Online trading! How does it work and how do you get started

Online trading: How does it work and how do you get started?

Online trading: How does it work and how do you get started? | Online commerce is increasingly common globally. What makes it increasingly popular is, in particular, the extraordinary ease of use of platforms that offer financial services on the web. In fact, just open an investment account to be able to start opening and closing positions in stocks, currencies, including virtual currencies, commodities, and other assets.

On top of this, there is a cost advantage, which has made banks and SIM cards, or those who wanted to be middlemen before the Internet started a revolution, very busy.

However, in order to be able to invest in online trading in a really profitable way, it is necessary to try to create a modus operandi that aims to optimize this activity. Only a specific question, like “What is online trading?” can serve as a starting point.

What is online trading?

By online trading, we mean the investment activity carried out on the web every day by millions of investors spread all over the world. For this, new information technologies are used, thanks to which it is possible to speed up the opening and closing of positions in the market as much as possible.

Therefore, describing it is quite simple. In practice, however, it is not at all. To become a trader with real earning possibilities, it is necessary to create a path that does not include shortcuts. At the end of it, he will not only have to have a wealth of suitable skills but also have made certain choices.

For example, opting for a certain trading style: short-term and long-term investments are not the same thing; stocks and CFDs carry different degrees of risk. To succeed in this activity, you need discipline, banishing improvisation from the start.

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Online trading is not a game.

Online commerce is often referred to as “gambling”. In fact, all we need to do is read the email communications that arrive in our inbox to accomplish it. However, this is a glaring error of perspective. Whoever accepts it runs the risk of exposing themselves to the loss of resources invested in the prepared operations.

Therefore, it is necessary to start from a very specific assumption to prevent this from happening: online commerce is not a game, and luck plays no role in it. Once we have specified what it is not, we can start to point out what online commerce really is: real work. As such, it must be faced, using the proper tools so as not to be overwhelmed.

How to choose a broker to invest your money.

How to choose a broker to invest your money.

From what has been summarized so far, it should be quite clear that there are highly professional online trading platforms around the world and others that are not. In addition to scams, in fact, there are other dangers lurking for novice traders.

Represented in particular by operators who do not have great scruples in terms of transparency. For example, using its customers’ money for personal transactions without, therefore, making the necessary distinction between the company’s funds and those of its users.

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In an attempt to remedy an out-of-control situation, market regulators have therefore adopted a series of measures aimed at preventing brokers from operating to the detriment of clients. At the supranational level, efforts have also been made to limit this trend.

For example, the European Union passed a directive, the MiFID (acronym for Markets in Financial Instruments Directive), with the specific intention of securing retail investors. Anyone who does not comply with its dictates is out of the market.

You must opt for licensed brokers.

Therefore, before thinking about how to trade online, it is necessary to try to identify the best trading platforms that are capable of facilitating this activity rather than preventing it.

The starting point for this is represented by a license to be able to provide financial intermediation services. It is issued by the authorities responsible for controlling national markets. For example, this task falls to CONSOB (National Commission of Companies and Stock Exchange), while at the European level, CySEC (Cyprus Securities and Exchange Commission) does it.

In order to obtain such a license, the platform in question must not only guarantee very high standards in terms of services but also comply with the sector’s regulations. Only in this case will it be able to operate in the market.

Why is the enjoyment of a license such as that of CONSOB essential for a platform operating financial markets? Precisely because it offers maximum guarantees to customers.

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The license is a guarantee of security.

Online trading is an activity characterized by high risk profiles. The fluctuations that occur every day in the markets are tricky to manage, even for the most experienced traders. Statistics show this. The vast majority of investors end up losing their money.

Investment activity, however, runs the risk of becoming impossible if the broker you trust cannot offer maximum security. For example, not guaranteeing the fast processing of orders, which is necessary in markets where a few seconds are enough to lose harmony with a trend.

Platforms with regular licenses represent an advantage from this point of view. In line with industry guidelines, they must not only ensure high operating standards but also prevent inefficiencies and malfunctions. If it occurs, they are obligated to compensate the injured customer. A point that must not be ignored under any circumstance.

Besides the license, what are the most important things to look for in a broker?

