Online Trading for Latest Guide for Beginners

Online trading has been around us for more than two decades since the rise of technology in the late 90s of the previous century. Although the early signs of online trading platforms have emerged around the 1970s, the accessibility of these platforms in the form of desktop and mobile applications greatly increased trading volumes and liquidity and created a new profession, home day trader.

But the concept of online trading has a wide spectrum that ranges from professional proprietary institutional firms and web-based trading platforms that are accessible by any individual.

In this guide, we break down the benefits of online trading, explain the differences between each platform and suggest the best CFD brokers in order to help you get started.

How to Start Online Trading in 3 Quick Steps:

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Online trading might be a lucrative business, however, it is also risky and complicated. First, you’ll have to learn the markets, get the right equipment (you might need a second computer screen and a strong computer), find a set of sites and trading platforms to get data and information and find a reliable broker.

Obviously, there are plenty of ways to start online trading. These include online stock trading, options trading, futures trading, cryptocurrency trading, forex trading, bonds trading, and ETFs trading. Each one of these markets has distinctive demands and its own set of dynamics and there’s another way that combines the above markets and products and enables you to start trading with a minimal capital due to a concept called margin trading – The Contract for Difference (CFDs) market.

CFDs are basically a form of agreement between two parties who speculate on the price of certain security without owning and delivering the asset. The CFD market has grown exponentially in the past two decades and has gained the necessary regulatory framework in order to maintain a functioning industry. We have included a step-by-step demonstration that shows you how to start trading online with a top CFD broker.

Step 1: Open an Online Trading Account

First, you will have to choose a CFD broker that is regulated and authorized to operate in your country. You must note that every broker has different markets, products, terms of trading, trading platforms, and trading tools. When looking for a broker, you can create a demo account to test the upsides and downsides of each broker. Below, we have collected some of the best CFD brokers to help you get started trading online.

Step 2: Learn How the Online Trading Market Works

What is Online Trading?

In simple terms, online trading is trading in the financial markets through an electronic trading platform over the internet network. While traditional trading has taken place on the floors of exchanges, the integration of technology in financial markets has created the electronic trading method which ultimately functions similarly to buyers and sellers on exchanges. For instance, the Level 2 screen which is available on most exchanges allows users to get a full picture of the market, providing the buyers and sellers of the market including the offered prices and quantities.

How the Online Trading Market Works

Trading online is an act of buying and selling securities via the internet. It can be done through a brokerage firm with multiple channels that allow the user to execute market orders: a telephone, a web-based platform, a desktop-based platform, or a mobile application. Online trading is the same as any other type of trading but takes place in a virtual sphere. Nevertheless, a trader must take into consideration the motives and interests of other participants in the market, though it is not a face-to-face market.

Online trading refers to various markets such as stocks, ETFs, options, currency pairs, cryptocurrencies, futures, commodities, bonds, etc. Online trading occurs through a network of computers transacting one with the other, therefore, the reliability of networks and computing systems becomes a necessity for the existence and development of online trading applications.

Step 3: Choose a Trading Strategy/Broker Type

Throughout the evolution of online trading since the mid-90s, market orders and trading styles have become popular terms and much more defined.

Here are the four types of trading style to apply on the online trading market:

Day Trading – Day trading is a trading method that involves around buying and selling securities with the principle rule of thumb of closing all positions by the end of the trading day.

Scalping – Scalping refers to a trading method in which a trader profit from small price gaps in the market. Scalping is usually done in timeframes of seconds or minutes.

Swing Trading – Swing trading is a trading method in which a trader attempts to make a profit in a position held for 2-5 trading days.

Position Trading – Position trading refers to a trading technique in which a trader/investor holds a position for a long period of time. By definition, a position trader makes less than 10 trades per year.

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Technical and Fundamental Analysis

Technical and fundamental analysis are the two main techniques of analysis for any financial security. While technical analysis aims to predict future price movements by clear patterns and previous price action, fundamental analysis helps traders to get a better indication of a security based on economic data and market news. These two techniques, or at least one of them, is mandatory for every trader.

Types of online trading brokers

Market Maker – A market maker broker literally makes an independent market. It is usually a brokerage firm that buys and sells securities on its own account, at the same prices of the exchange.

ECN Broker – An Electronic Communication Network (ECN) broker is a type of broker that functions as a bridge between the trader and the market. While these brokers are more transparent and reliable, they often charge higher trading fees.

STP Brokers – A Straight Through Processing (STP) brokers transfer clients’ orders directly to their liquidity provider. An STP broker is a No-Dealing Desk broker but unlike an ECN broker that sends orders to the members of the electronic network, an STP broker channels all orders to external liquidity providers.

Step 4: Placing a Trade on Online Trading Placing

Making a trade on an online trading platform may be complicated but in this section, we’ll go through each step to help you get started. As we mentioned, the eToro’s trading platform is intuitive and user friendly, hence, it is quite to place an order directly to the market.

Once you have completed the registration process and transfer funds into your account, log in to eToro’s trading platform and search for one of the instruments you wish to trade on (for demonstration, we have chosen gold).

eToro immediately transfers you to the instrument page. On this page, you will be able to connect with other traders, see posts and relevant news, and analyze the asset using charts and stats.

Whenever you are ready to place your first order click on the ‘Trade’ button, set the amount of the trade, and click the ‘Open Trade’ button.

Conclusion

Nowadays, it is almost impossible to not come across an online trading broker, platform, or a friend that has traded through the online trading market. Some people are gifted with instincts that enable them to make consistent profits, basic income, or even a hobby. Believe it or not, trading can be fun. The adrenaline, excitement, and competitiveness of online trading will be something you wouldn’t want to miss.

Having said that, it’s not a secret that you might lose your capital which can end up in big disappointment and occasionally even tragedy. We highly suggest that you start small, and always be responsible with the money you risk.

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