Tips for Reading the Financial Markets Effectively

  • If you’re new to the financial markets, you’ll want to know a couple of things before you get your feet wet. Firstly, what types of assets are you interested in trading? What causes asset prices to rise or fall? What steps can you take to anticipate the price movements of financial assets? Which trading platforms are best suited to you? Expert traders recommend that newbies begin with an asset they are familiar with. Consider that most trading platforms today offer a range of asset classes, including the following:

    Stocks – IBM, MCD, GOOG, FB, TWTR, GS, MS and thousands of others.

    Commodities – gold, silver, copper, iron ore, cocoa, zinc, palladium, platinum, soy, coal.

    Indices – NYSE, FTSE 100, CAC 40, DAX 30, JSE, and others.

    Currencies – USD, GBP, JPY, CHF, SEK, CAD, ZAR, COP, BRL, and others.

    Treasuries – 1-year Treasury bonds, 10-year Treasury bonds,

    Digital currencies – Bitcoin, Litecoin, Dogecoin, Ethereum etc

    Step #1 – Choose an Asset

    Once you have decided upon a financial asset class or option, you can use that as a springboard to understand the dynamics of the trading platform you’re working with. For example, a good place to start is your country’s currency, perhaps the CAD. Since Canada is a commodity-rich country, the strength of the loonie is largely influenced by what happens with commodity prices. When the price of crude oil is rising, this bodes well for the Canadian economy, which is rich in crude oil supplies.

    Likewise, the Canadian economy also relies heavily on timber, plastics, industrial machinery, motor vehicles and parts, aluminium, fertilizes, telecom and aircraft. When the prices of these commodities increase this brings in more revenue to the Canadian economy. All Canadian exports are paid for in Canadian dollars, meaning that demand for the CAD increases when commodity prices rise in global markets.

    Step #2 – Practice Trade

    Before you invest real money with any individual asset, it’s important to practice your trading tactics and strategies online. Many reputable trading platforms offer a demo account option which allows you to practice trading for free – no money down. This is the best way to understand the trading platform, and how macroeconomic variables impact asset prices.

    Step #3 – Follow the Pros

    According to Weiss Finance guru Martin Schein, ‘Everybody has to learn how to trade financial instruments. In all my years as a financial analyst, I cannot stress how important a sound financial education is for your daily trading activity. Read as much as possible on macroeconomic variables that can impact prices of assets. For example, data releases like GDP, NFP, interest rates, new housing starts, inflation, monetary and fiscal policy can dramatically influence asset prices. Use a reputable broker and, ensure that there are tight spreads in play. If possible, try to leverage your bankroll with promotional offers, and piggyback off the success of profitable traders by copying their trading activity. No strategy is 100% ironclad, however you can boost your chances of success by learning from seasoned professionals, by watching webinars, reading tutorials and expert trading guides.’

    What’s Hot Right Now?

    Recent geopolitical events have resulted in traders flocking to safe-haven assets such as gold bullion. The price of gold rose above the critical $1,300 per ounce level, and was trading at $1,334.21 per ounce by Monday, 4 September 2017. Gold has gained ground over the past 1 year (0.18%), and has a 6-month appreciation of 8.17%. For the 30-day period ending on September 4, 2017, gold appreciated by 5.27%. The price of gold is directly related to the geopolitical uncertainty in markets, notably North Korea. As tensions with the rogue totalitarian regime rise, so demand for gold increases. A month ago, gold was trading at $1258.30 per ounce, and it has appreciated by $80 since then.