Alpari releases Financial Literacy 101 for beginner traders
To begin with, Alpari advised that those looking to start trading or investing should first make sure that they have budgeted effectively. The broker said that the 50/30/20 rule could help people check their budget – 50% should go towards 'needs' like accommodation and food, 30% towards 'wants' like travel and entertainment, and 20% should go towards savings or investments. But before they use that 20% to trade or invest, they should make sure they have an emergency fund that can cover their expenses for 6 months.
Alpari also advised traders to make sure they understand the tax law in their country, as the amount of capital gains tax they need to pay on their earnings will vary. For instance, Denmark has the highest maximum rate in the world at 42%, compared to a much lower 20% in the US.
The broker also explained three key concepts that traders and investors need to understand: diversification, leverage, and risk tolerance. To diversify their portfolios, they should aim to spread their capital across different asset classes and markets. This reduces the level of risk that their capital is exposed to.
Alpari urged beginner traders, and those who are interested in getting started, to learn about leverage. Leverage is commonly used when trading CFDs, and can allow traders to open a position that is worth more than the actual outlay. It can magnify potential profits, but it can also magnify potential losses.
Lastly, risk tolerance is the level of risk that each individual trader is comfortable with – everyone should understand their own risk tolerance, to ensure they make trading decisions that they're happy with. Some traders are willing to accept short-term losses in pursuit of long-term growth, while others prefer as little volatility as possible.
Alpari also offered some examples of ways beginner traders and investors can learn as they get started. They can use a practice account with their broker of choice to explore trading without putting their capital at stake. These demo accounts can teach traders how the market works in a real time demonstration. Traders should remain committed to ongoing learning – staying on top of financial and legal regulations in their country, as well as ever-changing global market conditions.
Alexey Efimov, Market Analyst at Alpari, comments: 'Gaining a clear understanding of how different markets and asset classes operate is only one part of becoming a successful investor. Equally important is the development of strong personal financial habits. Building an emergency fund and saving consistently provide the stability needed to invest with confidence and resilience over the long term.'
About Alpari
Alpari is a long-established leader in online financial trading. They pioneered online forex trading for retail clients 25 years ago, and remain focused on enabling individuals to access the potential of global financial markets.
Alpari clients are individuals with an appetite to generate financial returns through self-directed trading. They are comfortable taking risks in order to generate returns and are willing to invest time to build the skills needed to succeed.
Alpari's promise to these clients is to enable them to 'access global trading opportunities securely'. They believe that individuals anywhere in the world should be able to access opportunities in financial markets, where local political environments do not support domestic regulation, they provide solutions for individuals to access our services offshore, but offering the same service standards and client protections as a regulated business.
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