In the past, online trading was dominated by financial experts and investors with a solid financial background. Today, almost anyone can trade, provided he/she has some financial knowledge, Internet access, and sufficient capital. If you’re looking to get into the trading game, it’s best to understand the basics. That said, here’s the ultimate guide to online trading:
What Does Online Trading Entail?
As the name suggests, online trading entails placing sell and buy orders for financial securities via a brokerage’s Internet-based platform. When you create a brokerage account, you’ll have the opportunity to trade currencies, indices, equities, and commodities on the main international markets.
Traders profit when they sell or buy tradable financial instruments such as forex pairs, CFDs, and stock. You make money by anticipating the short-term fluctuations in the value of these financial assets. Thanks to the Internet, online traders can access a wide range of trading products on the major financial markets. Trading brokerages are the hubs that enable investors to sell and buy bonds, stocks, future, etc.
How to Choose a Brokerage
Perhaps, this is one of the most significant decisions you’ll make as a trader. Choosing a suitable online broker is as essential as selecting the financial instruments to trade. It’s best to open an account with a credible trading brokerage. Some of the factors to keep in mind when selecting a broker include:
- The intuitiveness of a broker’s app/website
- The financial products you can trade
- Available promos and perks
- Commissions and account fees charged
- Customer service offered
- Educational and research tools available to traders
The brokerage you choose should also support the type of trading you want to do. Ultimately, the final decision always boils down to personal preferences.
Opening a Trading Account
Once you identify the platform you want to trade on, you’ll be required to open a trading account. When opening an account on most platforms, you’ll be asked about your financial and investment history. This helps determine whether you’re the right fit for the account you’re requesting since brokerages can’t allow you to access investments you can’t handle.
After opening an account, you must stipulate how you want the brokerage to store your money in-between trades. Some online brokerages provide traders with interest-bearing accounts, which enable you to earn some money even when you’re not trading. If your brokerage offers this account, do not hesitate to pick it.
Once you’ve made all the necessary decisions regarding your trading account, you should go ahead and fund it. You can deposit money into a trading account either by cheque, wire transfer or by transferring funds from another brokerage account. With funds in your account, you can start trading.
How to Make Trades
Having a functional and funded account doesn’t mean you should start making trades immediately. Instead, you should first get real-time stock quotes to confirm the prices of the financial instruments you want to trade. Most brokers provide these quotes as part of their customer service. Financial news websites also offer slightly delayed quotes. However, you should be wary of the delayed quotes since they may be slightly different from the real prices if the markets are moving quickly.
Why You Should Beware of Online Trading Scams
Apart from erratic prices and the complexity of trading, newbies should beware of trading scams. With online trading, you’ll have to research financial instruments on your own and decide on what to sell and buy without any help from investment planners and other professionals. Fortunately, informational websites such as https://tradingguide.co.uk/ can point you in the right direction when it comes to identifying reliable brokerages.
You can protect yourself from scams by researching your trading platform and going through its financial statements, annual reports, and customer reviews. It’s also a good idea to check whether your brokerage meets all FCA regulations. Most importantly, remember that if an online trading deal looks too good to be true, it’s probably a scam.
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