Why is learning about finances important and how to get started?

In life, there are a couple of things that really matter and they are all connected. It’s critical to have good health, family and friends around you and be financially independent. Having money makes the best health care accessible. With money you can take your family on vacation and have more free time for your personal life.

Importance of financial education

Financial education is crucial for becoming financially independent. Learning about finance is important for several reasons:

• Knowing about finance allows you to manage your finances better. Plan your budget and be prepared for emergency situations
• Financial education helps find new career opportunities. There are vast amounts of job opportunities in fields such as accounting, financial planning, investment management, etc.
• Education helps understand how the financial world works. How money is printed and distributed among regular citizens
• Financially educated people are much less likely to fall for scams and money traps

Financial education can help make money in various ways, for example: you can use your knowledge in investing, entrepreneurship, and career advancement. In addition, it will be beneficial for debt management and financial planning.

There are a million ways to grow wealth. However, all of them are very hard to find. No matter what you do to make money, you’ll be faced with fierce competition.

How to get started with your financial education?

One way to learn how the financial world works is to start participating in financial trading. There are various types of trading:

• Forex trading: involves buying and selling currency pairs in the foreign exchange market. In addition, investors use currency markets to hedge their risks. You can view useful hedging strategies here.
• Stock trading: includes both investing and speculating on company stock prices. For investing purposes, traders purchase real or also known as physical stocks. For market speculations, there are CFDs on Stocks available. CFD stands for Contract for Difference and it enables traders to speculate on the underlying asset price without owning it. When trading CFDs, you can use leverage to increase your purchasing power, you can trade both bullish and bearish markets by going long and short respectively and have access to high liquidity. Such instruments are great for speculating, however, CFDs are not for investing long term due to trading fees that can accumulate for keeping positions open for a long period of time.
• Futures trading: buying and selling futures contracts. This type of contract enables traders to buy or sell underlying assets at a future date and price.
• Bond trading: involves buying and selling government or company bonds, which are debt securities.
• Commodities trading: such as precious metals and energies. Commodities can be traded as CFDs or as physical commodities, such as gold bullions, silver bullions, etc. When trading commodities as CFDs, you can use leverage and trade both uptrends and downtrends.
• Cryptocurrency trading: buying and selling digital currencies such as Bitcoin, Ethereum, Dogecoin, and others is becoming increasingly popular. You can invest in such coins or speculate on underlying prices by trading them as CFDs. Some of the most popular crypto derivatives are Bitcoin vs US Dollar, Litecoin vs US Dollar, etc. The same benefits apply in crypto derivatives trading as in CFD trading such as leverage, high liquidity and ability to trade in both upward and downward directions. In addition, when trading digital currencies as CFDs, you don’t need to worry about how to store them or how to cash out. Profits are added straight to your trading account.

You can find an online broker on the internet easily. However, make sure the broker is regulated by top tier financial institutions. This way, you will be protected from fraudulent behavior.

Getting started with currency trading

Forex (FX) is also known as foreign exchange market and it is probably the easiest market to get into. There are so many brokers to choose from and great strategies that you can find online. For example, you can trade this strategy if you want to be actively trading. There many different trader types, for example:

• News traders: trade market economic and political news. Typically news announcements are highly unpredictable. And therefore, traders need to act quickly and use certain strategies.
• Scalping: involves making multiple short term trading decisions. Scalpers are trying to catch price swings within a trend.
• High frequency trading: is usually done by trading algorithms. Trading algorithms help automate trading. You can learn to build them, pay someone to create one according to your own trading ideas, or you can purchase custom-made trading robots on the internet. MetaTrader platform users have access to the largest selection of trading robots. Trading algorithms of MetaTrader are called Expert Advisors (EAs) and they can be found in Meta Market.
• Intraday trading: Some day trade to avoid paying rollover fees for keeping position open overnight. Typically day traders try to trade during the most active trading sessions such as London, and New York.
• Position trading and swing trading: some traders like to plan their trades better and only trade high probability trades.

In addition, there are many other types of traders. As already mentioned, there are many different ways to make money. Which is why it’s important to try different strategies to find out what works for you best. Most forex and stock brokers offer demo accounts that you can use to learn how to trade without risking actual capital. On demo accounts trading is done using fake money.

Get started with CFD/Stock trading

Most Forex brokers have started offering solely currency pairs, but gradually they have added CFD (Contracts for Difference) to their portfolio. You can find numerous multi-asset brokers online. Those brokers are offering not only currency pairs, but CFDs on stocks, crypto derivatives, indices, commodities, and ETFs for trading.

Registration and account opening is fully digital and fast. Typically brokers ask from their customers account verification after registration is complete. For verification two types of documents are required. Traders send proof of their ID (digital photo or scanned version passport/driving license/ID card), and proof of residence (digital or scanned version of a utility bill or bank statement).

When trading stocks or CFDs on Stocks, investors are studying company finances such as earnings, capital expenditure, and more. In addition, keeping an eye on global indices are also important. Many company stocks follow the performance of major indices.

It’s important to learn about indices as no matter which asset class you are investing in, you will find it highly useful to include indices into your market analysis. Indices are also known as company indexes and they measure the performance of certain baskets of publicly traded company shares. For example, the US 500 or more widely known as the S&P 500 measures the performance of top 500 US companies. As a result, it is a commonly used index for assessing health and fitness of the US economy.

Important things to consider when learning financial investing

There are various things to consider when learning about financial investing. Here are some major factors:

• Stay away from scams: Modern financial world is highly connected and very transparent. However, novice investors can easily fall victim to scammers. It’s critical to spend time on your education, the more you learn, the less likely it will be to entrust your hard earned money to con artists. Stay away from people that promise you can get rich overnight and always choose reputable and regulated brokers.
• Learn about risks: It is critical to learn about risk management before you make any trading decisions. Professional traders never risk more than 1-5% of their trading capital on a single trade. Learning about probabilities can help you pick the risk management strategies that best suit your personality. Even if you are starting a business, startups are considered to be highly risky endeavors. Education limits uncertainty and increases chances for success.
• Set achievable goals: people with goals succeed because they know where they’re going. It’s crucial to set realistic goals, make a plan for achieving those goals and follow them. Successful investors have short, medium and long term goals. Make 5 year, 10 year, 20 year plans for your future.
• Choose the right investment class: There are many investment vehicles and it’s important to educate yourself and try as much as you can to find out what works for you best. There are investors that are great at investing shares, and totally fail in currency trading and vice versa.
• Stay disciplined and monitor your performance: most professional traders and investors do their best to learn from other people’s mistakes. However, mistakes happen and it’s important to avoid making the same mistake twice. For this purpose, trading or investing journals are very handy. Trading journals keep technical information, such as trade entry price, exit, reasons for opening a trade, etc. In addition, trading journals typically include information on how the trader feels. For instance feeling tired before making a trade might result in losses, and trading journals can be a highly important tool to spot it.

Key takeaways

To sum everything up, financial education can help avoid scams, plan for the future, get out of debt and grow your wealth. There are various ways to increase your capital. Long term investors are purchasing cryptocurrencies, company shares and precious metals. While active traders speculate on financial markets. Opening an account with an online broker is easy and fully digital. For market speculations available financial assets are: currency pairs, commodities, indices, crypto derivatives, and CFDs (Contracts for Difference) on stocks. While learning how to invest, it’s important to learn about risks, set achievable goals, have a trading journal, pick the right asset class, and stay disciplined.