Different markets and asset classes have different personalities: some move slow and steady, others have bursts of volatility followed by long, eery lulls. To find markets whose pace and price action suit your temperament, you have to try new ones. On Nadex, you can do it risk-free in your permanent demo and with limited risk in your real money account.
By Vikram Rangala
Wednesday, September 7, 2016
September 7th is the day Apple Computer reveals the new iPhone 7, which means it's also the day millions of iPhone 6 owners become sad about the obsolete piece of junk in their pockets. What did they ever see in that old thing? The iPhone 7, on the other hand, looks like happiness in a sleek, shiny, slightly different case.
If people can change their feelings about a phone that dramatically, it's no surprise that they can change their feelings about the markets they trade. Trading is emotional in many ways, and one of them is the intensity some traders feel about being crude oil traders or grain specialists. Trader Anthony Ward of the London investment firm Armarajo has been obsessed with cocoa since the 1990s and has at times cornered as much as 7% of the global cocoa supply. Some call him Willy Wonka.
Mr. Ward loves cocoa and has offices in West Africa and his own weather stations to monitor crop conditions in Indonesia, Ecuador, and Ivory coast. He is rumored to have enough of a corner to influence the price of chocolate. Whether that rumor is true or not, one thing is a fact: He knows cocoa better than almost anyone in the world.
If you love a market well enough to learn it that closely, you might well stick with it for years. Some traders diversify into markets related to their main interest. Stock index traders sometimes trade gold as well, since gold is often a safe haven during stock market downturns. Even Anthony Ward diversified from cocoa to coffee and other agricultural commodities.
But the most common way traders move from one or two markets to confidently trading a range of them is by learning an important lesson of technical analysis: if it has a chart, you can trade it the same way as any other market that has a chart.
A chart is a chart is a chart
Technical analysis is based on the idea that the most important thing for traders to watch is not any outside factor that might influence a market, but the price action, pure and simple. This is what makes it different from fundamental analysis. Some examples of fundamental analysis might be:
- How the rainfall in Ecuador might affect the cocoa crop
- How the stock market might react to the weekly jobless claims number
- How comments by the Saudi Energy Minister might affect crude oil prices
A technical analyst, on the other hand, would largely ignore the news and go straight to the price chart. Did crude oil have three consecutive price bars with higher highs and higher lows? It might be in an uptrend—time to buy.
Is the S&P 500 index in a sideways channel, with prices stuck in a range? You could buy or sell when prices break up or down out of that range.
Simply put, technical analysts focus on what the market is doing, rather than why it might be doing it. They don't speculate on what the market might do in response to events. They monitor what the market is actually doing and project how its momentum might push it in the future.
To learn more about the tools of technical analysis like trendlines, support and resistance levels, or Fibonacci retracements, sign up for one of our free weekly webinars, where our educators will share examples from current markets and teach you how to use price charts in your trading.
So if you're feeling stuck in the markets you're currently trading, don't be afraid to try out new markets and even new asset classes. Conventional traders have to open a new brokerage account and pony up another large minimum account balance.
Now, you're probably not saying to yourself, "You know, since I was a kid I've dreamed of being a soybean futures trader." And even now, many people who feel comfortable taking risks in the stock market won't touch the futures markets because they've heard some rumor that if you make a mistake, a dump truck will unload 60,000 pounds of corn onto your front lawn. That's nonsense, but serious people still think that somehow stocks are safe and futures are too risky.
But on Nadex, you can trade multiple asset classes from a single account. You can trade US and global stock indexes; commodities like gold, oil, and grains; 10 of the most popular forex pairs; and economic numbers like weekly jobless claims, nonfarm payroll, and the Fed interest rate. No matter which market you trade, on Nadex your risk is always limited to an amount you choose.
Multiple markets and asset classes on one platform with guaranteed limited risk is one of the main reasons Nadex is called "the future of trading." Part of that future is not being a stock trader or futures trader or forex trader, but just a smart trader who can spot trends and price action on a chart and take advantage of them. It's a new paradigm of trading.
The best way to learn that new paradigm is to practice. Nadex offers a free permanent demo just for this purpose. Take your simulated $25,000 practice account and wear it out. Try out markets you've barely heard of, with free live market data. Make mistakes without worrying about losses and get comfortable using charts. Along with our free webinars and resources like the trading examples in the Learning Center, the demo is the best way to learn and become confident.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.