An Introduction To Online Trading
As we roll into week 14 of the coronavirus pandemic, which has so far killed more than 73,000 and spread to more than 180 countries, more and more of us are finding ourselves in lockdown as governments around the world take extreme measures to curb the spread of the highly infectious disease. It’s never been a better time to upskill, learn a language, master a skill, or take up a new hobby. For some, it is a time to diversify one’s income stream, and some are choosing to do this via taking up online trading.
Online trading is the act of buying and selling financial products on the internet via an online trading platform. This might include the trading of bonds, stocks (shares), international currencies, futures, and other financial instruments. Why is now the time to take up online trading, you ask? Simple. You can make money from within your home, meaning that even during lockdown you can make trades. Given that all trades are made via the internet, you can make deals on the financial market within seconds or even less. But there are a few key things every beginner should know about online trading before they tumble headfirst into the virtual trading world. Here are some of those things:
Which Type Of Trading Are You Interested In?
As mentioned above, there are different types of trading available to online traders. They include:
Stock trading: Buying, holding, and selling stocks of securities listed on public stock exchanges (e.g. NASDAQ, NYSE, and AMEX). You can click here to learn how to trade stocks online in just 5 steps
Options trading: A type of derivative trading where people trade contracts that give them the rights (but not the obligation) to buy or sell an underlying instrument like a security, ETF or even index, at a predetermined price.
Forex trading: Forex trading (also known as foreign exchange trading, FX trading or currency trading) is the act of buying and selling currencies which, as the global economic landscape changes, could one day turn a profit as the value of those currencies change. This one can be a little confusing for beginners, but thankfully you can click here to become familiar with the different aspects of forex trading by setting up a forex demo account, which can be used to test a new trading strategy without any risk to actual money.
Binary options trading: A form of trading where the outcome is a ‘binary’ yes/no answer, in others words, traders expect to earn a fixed payout or nothing at all, based entirely on the success of their prediction of the performance of a specific market.
This type of trading may seem deceptively simple, but note that ASIC considers binary options as “high-risk” and “unpredictable” investment options.
2. Every Online Trader Needs a Broker
Trading online within the confines of your home may seem much more of an independant activity than trading in-person, but one thing remains the same: a private trader still requires a broker in order to trade. Brokers provide traders with the software that traders need to conduct business, and choosing the right broker or brokerage firm is key to your ongoing success in the market. They will have a direct influence on the kind of trading tools you will use, how much you will pay in fees, and ultimately, how much money you will make. So it pays (literally) to shop around before deciding on a broker.
3. Make a Trading Plan, And Ensure You STICK To It
There are a million things that could be said about the psychology of trading, but perhaps the most pertinent thing to keep in mind is that trading can be incredibly emotional – particularly for those who are relatively new to the game. You may lose your cool and want to sell your shares when the going gets tough, but one lesson learnt by all successful traders is that the best approach to succeeding at online trading is to decide on a game plan and stick to it, no matter how much you may want to change your tactics halfway through. Figure out how much you want to invest at what price, and then decide how far you’re willing to let a stock fall before you sell. And follow through with that plan, no matter what.
Online trading is most certainly not a scam, and many people earn a decent living through conducting online trades. If you wish to be one of those people, do your homework, find a decent broker, and decide on a sensible game plan. Good luck.