The use of an internet-based platform for the purpose of buying and selling financial assets is called online trading. As an online trader, you can trade across a range of diverse assets. From stocks and indices to currencies, commodities, and bonds.
Online trading eliminates brokerage and enables DIY transactions. Relying on an array of digital tools, you could buy and sell instruments. You can also place orders, view real-time quotes and data and examine all your open positions.
Is online trading the same as investing?
Online trading and investing are two different options you can use to speculate on the financial markets.Investing is a lengthy process. Usually, investors will build their wealth over years. They will accumulate assets to build an investment portfolio. Online trading is more short-term and involves the frequent buying and selling of instruments including stocks and commodities for a profit.
The difference between CFD trading and spread betting
Spread betting and CFD trading are a form of leveraged online trading. Both forms of trading share many similarities. The main difference between the two is that spread betting is available only in the UK and is free from Stamp Duty and Capital Gains Tax (CGT). Contract for difference (CFD) trading is available in many countries globally. CFD trading is currently free from Stamp Duty in the UK.
As a trader, you can trade on rising as well as falling market prices with spread betting and CFD trading. This means that you could net a potential profit even when markets are falling. You don’t own an asset with this form of trading but are rather taking a position on whether its value will rise or go down.
Whenever your prediction is accurate, profits can be made. But if the trade goes against you, you could also make a loss. With leveraged trading, a small portion of the full value of your trade needs to be deposited for the purpose of opening a position. The official term is trading on margin. This means you could make significant profits by depositing just a small sum of money to place your trade. You could also, however, make big losses if the market moves in the opposite direction.
What to look for in a trading platform?
Several factors have to be examined before joining a trading platform.
For a start is it free and does it offer a free demo version? This is the best way to test the waters. How reliable is it? All functions should be impeccable for the purpose of effective trading. Other essentials to look for include:
- Is the platform service provider licensed by the proper regulatory authorities?
- Whether fees and charges are reasonable
- User-friendliness and ease of operation
- Well-defined deposit and withdrawal methods
- Availability of sufficient data and technical indicators and charting
- A suitable method of using the platform (web-based, Windows-based, etc.)
Minimising risk
Every successful trader understands the potential risks and adopts strategies to limit those.
Planning trades is the first and the most important risk-minimisation option. There are at least two points that can be planned ahead of time: placing stop-loss and take-profit orders. Successful traders know the price points at which to buy and sell for the purpose of generating profits.
Timing is everything in the world of trading. When a position is created, the trader needs to have a good enough reason for it. There are two other essentials in the world of online trading – being patient and having realistic expectations. Keep your hopes for profit within reasonable limits and always do your research well.
