In the current economic climate, it’s important that you be very critical about the money-making methods that you choose to use. Of course, you may choose to depend only on your salary for sustenance, but others prefer to put their money to work. You never know when you might lose your job or when the company you’re working for will go bust. For this reason, some people find that it is a good idea to spread out their income and they choose to invest in the financial markets.

Doing this, however, is not as straightforward as you might think. There are many things that can be bought and sold in the financial markets, and choosing the wrong market is likely to lead to heavy losses. Rather than simply choosing a random investment, you should try to get one that is suited for you. Some of the factors that can affect which financial market is best for you include:

Your investment goals - The most important thing you need to figure out is what your investment goals are. Of course, anyone who invests in the financial markets is there to make money. However, you need to flesh out your vision and figure out the details regarding specifically how you want to make this money so that you don’t have a harder time doing it. Investments in the financial markets can be split into three basic categories: those with long-term, medium-term and short-term returns. As part of the process of choosing the financial markets you want to invest in, you must figure out which of these types of returns you want to receive. For example, if you have a large sum of money that you don’t plan on using in the near future, you could opt for long-term investments.

Discover your investment goals to help you to choose which markets you want to invest in.

Your risk appetite - Another important factor that needs to be cleared up before you start investing is the amount of risk you are willing to tolerate in regards to your investment. In the financial markets, it’s often thought that the higher the risk, the higher the potential returns. If you are willing to lose most or all of your investment money, you could opt to invest in high-risk ventures so that you can reap more returns, if these ventures prove successful. If you are not keen on losing a lot of money, you may opt for the low-risk ventures. However, these tend to yield much lower returns, especially when the investment is a short-term one.

Allow your appetite for risk to guide you in regards to which markets you choose.

Trading experience - These days, it’s entirely possible to control your own trading in most financial markets. This is usually facilitated by trading companies that have online portals that allow customers to buy and sell without the presence of a middleman (online broker). When you want to have control over your investment in this manner, you also need to figure out if you have the right amount of experience to trade. If not, you might find it beneficial to practice with a demo account or start with a small trading account. This way, you can significantly minimize your risk of loss.

Figure out how much experience you have before choosing a market to trade in.

Your personality - In many cases, the kind of character you have can also have an influence on which kind of financial market investment you should make. Depending on its volatility (price movement), a market will either move very fast or very slowly. Traders who like action and erratic movements tend to trade in markets with high volume, and more conservative traders tend to trade in markets that move a lot slower.

Find out who you are to find out which markets suit you best.

How much you are willing to invest - Most people think that one needs to have a lot of money in order to invest in the financial markets. But this is not always the case. Some markets are better suited for people who have more money; others are better suited for investors who have only a small amount of money to invest. It all comes down to the margin that is required for that particular market. The more leverage that is available for the market, the less money you need to open a trading position. However, leverage acts as a double-edged sword, maximizing your potential profits and losses. Leverage is further discussed in another educational module.

The funds you have available to invest will help you to determine which markets to invest in.

How much time you have – The amount of time you have plays a significant role in the way that you will invest. For instance, if you are interested in trading in markets that are active in other parts of the world, you will need to plan your time so that you are available to trade when those markets are open or most active. This is particularly notable when the markets you choose to trade in are a few time zones apart from your physical location. In these cases, you will need to wake up at odd hours in order to trade.

There are four main trading sessions and market hours—the European markets, the U.S. markets, the Asian markets and the Australian markets. When some of these countries close, others open.

Knowing the time that you have available for trading will help you to determine which markets to choose.

Bottom Line

There are many factors that can guide you when you are choosing the market or markets that are best suited for you. Everyone is different, and there are many investing or trading styles that you can learn. However, the crucial question when choosing a market is this: Are you long-term or short-term trader, and do you look at fundamental analysis or technical analysis? Some traders will make 100 trades a day, quickly dodging in and out, while others like to take their time when trading. How you respond will depend upon your comprehensive understanding of your goals, your appetite for risk, your experience level, your temperament, your available funds and your time schedule.

Summary

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Discover your investment goals to help you to choose which markets you want to invest in.


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Allow your appetite for risk to guide you in regards to which markets you choose.


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Figure out how much experience you have before choosing a market to trade in.


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Find out who you are to find out which markets suit you best.


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The funds you have available to invest will help you to determine which markets to invest in.


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Knowing the time that you have available for trading will help you to determine which markets to choose.

 

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