Many have probably heard about this method of making a profit, how to make money on exchange rates. They usually think that this is available only to a select few, and therefore they give up and refuse such an undertaking. We assure you that using the exchange rate you can not only earn money, but even get a very decent income.
At first it seems that everything is very simple. You just need to sell more profitably what you bought earlier. And we plan to trade currency.
The easiest way for some in this area is to work with banks and exchange offices. In this case, you will always receive money in your hands, without having to delve into the nuances of virtual trading.
But there is a significant drawback - purchases from banks and exchange offices are always carried out with a markup, and this means a significant loss in planned earnings. Therefore, it is logical to think about other ways to make a profit on the difference in rates. For example, large “currency traders” never go to banks and exchange offices.
There is another popular way to generate income on exchange rates - Forex. You can invest your savings as a trader through a broker who will handle the trading operations. The profit will be the difference in the results of purchase and sale transactions.
Losses are not excluded, so before starting trading on the Forex site, it is imperative to understand everything well, gain the appropriate knowledge, practice, calculate everything, and provide for all sorts of risks.
It is impossible to simply come to such a market and immediately invest money through a successful trader if you do not have a lot of experience, as well as economic acumen. Forex trading takes a long time to learn.
When working with currency, you must pay attention to its liquidity. For example, euros and American dollars have high liquidity (they are easy to buy and sell), unlike such exotic currencies as Algerian dinars, Vietnamese dongs and the like. The list of currencies of most brokers does not include illiquid currencies, since if you invest in them, you can “burn out” very quickly.
What you need to know about making money on the stock exchange
First of all, it’s worth considering that making money on the stock exchange is not a magic wand, and investing money in the first deal you come across and waiting for a million-dollar profit is not the best idea. To earn a regular income, you need to study and practice. Without this, you won’t be able to set up a serious income.
Essentially, traders are speculators whose task is to buy something cheaper and sell it more expensive. The object can be bonds, stocks, futures, gold and other assets, betting (for example, sports) and Forex (foreign exchange market). Depending on what is more interesting and easier for you to work with, you choose the appropriate exchange for trading. They all have their own characteristics and differences.
You cannot act on emotions on any exchange. Many novice traders make one or several successful transactions, but then give up the idea of making money on the stock exchange. In fear of losing everything, they sell their assets as soon as they decline and remain at a loss. The stock exchange is not a place where you should be guided by emotions. This requires a scrupulous approach, detailed analysis and strict adherence to strategy.
At the beginning, invest only the amount that you are comfortable psychologically parting with. This is a guarantee that you will not constantly sit at the monitor thinking that someone is stealing your money. Only in this case will you be able to calmly reason and analyze the situation.
Do not take loans and money as collateral. The amount you invest should be insignificant to your budget and not have a significant impact on your life. Excessive excitement and inability to manage your capital leads to negative consequences.
You need to be able to analyze and calculate transactions. You must understand what you are investing in and what results you expect. And for this you need to study theory and practice.
Try working with different exchanges. The more experience you gain, the easier it will be for you to predict the market and your own transactions in the future.
There will always be losses and risks. Even very experienced players sometimes suffer losses: without this it is impossible to trade. The difference is that an experienced trader knows how to minimize them and recover losses in a short time. The beginner’s task is to learn how to minimize these risks and learn how to quickly exit unsuccessful trades.
TOP 10 mistakes
- Reluctance to learn. To quickly gain experience, two aspects are important - expanding the knowledge base and practice. Laziness, lack of time, reluctance to learn are the main enemies of the individual on the path to big earnings.
- Greed, thirst for quick profit and rash actions. A few good positions can boggle the mind of a beginner. Realizing that every rate fluctuation he misses is lost profit, the trader loses self-control. Succumbing to the thirst for quick profit, a person begins to randomly open transactions, thereby losing all his capital.
- To win back at any cost. For those who may be shocked or confused by the “minus” in the “profit” column, this point becomes especially important. In attempts to “recoup” and return lost profits, you can easily “break the woods” and be left without a deposit.
