Trading in financial markets can be exciting and rewarding, but it's also complex and requires careful navigation. Whether you're interested in stocks, forex, cryptocurrencies, or commodities, getting started can feel overwhelming. However, with the right approach and understanding, you can begin your journey into the world of trading with confidence. This beginner's guide aims to provide you with essential knowledge and tips to help you navigate this exciting realm.
Understanding the Basics
Trading involves buying and selling financial instruments at its core, to make a profit. These instruments can include stocks, bonds, currencies (forex), commodities (gold or oil, etc.), and derivatives like options and futures contracts.
There are various trading styles, including day trading, swing trading, and long-term investing. Day trading involves making multiple trades within a single day, while swing trading involves holding positions for several days or weeks. Long-term investing, on the other hand, focuses on buying and holding assets for extended periods, often years.
Trading inherently involves risks, and it's crucial to manage these risks effectively. This includes setting stop-loss orders to limit potential losses, diversifying your portfolio, and only risking a small percentage on each trade.
Getting Started
Before diving into trading, it's essential to educate yourself about the financial markets and trading strategies. There are numerous resources available, including books, online courses, and educational websites. Take the time to learn about fundamental and technical analysis, market indicators, and risk management principles.
To trade in financial markets, you'll need to open an account with a brokerage firm. Look for a reputable broker that offers a user-friendly trading platform, competitive fees, and a wide range of tradable assets. Take the time to compare different brokers and choose one that suits your needs and preferences.
- Practise with a Demo Account
Handily, many brokers offer accounts that allow you to safely practise trading with virtual money in a simulated market environment. Take advantage of these accounts to familiarise yourself with the platform and ensure you test out different strategies without risking real capital. With a Coin Market Manager, you can have an automated journal for your trading to keep you on track at all times.
Developing a Trading Strategy
- Define Your Goals and Risk Tolerance
Before placing any trades, it's essential to define your trading goals and risk tolerance. Are you looking to generate supplemental income, build wealth over the long term, or actively trade for a living? Understanding your objectives thoroughly will help you develop a suitable trading strategy.
- Technical vs. Fundamental Analysis
Traders use two primary methods to analyse markets: technical analysis and fundamental analysis. Technical analysis involves studying price charts and market patterns to predict future movements, while fundamental analysis focuses on analysing economic indicators, company financials, and geopolitical events.
A trading plan outlines your approach to trading, including your entry and exit criteria, risk management rules, and position sizing strategy. Having a well-defined trading plan can help you remain disciplined.
Practising Discipline and Patience
Emotions such as fear and greed can cloud judgment and lead to irrational decision-making. You must remain disciplined and ensure you stick to your trading plan, even when faced with uncertainty or market volatility.
Successful trading requires patience and perseverance. Not every trade will be profitable, and there will inevitably be periods of losses. Stay focused on your long-term goals, whatever they may be, and be prepared to learn from your successes and failures along the way.
Conclusion
Navigating the world of trading as a beginner can be challenging, but it's also incredibly rewarding. By educating yourself, practising with a demo account, developing a trading strategy, and maintaining discipline and patience, you can effectively increase your chances of success in the financial markets. Remember that trading is a journey, and continuous learning and adaptation are key to long-term profitability.
On Monday morning, the price of brent crude rose by around 0.6% or over $86 per barrel.
This comes after G7's plans to cap the price of Russian oil at $60 per barrel in an attempt to put additional pressure on Russia over the country's invasion of Ukraine.
Meanwhile, oil producers' group Opex+ said it plans to stick to its policy of reducing output.
Opex+ is an organisation of 23 countries which has regular meetings to decide how much crude oil they can sell to the world market.
Opec+ is a group of 23 oil-exporting countries, including Russia, which meets regularly to decide how much crude oil to sell on the world market.
Analysts said that the group's decision shows support to the oil market.
The ECB has increased its key deposit rate – or how much interest it pays on deposits - to 0.75% from 0% and lifted its key refinancing rate – or how much banks have to pay when they borrow from the ECB - to 1.25% from 0.5%.
