So, you have decided to be a trader. What are you going to trade?
The options can seem somewhat daunting: shares, currencies, cryptocurrencies, commodities, indices, bonds and the rest. Where on earth to begin?
A good starting point in selecting the assets you wish to trade would be to decide how many different securities you intend to deal in. This is very much a matter of temperament. One novice trader may decide to focus not merely on one asset class, such as commodities, but on only one or two securities within that class, such as gold and silver.
Hedgehogs and foxes
By contrast, another would-be trader may choose to paint on a much broader canvas. Such a person may take the view that nothing ought to be ruled out, and that the widest possible “investable universe” provides a happy hunting ground for the intrepid trader.
The hedgehog knows one important thing, while the fox knows lots of lesser things. Neither is better or worse than the other, and most people sit on a spectrum between the two, but it is essential that the would-be trader has the self-knowledge to decide where on that spectrum they reside.
Once they have done so, they can begin the process of asset selection.
Given that every novice trader will be different, it makes sense at this stage to examine each asset in turn. After all, the characteristics of traders vary greatly, but the characteristics of the various families of securities remain relatively stable.
Let’s start with the euro, used and overseen by a number of states, as it is for currencies such as the Japanese yen, which circulates only in its country of origin.market. This is, at heart, a “political” market. It trades a state-guaranteed and state-sponsored product, money, and is thus supremely influenced by political decisions. This is as true for the
OPEC and the oil market
Are you comfortable dealing in such intensely-politicised assets? If not, currency trading is not for you.
You may be much happier trading . By definition, almost all the companies whose shares are quoted are 100% private-sector entities. True, some will be dependent on public contracts – defence-related firms being a classic example – while others, such as British housebuilders, have been greatly helped by government-funded schemes introduced in the wake of the financial crisis.
But overall, this is a market driven by private enterprise. A sizeable literature of research is available on the largest companies, should the trader take a fundamental approach to asset selection, while for those who prefer a technical, chart-based approach there are historical trading records from which can be gleaned levels at which individual stocks have seen support and levels at which they have encountered resistance.
The sector straddles both the politically-driven nature of the currency exchanges and the free-market atmosphere of company stocks. is an obvious example here, with the inter-governmental Organisation of Petroleum Exporting Countries (OPEC) explicitly seeking to influence the price by altering the volume of crude entering the world markets.