- Unconditional adherence to the recommendations of stock exchange “gurus”. The advice of professionals is not always the “ultimate truth”. When making a decision, always remember this rule.
Ignorance of the basics of money management
- Rejection of the “Trend is my friend” principle. Trading against the trend often leads to failure.
- Using the “averaging” principle. Buying lots from a losing position may seem like a brilliant solution for making money in the future. However, it is worth keeping an eye on your trading account to avoid going broke.
- Refusal to use stop orders.
- Lack of thorough analysis of actions. The Trader's Diary is an ideal solution for novice shareholders. Actions recorded on paper will help you avoid repeating mistakes and bring out the most profitable combinations.
Is it even possible to make money on the stock exchange?
This question is asked by everyone who begins their journey in trading. Ad headlines and video ads are filled with loud calls to action, and famous traders talk about how many millions they have made from it - but common sense dictates that everyone can't stay ahead.
You can make money on the stock exchange. But you need to understand that you won’t be able to invest a hundred rubles and earn a million in a week; the profit directly depends on how much you invest in it and on your strategy. On average, traders can earn about 10-20% of their deposit per month, and successful traders, in a good situation, can earn about 35-40%. It is also worth considering that it is rarely possible to earn a large amount in 1-2 days. Therefore, for those who want to earn money here and now, this method is not suitable.
Open a foreign currency account
The easiest way is to open a foreign currency account at a bank where you already have a current account in rubles. A foreign currency account is opened through an application or online banking - you don’t have to go to a branch.
The cost of servicing a foreign currency account depends on the tariff: in a tariff that includes services for foreign economic activity (FEA), a foreign currency account will be opened free of charge. At other tariffs, as a rule, you need to pay for a foreign currency account as for a ruble account.
Some banks open foreign currency accounts for free. For example, Delobank opens an account in dollars or euros free of charge at any tariff. Provided that the entrepreneur already has a current account with this bank.
Along with a foreign currency account, the bank must open a transit account. It is not needed for currency exchange. It is used only for transfers from abroad and vice versa in order to pass exchange control. You can ignore him.
Is it possible for a beginner to make money on the stock exchange?
Newcomers to the stock exchange often lose money. This is due to inexperience and high expectations. But beginners also have a chance: it all depends on how seriously you take it.
If you are ready to study theory and wisely apply it in practice, and not blindly follow your emotions, then making money on the stock exchange is quite possible. Keep in mind that this is a complex process that requires patience and perseverance. Over time, as you understand how the market works, you can increase your earnings.
In good hands
In the past year, the IPO boom was noted in many countries, primarily in the United States. In 11 months, more than 400 companies around the world raised $218 billion, the best result in many years. In many cases, quotes grew significantly in the very first days of trading (by an average of 29 percent) - a clear indicator that the moment to enter the stock exchange was chosen correctly.
Explosive demand was fueled by large-scale injections of money into the economy by governments and central banks amid the coronavirus pandemic. In the US alone, the Treasury Department and the Federal Reserve System (FRS) have launched programs worth two trillion dollars each. In December, another stimulus package worth 980 billion was added to them. The money supply (the total volume of all money in the economy: cash, household and business account balances) in the United States grew by a record 24 percent over the year. 15 trillion dollars were “printed” worldwide. The main recipients of funds were banks, which spent them not only on lending to the real sector, but also on investments, including IPOs.
Photo: Carlo Allegri/Reuters
Technology companies, whose products were in high demand during quarantine and self-isolation, were more active than others in entering the stock exchanges. This year's three largest offerings are among the top ten American technology IPOs of all time. Cloud technology developer Snowflake raised $3.9 billion, food delivery service DoorDash received $3.4 billion from investors.
But the most surprising thing is the story of the online short-term accommodation booking platform Airbnb. In a situation where the tourism business is experiencing an unprecedented crisis and suffering losses, the company managed to sell shares worth $3.7 billion on the stock exchange. The stock rose 120 percent on the first day, and the final capitalization (total market value of shares) was twice what analysts expected based on the expected number of bookings in 2022.
