AD | The Internet has brought many important advancements in the worlds of business and finance. One of these is the emergence of trading platforms, introducing new ways to invest. Looking at the ease and convenience of online trading, it isn’t difficult to see why more people are interested in this method of making money online. However, there are certain things you need to know for success, especially if you’re a beginner.
Contents [hide]
- 1 What is Online Trading?
- 1.1 Benefits of Online Trading
- 2 Online Trading Assets
- 2.1 Forms of Online Trading
- 3 How To Trade Online?
- 3.1 Online Trading Risk Management
What is Online Trading?
In the simplest terms, it’s the buying and selling of financial assets over the Internet for profit and you usually do it via a trading platform or online broker, as opposed to traditional offline trading. You can do it at any time of day that suits you as well, whether you work from home or not, or even after the kids have gone to bed. Thanks to the competition between trading platforms, there are plenty of benefits to online trading too.
Benefits of Online Trading
Online trading platformsinstantaneous trade entries
Online Trading Assets
Online trading platformsStocks
- Forex is an abbreviation for “foreign exchange” and simply entails trading between two currencies (a currency pair).
- Stocks are assets representing shares of ownership within a company.
- Commodities are raw natural resources such as oil, gas, gold, and silver, among others.
- Bonds are government-issued assets, used as a public fundraiser.
- Derivatives are agreements between a trader and trading platform or broker on the price movement of any of the assets mentioned above.
You don’t need to purchase any assets to trade them though, you only take positions on where you predict future prices may be. So, what types of trading can you do?
Forms of Online Trading
When dealing on a trading platform, you either go into a long trade or a short trade. A long trade is where you buy or take a position on an asset to make a profit from an increase in its value. Shorting is where you take a sell position on the price of an asset to make a profit from a decrease in the asset’s value.
There are multiple forms of online trading, some more intensive than others. Position trading is a long-term form of trading where the investor predicts the uptrend or downtrend of an asset, takes a long or short trade, and intends to take profit at the very peak of the trend.
Day trading is a short-term trading method where you buy or take a position on an asset and then sell the asset or exit your position on that same day. Swing trading and scalping are more intensive forms of short-term online trading where you maximise your profit by taking advantage of small price movements over very short time frames.
A top trading platform allows you to do all this, and also provides you with appropriate security, privacy, and insurance for your sensitive information and money. Once you’ve made your choice, how do you actually engage in online trading through these platforms safely?
How To Trade Online?
The first thing you should do is conduct some research to help you decide which assets to invest in. After that, you can choose a reliable trading platform or online broker that will allow you to trade your preferred assets. Then you can create a secure trading account and add some funds so you can begin trading online.
It’s a good idea to study and learn the best trading strategy, either by consulting an expert or learning through online courses. And make use of trade simulators to test trading techniques as well, so you can get a feel for what suits you, and the risks involved, before engaging in real trades on a live trading platform.
Online Trading Risk Management
Of course, the point of online trading is to turn a profit, but it’s quite easy to lose a lot of money too. This is where your risk management strategies come into play.
With trading platforms, probably the most important “tool” at your disposal is the stop loss. A stop loss is a risk management trade order that takes you off the trade when your losses reach a particular limit. A safety gate, if you like.
How does this work? You set a stop loss at a price lower than your entry price (in a long position) or higher than your entry price (in a short position), and are automatically taken out of the trade when the price hits these limits. Some other online trading risk management strategies include hedging, and the diversification of assets in your portfolio.
Making Money Online
If you’re looking to make money online relatively easily and with minimum outlay, then online trading offers the potential to make a lot of money, even with only a little capital. However, this is only possible when you use the right trading platform, right investment method, and right risk management strategies to your advantage. As with all such enterprises, you need to do your research, set your limits, and be prepared to stick to them.
Did you find this a useful introduction to online trading? Have you ever tried it? If not, would you consider trying it now?
* This is a collaborative post, please see my Disclaimer.
