Online trading is an activity that is attracting increasing interest from individuals. More and more traders are getting started, but to be successful, there are a few requirements to follow. In particular, it is essential to know the assets on which you are going to speculate…
A very wide choice of assets
A wide choice of assets is generally one of the advantages highlighted by online brokers. But for the beginner, the incredible number of active ingredients offered can be quite confusing. Brokers also offer hundreds or even thousands of references.
These are generally stock market indices, equities, currency pairs, commodities, but also ETFs, warrants or trackers… One thing is certain: to trade in the right conditions and take the best conditions, it is essential to know the assets well.
The importance of knowing the assets
Knowing the assets means having a better chance of making the best decisions. In particular, it should be borne in mind that the price of each asset reacts differently according to events, not having the same volatility.
Each person will then choose the assets to be processed according to their preferences and requirements. Some will opt for stable assets while others will focus on those who move around a lot.
It should also be noted that the foreign exchange market (Forex) has a rather low volatility, at least on major pairs (outside the JPY). As for equities, they can be very volatile and can gain or lose a lot of value in a single day.
Next to it, there are stock market indices (combining several stocks) that fall into two main categories. On the one hand, there are those who are qualified as heavy, because they encompass several actions at once. This is the case with the NASDAQ composite, the FTSE100 and the SPX500. This type of index is still slightly volatile (except for the exceptional case of the Nikkei225).
This brings us to light stock market indices with fewer shares than previous ones. In this category, we find the CAC40, DAX30, IBEX35 or DOW JONES which show a higher volatility.
ETFs, on the other hand, are of low volatility and these assets are characterised by a certain difficulty of access. Indeed, they are not systematically found on trading platforms.
Diversify assets, but not too much
A very important rule for traders (especially beginners), do not vary the assets too much. It is certainly interesting to diversify your portfolio, but you shouldn’t overdo it. Indeed, different analyses and observations are necessary before any decision can be taken. If you process too many assets, you can easily get lost.
It is best to limit yourself to a maximum of three or four markets. We can always increase the pace once we have acquired solid experience in the world of online trading.
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