Where to start and on which exchanges you can make money
First, choose which exchange is best for you.
Exchanges are usually divided by the type of assets traded on them:
- Stock. On these exchanges, transactions are made with securities such as stocks, futures, bonds and others. Such exchanges have a strong influence on the global stock market. These include the Moscow Stock Exchange.
- Trading (raw materials). Such exchanges are designed for trading various valuable materials. The list of them is quite extensive. For example, it could be: coffee, gold, metals, oil. They can be highly specialized (trade only one type of valuables) or broad-based.
- Currency. Trading on such exchanges is based on the purchase and sale of currency ratios (the exchange rate of one currency to another). These can be both the main world currencies (US dollar, euro) and the currencies of any country in the world. Such exchanges have high liquidity, and the exchange rate is influenced by the geopolitical situation. The most famous currency exchange is Forex.
- Cryptocurrency. A fairly new type of exchange that appeared several years ago. On such exchanges, various types of digital assets (cryptocurrencies) are traded: Bitcoin, Ethereum, Ripple, etc. The most famous are Binance, Okex, HitBTC, Bittrex, Bitmex, Poloniex.
Read how to make money on cryptocurrencies.
Before starting trading, it is better to undergo training on trading on a specific exchange. In addition to free lessons or instructions, which are available on almost every site, you can take courses from famous traders. The courses offered by brokers do not always provide enough information for a beginner. But be careful when choosing a mentor: there are always plenty of people willing to make money from inexperienced traders.
Main trading members:
- Central and commercial banks;
- Brokers;
- Brokerage agencies;
- International corporations.
- Primary functions of the market
- Settlement and foreign exchange and credit services for export or import;
- Speculation with banknotes;
- Transactions for investing finances outside the national economy;
- Risk insurance.
What is a brokerage exchange
It is not always possible to trade on the stock exchange on your own. On many types of exchanges (for example, on stock exchanges), this requires obtaining a license, making a mandatory contribution of several million rubles and purchasing special software. For an ordinary person this is an impressive amount.
Therefore, traders use the services of brokerage exchanges to trade on the stock exchange. Brokers are intermediaries between the exchange itself and its participants. They charge a commission for their services. Persons who trade on the stock exchange for their own account and on their own behalf (as opposed to brokers) are called dealers.
When choosing a broker, you should not focus only on the size of the commission. Unscrupulous brokerage companies often take advantage of this. In addition to the size of the commission, also pay attention to:
- Reliability of the brokerage company. It is important to know how reliable your intermediary is: what software he uses, what trading system and platform he works with.
- Brokerage exchange rating. Another important point that you need to pay attention to first. If such a rating is not on the broker’s website, then this information can be viewed on the exchange itself.
- Additional services. Such additional help can make it a little easier for a beginner to get acquainted with stock trading. This list includes: current news from the work of world exchanges or an assistant who gives personal consultations online. The more interesting offers a broker has, the better it will look compared to other competitors.
- Analytics assistance from experienced mentors. It is important that a novice trader has someone to ask for tips or whose opinion to rely on when making a trade. Therefore, if a broker has good support from successful analysts, this can protect you from rash actions and disappointments.
The more responsible you are in choosing a broker, the lower the likelihood of making unprofitable transactions.
As easy as pie
Finally, the development of various services for stock trading has reached its peak. In 2022, almost every bank, broker and investment company has its own convenient mobile application. The process is similar to what has been happening in recent years in the field of non-cash payments. Russia has long been among the laggards, while in developed countries, especially the United States, card payments and online purchases have been considered the norm for decades. However, the next round of technological progress led to the fact that Russian banks began to invest more actively than others in new technologies, and stores began to install terminals for accepting cards. As a result, in the 2010s, Russia took first place in the world in terms of growth in the number of non-cash transactions, and international analysts called the phenomenon the “Russian miracle.”
