profits from daily volatility
• No need to monitor multiple stocks for days
• Benefit from diverse trading opportunities each day

Disadvantages:

• High transaction costs due to frequent trading
• Rapid losses from price volatility
• Requires high experience and constant market monitoring

Swing Trading: Profiting over the medium term

This style lies between Day Trading and Long-Term Trading. Traders hold positions for days or weeks to capture larger price movements.

Advantages:

• Less screen time than Day Trading
• Lower transaction costs
• Suitable for full-time workers

Disadvantages:

• Requires market vigilance and discipline
• Risks from holding positions over longer periods

Long-Term Trading: Building long-term returns

Traders hold assets for weeks, months, or even years. They analyze broad trends and wait for smart price movements.

Advantages:

• Less stressful, no need for hourly monitoring
• More profit opportunities through multiple trades
• Can work full-time while trading

Disadvantages:

• Requires deep understanding of economic factors
• Not suitable for impatient traders seeking quick gains

Five rules professional traders follow to reduce risk and build sustainable income

1. Study yourself first: what do you want?

Before starting, ask yourself: Are you trading to save money? To generate extra income? Or to save for retirement? These answers will help you choose the right trading approach.

2. Continuously learn

Trading demands ongoing education. Read articles, study guides, and practice on demo accounts to deepen your market understanding.

3. Learn technical terms

Traders must understand many terms like Leverage, CFD (Contracts for Difference), Scalping. Proper knowledge helps organize your trading effectively.

4. Manage risk strictly

Set limits on how much you can lose. Risk management isn’t optional; it’s mandatory.

5. Choose a trustworthy broker

There are many trading platforms. Select one with reasonable fees, good customer service, and regulation from reputable authorities like ASIC or FSC. Always study the analysis tools available.

Analytical frameworks used by professional traders

Macroeconomic analysis

Traders need to understand current economic trends, interest rates, policy management, and other data affecting the overall market.

Sector analysis

Not all industries grow simultaneously. Traders should observe which sectors are expanding and which are declining.

Fundamental analysis

Study profit and loss statements, debt ratios, assets, and internal company factors to decide whether to invest.

Trading strategies for different types

Stock Trading

Buying and selling listed company shares. You need to open an account with a broker, who executes your orders via automated trading systems.

Stock trading is legal, but traders bear the risk. Choose brokers regulated by ASIC or FCA to avoid fraud.

Why choose stocks? Despite volatility, stocks tend to appreciate long-term. Good companies pay dividends, making stocks a good way to save and build wealth.

Cryptocurrency Trading

Cryptocurrency is a digital currency without physical form, with value driven by demand.

Crypto traders often use Scalping—short-term trading that captures small price movements and quickly sells for profit within minutes. They may open dozens or hundreds of positions simultaneously.

Forex Trading

Forex involves exchanging foreign currencies. It’s the largest market globally, open 24 hours nearly every day.

Forex’s advantage is low capital requirement with high potential profit via leverage, but leverage also increases risk of large losses.

Popular currency pairs include:

• EUR/USD (Euro - US Dollar)
• USD/JPY (US Dollar - Japanese Yen)
• GBP/USD (British Pound - US Dollar)

CFD Trading

CFD (Contracts for Difference) allows speculation on price movements without owning the underlying asset. It requires low capital, offers high returns, but also involves high risk.

Gold Trading

Gold is a safe asset with lower volatility than other assets. Traders often use CFDs to trade gold without physically holding it.

Five principles for successful trading

1. Continuously learn and improve

Read articles, buy books, attend seminars—ongoing education is key.

2. Practice until proficient

Demo accounts are essential. Practice with virtual money until familiar with the market.

3. Keep emotions in check

Greed and fear are traders’ enemies. Use reason and data to guide decisions.

4. Be consistent and disciplined

No trader wins 100%. Consistency and discipline help generate long-term returns.

5. Choose the right broker

Select reputable brokers with fair fees, good customer service, and proper regulation.

Summary

Trading is the art and science of reading markets and making rational decisions. Traders must study continuously, practice regularly, and prioritize risk management.

No method guarantees 100% profit, but with effort, learning from experience, and discipline, you can create good profit opportunities. Choose suitable trading styles, platforms, and brokers, and start cautiously.

Frequently Asked Questions about Trading

What methods can I trade with?

You can trade various assets: stocks, cryptocurrencies, forex, and gold. Using leverage can boost profits but also increases risk.

What is the purpose of trading?

Trading aims to generate income from short-term price movements, unlike buy-and-hold investing. Traders seek higher short-term returns.

What are the risks of trading?

Main risks include losses, asset price volatility, and leverage amplifying losses. There’s also the risk of fraud if choosing unregulated brokers.