So far, we’ve focused our attention on the security side. To make online trading profitable, however, the platform must also be able to secure other valuable resources for the trader. In particular, a quality broker cannot ignore the following factors:

  • The platform’s usability by users;
  • The bare minimum that must be deposited in order to activate the account;
  • The asset and market catalog available to its users;
  • The presence of a support service capable of solving customer problems.
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If these are points capable of enhancing operations and services, there are at least three others that cannot be completely forgotten when choosing the platform. Let’s see which ones.

Training services

Those who start trading online and perhaps intend to specialize as CFD traders are unlikely to have economic skills equal to the challenge that awaits them. Perhaps he is following the industry news with interest and is also able to understand its extent, but investing in financial instruments is a very different thing.

Fortunately for him, brokers who propose themselves as intermediaries on the web usually set up real gyms. Schools with a single goal: to prepare aspiring traders to withstand the effects of market volatility.

What is the reason that drives them to do so? Certainly not the desire to do charity. In fact, the fate of operators is closely linked to that of their customers. If the latter wins and continues investing, the broker also benefits. Your compensation actually depends on the number of operations that take place on your platform.

The free demo account

Training is essential to provide the trader with the tools that can help him weather the frequent storms that characterize the market. But how is it possible for interested investors to understand when their know-how is enough to put them in a position to not succumb?

The question in question has a very precise answer: using the free demo account offered by all operators, or almost. This is the simulation mode that allows the aspiring trader to open positions without using real money.

In practice, this modality replicates the behavior of the market. The user can bring the operation to life and test the strategy developed on the card. All without the risk of losing money, a very likely eventuality in the first transactions and, of course, without winning.

It is also necessary to underline a partial defect of the demo, namely the lack of stress associated with real trading. In order to pressure experts to advise its use as simple training, with no probative value.

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The importance of an app to invest in mobility

For those who trade online, it is very important to be able to carry out their trades without interruption. Trend changes are a big part of the financial markets, and they have to be dealt with in real time.

The demands of everyday life, however, involve the need to move around, without having to constantly be in front of the work station. This is followed by having technological tools capable of dealing with these situations. Online financial services platforms have given a very specific answer in this regard; the app to invest in online stocks or other assets, at the choice of the trader.

Thanks to these forex trading apps, it is possible to follow the evolution of the market in real time and open or close positions based on it. All the best brokers have their own mobile app, which is now hard to do without.

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How much does it cost to trade online?

Of course, there is another key question that anyone starting to trade online must ask: how much does it cost? Of course, costs vary from operator to operator, based on the services offered, reliability, and the degree of functionality of the chosen platform.

In theory, these costs can range from zero to very high levels. What experts do agree on, however, is the need to avoid commissions as much as possible. Trading can be classified into three sorts:

  • Account opening;
  • on execution, or on each operation initiated;
  • account management.

These are essentially fixed costs, but different from one broker to another, so they must be evaluated on a case-by-case basis. However, it is possible to avoid them altogether in trading by opting for CFDs and nextmarkets, the best app for stock CFDs.

CFD: What is it about?

CFD is the acronym for “Contract for Difference.” In practice, we are talking about derivatives, or financial instruments that replicate the price of an underlying. The first great advantage they offer their subscribers is represented precisely by the fact that there are many platforms that offer them for free.

Although the economic advantage is quite evident, it is not just linked to its use. Among others, we mention in particular:

  • The ability to profit not only from the asset on which the contract was opened, but also from its depreciation.To win, you need to be able to predict the market’s direction in time and make a bet based on that.
  • The ability to use financial leverage or to operate on a tight budget.In this way, even those who do not have large resources can move significant amounts;
  • The ability to open and close transactions when you intend to do so. Thanks to this peculiarity, the trader can maximize profits and minimize losses.

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So, what does it mean to trade online?

We mentioned this at the beginning, but it certainly helps to repeat it: online commerce is not a game. Why do we go back to this point? The reason is very simple: many continue to underestimate this type of business. Emails or ads that show you in that role are likely to get you to do it.

On the contrary, investing your money in financial instruments should be considered a real job. In order to involve a continuous updating of your skills. Only then, in fact, is it possible to establish a safety net around money.

To do this, you need to know technical and fundamental analysis, follow economic news, and take care of yourself to better face this demanding activity. Those who don’t, perhaps relying on good luck, are destined to lose their money. This is to share the fate of most of those who trade online roughly.