In the West, the most popular online trading applications are developed by individual companies or special divisions of the largest banks, often under an independent brand. The inexperienced layman may simply not know about their existence (although the share of Americans with brokerage accounts reaches 50 percent). Russians just need to install the mobile application of their bank (the clients of at least one are everyone who receives a “white salary”, benefits, pensions): either they can trade directly from there, or the user will be offered an additional download link.
Residents of Moscow during the self-isolation regime
Photo: Irina Bujor / Kommersant
In 2022, the attention of Russians trading on the stock exchange was attracted by numerous IPOs (Initial Public Offerings). This is the name of the procedure for a company going public. The labor-intensive process takes several months and requires the coordinated work of many participants. The most important role is played by underwriters (as a rule, they are banks or investment companies) - intermediaries who attract investors, collect applications from them, and determine the price of shares at the start of trading.
Going public means a new stage in the life of the company. It becomes more transparent because it must comply with the platform's corporate disclosure requirements, it learns its fair market value, it has an additional way to raise financing (through the issuance of shares, which can be done at any time), and it begins to enjoy greater confidence among banks. A successful placement on a foreign, and even more so on an American exchange, can elevate a Russian company to the ranks of the most respected and stable.
What is the difference between the stock exchange and how to make money on it
The stock exchange ensures a constant turnover of securities in the world market. The main assets on stock exchanges are futures, shares, bonds. It's great for beginners to start with. On such exchanges, traders buy and sell securities.
The stock market is less volatile, but it is great for long-term work. You need to understand that stock prices may vary slightly throughout the day, and they tend to change constantly. For example, shares of the same company can be 95 rubles in the morning, and about 85 in the evening. This causes panic among inexperienced traders: they begin to sell everything that is left at a low price and go to a loss.
Sometimes the price of a stock may not change significantly for several days or even months. Then there is a sharp jump, and the price increases by 200-400%. And this can be predicted if you carefully monitor the market situation with the company whose shares you own. With a competent approach and careful analysis of the situation, you can almost always make successful transactions and, over time, increase your capital significantly.
Nowhere lower
The abnormal activity of Russians in the stock market (not only through IIS) has several explanations. One of the main reasons is low deposit rates. Last year, the Central Bank was preparing for the next global recession (happens once every 10-12 years, the last one took place in 2008) and sought to make it less painful for the Russian economy. But this time I was forced to urgently respond to the unpredictable and unprecedented crisis caused by the coronavirus pandemic. According to the most optimistic estimates, domestic GDP will decline by four percent by the end of the year (after several years of moderate, but still growth).
Photo: Alexander Miridonov / Kommersant
The main instrument of influence on the part of the regulator is the key rate, which serves as a reference point for the entire market and determines the cost of borrowing on it. Since the end of July, it has been at a record low of 4.25 percent per annum - this is how the Central Bank (together with regulators around the world) hopes to fill the real sector of the economy with money through cheap loans. At the same time, conditions for deposits have worsened: banks view them as the most preferable source of funds for carrying out routine transactions - and an alternative to loans on the interbank market or directly from the Central Bank.
At the end of December, the largest credit institutions offered to place free money at best at six percent per annum, but more often the potential return was limited to 4-5 percent, barely exceeding the current inflation rate (according to Rosstat and forecasts of the Ministry of Economic Development, by the end of the year it will be 4.3-4 .8 percent with the Central Bank target of four percent). This situation does not suit many people - people are not ready to invest in instruments, the benefits of which barely compensate for rising prices, and are looking for new ways to invest.
How to make money on the stock exchange with minimal losses
Beginners often repeat the same mistake in stock trading - they make trades too quickly. It is possible to make money on short-term fluctuations, but it is very difficult and only professionals can do it. For beginners, it is better to count on the medium and long term.
It is equally important to choose the right trading strategy in the market. All of them are divided into 2 main types:
- aggressive;
- minimizing risks
The first option involves aggressive trading in order to maximize profits, and the second - to reduce risks. For a trader, it is necessary to choose one strategy and follow it.