"Price pressures have continued to strengthen and broaden across the economy," said the ECB.
"I cannot reduce the price of energy," said the president of ECB Christine Lagarde.
"I cannot convince the big players of this world to reduce gas prices. I cannot reform the electricity market. And I am very pleased to see that the European Commission is considering steps to that effect because monetary policy is not going to reduce the price of energy," she continued.
Lagarde added that if gas prices continue to "skyrocket", a recession would be on the horizon. If Russia were to fully cut gas supplies to the European Union and it becomes impossible to secure alternative gas supplies from the US, Asia or Norway, the ECB expects gas rationing across the Euro area and a recession in 2023.
The situation appears stark for consumers. For major oil and gas companies, on the other hand, recent weeks have been far rosier. BP posted profits of £6.9bn, their largest quarterly profit in fourteen years. Shell did even better, announcing profits of £9.5bn.
All of which has led to increased government scrutiny of the oil and gas sector, and a reaffirming of the commitment to the Energy Profits Levy, or Windfall Tax, which has been heavily maligned by the industry’s biggest players.
What has not been reported to the same extent is the opportunity that the Energy Profits Levy offers prospective investors in new North Sea projects. The Levy includes a 75p immediate tax saving on every £1 invested into the domestic oil and gas industry. In time, once the field is producing the rebate can rise to a total of 91.25p in the pound. This support, after years of being ground down by protestors, is a fantastic incentive for would-be investors. The tax relief is designed to encourage investment from existing producing companies into the North Sea, but will also drive more interest from private investors.
The introduction of the Energy Profits Levy reflects the challenges the domestic oil and gas sector has faced in recent years.
Since 2018, the flow of money into the sector has dried up, with more focus on renewable energy as part of the UK’s drive to net zero, and oil and gas companies switching to “harvest” mode, meaning cutting back on new investment and running down existing fields. Companies producing oil and gas now have a huge incentive to reinvest their profits in new projects rather than pay dividends or buy back shares. We might now see the pendulum swing back towards a focus on domestic oil and gas.
As the winter cost-of-living crisis worsens, the importance of greater domestic energy security becomes more apparent by the day.
Having to import energy in an international market that is distorted by the war between Russia and Ukraine gives the UK little room for manoeuvre to reduce costs. The fuel bills people are facing this winter are unsustainable, and this will make domestic production more important than ever as the months go on. This in turn means that new North Sea projects are ripe for investment.
New North Sea projects might seem paradoxical in the march towards meeting net zero by 2050, but new technologies ease those concerns. It is a common refrain to hear Just Stop Oil protesters demanding that the government cease all new oil drilling projects in the UK for the good of the planet, but they miss the benefits that new technologies can bring.
Older reservoirs with older technologies decline in performance over time, so replacing them with more efficient, new platforms should be a priority. New platforms with new technologies can produce 40 times less CO2 in the extraction process than some of the platforms that are currently operating. That number rises higher still when compared with low production wells in the US and other countries we are importing energy from, whose restrictions around emissions are less robust.
Contrary to what we hear from protesters, new North Sea projects are better for the environment, and will support the transition to net zero. The environmental bar for new developments in the UK is among the highest in the world. New projects are adopting innovative new technologies, such as polymer flooding, to make the extraction process faster, more efficient and more environmentally friendly.
Partnerships are also being forged with renewable energy technologies, specifically with offshore wind producers. If we are to reach net zero by 2050, wind will need to produce the same amount of energy that oil does now. If these offshore wind partnerships are successful, the positive implications for accelerating our use of renewables are huge. New North Sea facilities that incorporate offshore wind technology successfully will reduce emissions even further and diversify our streams of energy supply.
The government has thrown its weight behind the North Sea oil and gas business. They recognise that we must balance our commitments to achieving net zero with a transition that is conducted in a responsible and affordable way. Renewables are the future, but with costs rising and oil and gas still key to our supply, the North Sea holds the key to achieving domestic energy security in the coming years.
