Tickets. It is a term we associate with culture. They are essential if we want to go to the cinema, the theater, a concert, or a museum. But in the stock market, there are also tickets and, instead of costing us money, they usually serve to win it.
A trader makes an entry when he starts trade in the markets. The starting point is the purchase or sale of an asset and its final objective is to obtain a financial benefit.
But, what are the basic tools that you must master to open a financial operation?
Today we bring you the five essential items when making a listing
• Short or long operations
• Stop Loss
• Take Profit
• Financial leverage
The first question you have to ask yourself is: do I want to do a SHORT or LONG operation?
No, it does not mean if you buy assets from your neighborhood organic store or from a US multinational. Not if you make a sale for two days or two years.
The short operation is the one that you open when you think the value is going to fall in price. You sell an asset that you have been loaned and then buy it at a lower price, keeping the difference. You do something you would never do: sell a gift. And then you get the gift back along with some extra money.
Instead, the long trade is opened when the market is going to rise. You buy at a low price and then sell it at a higher price. It would be like selling a piece of clothing from the 80s now, which at the time cost you little and now has been revalued by the vintage phenomenon.
And, once you have marked the type of operation you want to do, you have to consider how much you are willing to lose. For that, you need your STOP LOSS.
We are all fond of our money and goodbyes are very harsh. So if you don’t want to see all of your savings drifting away on a boat while they wave a white scarf, don’t forget to mark your stop loss before making your entry.
This limit marks the point at which your trade will be closed automatically if it reaches a specific loss level. If you want to lose a maximum of 100 euros you put it on the site where you would only lose 100. If you don’t want to lose more than 5, where you would only lose. Don’t risk more than you’re willing to lose.
Of course, aspire to the maximum when it comes to winning. For that, you have the TAKE PROFIT.
Be true to your trading and try to take everything you can with you. But always being realistic: analyze the graph and calculate the maximum peak that the Japanese candles will reach. So, before making the entry, mark your take profit at that point and do not aspire to impossible goals.
This order is the opposite of the stop loss. If the profits reach this limit the operation will be closed and the profits will be collected automatically.
So, with your stop loss and take profit marked, you will have to decide how much money from your account you want to allocate to that entry. Or even if you want to invest more money than you have in your account. This is known as FINANCIAL LEVERAGE.
This system offers you the possibility of obtaining greater benefits through temporary loans from brokers with which you can increase your positions.
It is expressed with a multiplier. If the leverage in a certain market is 100: 1, it means that to open a position of 100 dollars, the trader should contribute 1 dollar. And to open, for example, a $ 10,000 one would need to contribute 100.
But with all great power comes great responsibility. Because just as leverage can multiply profits, it does the same with losses. So you have to be very careful not to run out of money in the account and say goodbye to all your savings.
And to control your money once you make the entry, it is also essential to be aware of the TICKS.
Because this unit is the way to calculate your profits and your losses. They are like the cents of a coin and are used to calculate the minimum variation in the price of a security when you open a trade. In other words, they are like the grains of sand that you are winning or losing from the moment you enter.
Of course, ticks can have different sizes. For example, in oil, the tick size is 0.01 and in the SP500 E-mini, it is 0.25. Depending on this value, it will cost more or less to add a POINT, which would be comparable to obtaining a dollar or a euro when adding the cents.