For beginners, choosing aggressive trading is not recommended. The task at the initial stage is to learn to minimize risks. This will not immediately bring huge profits, but it will allow you to learn stock trading and protect the novice trader from unnecessary losses and disappointments.
Helpful information
Most people go to online exchanges with the goal of making quick money, but for long-term work in this area, self-education and immersion in trading are simply necessary.
It is difficult to overestimate the influence that emotional outbursts have on trading decisions. According to experts, it is emotions that often become the “enemies” of novice brokers. Giving in to impulse, a person can make an unprofitable operation and lose his savings. Before becoming a client of a brokerage company, soberly assess your capabilities and habits.
How and where to learn how to trade on the stock exchange correctly
To learn how to trade, you need to learn the theory and start applying it in practice. This will require a lot of practice. As with everything, it’s difficult to do without learning from your own mistakes. The main thing is to learn to correctly analyze the market, not to invest too much in one transaction, stick to one strategy and act without passion and emotions. Divide your deposit into at least 10 parts and never invest more than 1/10 in one trade. Some exchanges allow you to use demo accounts in the beginning and practice without risk.
Depending on the duration of the transaction, technical or fundamental analysis is used. The first one uses macroeconomic indicators and is suitable for investing for the medium and long term. The second is based on charts and indicators, and is more often used for one-day transactions and investments for the medium term. Technical and fundamental analysis can be studied in various courses.
What rules should you follow when trading?
There are many rules that must be followed when concluding transactions. Each trader has his own list, which he adheres to and what guides his work. Here are the main ones:
- You cannot invest all your money in only one type of value and one brokerage exchange.
- Use your money to trade. Do not take out loans, borrow money or pledge anything.
- Keep losses to a minimum.
- The transaction amount must be ten times less than the original amount.
- Focus on the optimal percentage loss indicators for 1 day of trading. This value should be less than 2-5% of the deposit amount.
- Profit should be 3 times greater than losses.
- In the beginning, you don't need to open many trades.
How much do traders earn in the stock market?
Traders rarely name exact amounts of earnings. Even if they name the amount, it will not help you in any way - your earnings may differ significantly from the announced figures. Most often, traders provide information as a percentage for a certain period of time. However, few people will say how much money he invested. It is believed that the average profit of successful traders is 20% of their investment. Making money with a small starting capital will take time and patience.
It is also worth keeping in mind that income depends on the market situation: during periods of active growth, even beginners can earn money. But only professionals receive stable and constant profits on the stock exchange, and they always have a certain percentage of unprofitable transactions. Their difference from beginners is that they know how to competently analyze the situation and minimize losses.
Adviсe
Here are some tips for beginners:
- Remember about T+2 - this is the operating principle of the Moscow Exchange. It means that the buyer of a security becomes its real owner on the second business day after the completion of the transaction. “But I can immediately put the stock back up for sale!” - a novice trader will exclaim. Yes, that's right, you can. But for two days, you have no rights to other income and property rights that come with owning a security, such as dividends. Let's imagine that today you bought shares of a company that tomorrow closes the register of shareholders and, accordingly, pays dividends. You are missing out on this income because you did not buy securities in advance. Likewise, you will not have the right to vote at shareholder meetings if you purchased a share before two business days have passed.
- Never give in to emotions. Working on the stock exchange (especially trading) can make you excited - this is a path to large losses. The exchange cannot be regarded as a lottery or slot machine. If previous trades were unsuccessful, this does not mean that the next one will necessarily bring you profit. To maintain peace of mind, after several losing trades, disconnect from the exchange for some time. Close the chart window, turn off your computer, and do something relaxing. You can meditate if it helps you calm down and focus on rational analysis. Trading on emotions is the worst strategy and will only lead you to disappointment and loss of money.
- Don't spend everything you earn. One of the areas of work on the stock exchange is increasing your capital. If you want to spend less time working over time and earn the same amount (or more), you should increase your capital. Add at least part of the earnings to your brokerage account.