If the Energy Profits Levy is here to stay, along with the associated tax relief incentives, we could see a wave of private investment deals flowing into a North Sea well that looks to have run dry in 2018. For investors, this is a moment of immense opportunity.
About the author: Steve Brown is CEO of Orcadian Energy.
Disclaimer: This article does not constitute financial advice. All investments are made at the reader's own risk.
Member countries of the International Energy Agency (IEA) will meet on Friday to decide on a collective oil release, a spokesperson for New Zealand’s energy minister told Reuters via a Thursday email: "The amount of the potential collective release has not been decided [...] That meeting will set a total volume, and per country allocations will follow.”
It remains unclear as to whether the US’ potential draw would come as part of a wider global coordinated release. If Biden does choose to draw from the SPR, it would be the largest draw in the SPR’s almost 50-year history.
US President Biden is expected to deliver an update on his administration’s actions on Thursday, the White House has said.
Following the news, global oil prices plummeted more than $5 per barrel, having surged since Russia’s unprovoked invasion of Ukraine on 24 February.
Global companies have begun to reroute cargo shipments away from the Suez Canal as analysts estimate that the blockage caused by the grounded cargo ship Ever Given may take weeks to clear.
Seven tankers transporting liquefied natural gas were diverted on Friday, the fourth day of the crisis. At least three were diverted towards the longer route around Africa via the Cape of Good Hope, according to Kipler analyst Rebecca Chia.
"A total of 16 LNG vessels’ planned transit via the Suez Canal will be affected if the congestion persists until the end of this week,” Chia said, adding that there will be considerable delays in the loading schedule at Ras Laffan from the beginning of April due to this congestion.
The 400-metre Ever Given ship has been stuck in the Suez since Tuesday morning after losing power and running aground, blocking the width of the canal. Dutch and Japanese engineering teams began to seek a way to dislodge the ship on Thursday, and Egypt has suspended all navigation within the canal.
The backlog caused by the blockage has sparked fears of piracy in the unstable regions surrounding the canal as ships are forced to remain static. Lloyd’s List tracking data shows more than 160 vessels paused at either end of the canal, including 41 bulk carriers and 24 crude tankers.
The Suez Canal, an artificial sea-level channel in Egypt that connects the Mediterranean Sea to the Red Sea, is one of the world’s busiest waterways.
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Its blockage will have an extreme negative impact on global trade. Approximately 13% of the world’s trade passes through the Suez Canal – an average of $9.6 billion per day, according to shipping data.
The price of crude hit its highest level since the beginning of the COVID-19 pandemic on Monday after Yemen’s Houthi forces targeted Saudi oil sites with drones and missiles over the weekend.
The storage tank that was the target of Sunday’s attack was the largest crude terminal in the world, capable of exporting around 6.5 million barrels per day, representing almost 7% of global demand for oil. Though the Saudi energy ministry confirmed that no injuries or property damage occurred in the attacks, and output appeared to be unaffected, the shock prompted a crude price surge.
Brent crude rose as much as 5% to its highest level in 14 months before easing slightly, while BP and Shell also rose higher on opening. Though Brent crude retreated to $67, it subsequently rose back to $69 by 10:14 GMT on Tuesday morning, while West Texas Intermediate rose 41 cents to $65.46.
Stephen Innes, chief global markets strategist at Axi, attributed the price surge to the possibility of supply disruption over the weekend. “With OPEC pursuing a tight oil policy and US Shale Oil inelastic supply response to higher prices, any disruption to the Middle East supply chain could shoot oil prices considerably higher,” he said.
The focus on supply follows last week’s OPEC+ meeting, in which the organisation agreed to maintain their supply cuts for April.
Pundits predict that this decision could have a long-lasting impact on oil prices in the months ahead.
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Oil prices have also benefited from expectations of global economic recovery after the US Senate passed a $1.9 trillion stimulus package, which US Treasury Secretary Janet Yellen hailed as sufficient to fuel a “very strong” recovery in the US.
The price of oil rose on Monday as US output slowly began to return after being cut by frigid conditions in Texas, showing the continued tightness of supply as demand sees an uptick from the sharp decline caused by the COVID-19 pandemic.
Brent crude rose 0.9% to $63.46 per barrel by 07:42 AM GMT, following a gain of almost 1% last week. US oil also rose 0.8% to $59.71 per barrel after last week’s 0.4% slump.
Prices were boosted further with Goldman Sachs’s announcement that it was raising its Brent price forecast by $10, with expectations for the price to reach $70 by Q2 and $75 by Q3.
“We now forecast that oil prices will rally sooner and higher, driven by lower expected inventories and higher marginal costs - at least in the short run – to restart upstream activity,” analysts at Goldman wrote.
Texas is home to 40% of the oil output of the US. Following the deadly winter storms that have brought the state to a standstill, the US government adjusted its production forecast down by 140,000 barrels per day to 7.16 million bpd.
The lack of a swift crude rebound in the US is likely to help OPEC and its allies to manage the market, though an OPEC source speaking with Reuters did not imagine that factor “will be permanent.”
OPEC is slowly winding down the record output curbs it imposed last year as both oil prices and demand buckled under the pandemic. Members of the alliance will meet on 4 March to review demand as it stands, though the organisation does not expect to see a repeat of 2020.
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“US shale is the key non-OPEC supply in the past 10 years or more,” another OPEC delegate said. “If such limitation of growth is now expected, I don’t foresee any concerns as producers elsewhere can meet any demand growth.”
Oil prices hit one-year peaks on Friday amid hopes for a quick economic revival and a commitment by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to restrain the supply of crude.
Brent crude futures reached $59.41 per barrel, a high not seen since 20 February 2020. Brent is currently on track to gain around 6% this week.
US West Texas Intermediate (WTI) crude futures also rose 0.5% to $56.52 after previously reaching a peak of $56.52 per barrel, its own highest level since 22 January 2020 – and is on track to achieve a weekly increase of 8%.
The backwardation of both benchmarks, where contracts for near-term delivery are more expensive than later supplies, reached their highest level in over a year at $2.30, showing expectations of tighter supply in the future.
The oil market has been shored up by supply restrictions from OPEC+, which on Wednesday announced member states’ “high compliance” with agreements to limit oil supply, forcing up prices.
In a statement released following a meeting of its Joint Ministerial Monitoring Committee on 3 February, OPEC said that countries had held back production by a total of 2.1 billion barrels since April 2020, when the market suffered an unprecedented shock. A combination of the dawning COVID-19 pandemic and a price war between Russia and a Saudi-led coalition drove prices to historically low levels, with futures even turning negative for a brief while.
“The committee welcomed the positive performance of participating countries,” OPEC said. “Participants pledged to achieve full conformity and make up for previous compensation short-falls, and stressed the importance of accelerating market rebalancing without delay.”
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Government data also released on Wednesday showed that US crude oil stockpiles unexpectedly fell to 475.7 million barrels last week, their lowest level since last March.
Saudi Aramco, the world’s largest oil company, has hired a group of major cash in an effort to raise cash as the price of oil slumps further.
A bourse filing from Aramco revealed that the company has contracted Goldman Sachs, JPMorgan, Morgan Stanley, HSBC and NCB Capital to arrange investor calls ahead of a multi-tranche US dollar-denominated bond issuance. The calls will begin today.
A host of other banks are also involved in the deal, including BNP Paribas, BOC International, BofA Securities, Credit Agricole, First Abu Dhabi Bank, Mizuho, MUFG, SMBC Nikko and Societe Generale, as shown by a document issued by one of the banks.
Aramco did not share details on the size of its latest proposed issuance, though its benchmark multi-tranche offering is planned to consist of tranches for three-, five-, 10-, 30- and/or 50-year tranches, subject to market conditions. Benchmark bonds generally see a minimum value of around $500 million per tranche.
The move comes as ratings agency Fitch revised its outlook on Aramco from stable to negative last week. Earlier this month, the company posted a 44.6% dive in third-quarter net profit compared to Q3 2019 as the COVID-19 pandemic continued to drag oil prices down.
Aramco has already raised a $10 billion loan this year and requires $37.5 billion to pay dividends for the second half of 2020. It also requires cash to fund its $69.1 billion purchase of a 70% stake in Saudi Basic Industries (SABIC), which is set to be paid by instalments until 2028.
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Oil prices fell to historically low levels in March and April in the initial onset of the pandemic, with West Texas Intermediate even falling into negative value for the first time ever. Though WTI and Brent crude made a comeback in August, prices have since dropped again on fears of a highly damaging “second wave”.
Stocks experienced a sharp sell-off on Monday, with a significant rise in COVID-19 cases in Europe and the Americas and a US stimulus deal still nowhere in sight.
In Europe, the DAX opened 2.7% down, while the CAC 40 fell 1.4% and the FTSE 100 fell 1.1%. Milan’s FTSE MIB shed 1.5%, and Spain’s IBEX dropped 1%.
Asian markets showed more mixed results overnight, with South Korea’s KOSPI and China’s Shenzen Component both gaining 0.5% while Japan’s Nikkei ended flat and the Shanghai Composite fell by 0.8%. The Hong Kong Hang Seng rose by 0.5%.
US futures also opened far lower, with futures attached to the S&P 500 and Dow Jones Industrial Average both falling by 1% and Nasdaq futures falling by 0.8%. The slump points to a probable sell-off when Wall Street opens later today.
The US saw its highest ever daily total of confirmed new COVID-19 cases on Friday, rising as high as 83,757 – a total that was almost reached again on Saturday.
France also recorded a new daily case high over the weekend, with 52,010 positive cases confirmed on Sunday. A 9pm curfew across two-thirds of France came into force on Friday night, while Italy and Spain announced tighter measures on Sunday. Spain has now declared a state of emergency.
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Oil prices also saw a slide in advance of a Libyan expansion in crude production, causing demand concerns that have been compounded by the global surge in COVID-19 cases. West Texas Intermediate Crude fell 3.3%, trading at $38.54, while Brent crude fell 2.25% to $40.83 per barrel.
A pricing war earlier this year, in conjunction with the early onset of the COVID-19 pandemic, led to a precipitous global decline in oil prices, with West Texas Intermediate prices falling below 0% for the first time in history.
Oil prices rose on Tuesday as disruptions in Norway and the Gulf of Mexico, as well as President Donald Trump’s early return to the White House, buoyed investor enthusiasm.
Brent crude surged by at least 0.1% to around $41 per barrel during early trading in London, with the crude oil spot pricing also rising by 0.1% to around $39 per barrel during the same period. West Texas Intermediate (WTI) was also trading 1.52% up.
These increases follow on from gains seen on Monday, where WTI rose by 6.15% after the release of positive reports regarding the health of President Trump following his COVID-19 diagnosis.
The new gains also coincide with news that Trump had left Walter Reed Medical Centre and returned to work at the White House, amid other reports that US Hose Speaker Nancy Pelosi and US Treasury Secretary Steven Mnuchin had held further talks on potential stimulus deals and agreed to continue negotiations on Tuesday. Both events contributed to resurgent optimism for oil and other markets.
In addition to this, the Norwegian Oil and Gas Association have estimated that an oil workers’ strike will cut Norway’s total output capacity bye equivalent of over 330,000 barrels of oil per day – about 8% of total production.
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“Besides Norway, there could also be production outages in the Gulf of Mexico this week, where another hurricane has developed,” Commerzbank noted in a statement.
The initial shock of the COVID-19 pandemic caused WTI crude oil prices to fall to negative values for the first time during April as a concurrent pricing war between Russia and a Saudi-led coalition saw global supply far outstrip demand. As events like the Norwegian strike and the Gulf of Mexico hurricane reduce supply, investor optimism for oil generally returns.
