Before the emergence of online trading, traders experienced complicated trading processes that had many challenges. Traders used to call their brokerage firms and mandate them to trade on their behalf. Thanks to the digital era that gave birth to the basic medium of online trading, the internet, traders nowadays open and close big trades at the comfort of their laptops, computers, or smartphones. This means that a trader can place orders, like a stop-loss or take-profit orders, market limits, check the progress of their trading positions, view the assets on offer, get the latest market news and others via their gadgets.
What is online trading? It is buying and selling assets or stocks through the internet, with wireless access, or any other emerging technology. Online trading eliminates intermediaries, or third parties, from executing trades on behalf of the trader or investor. After creating an account via brokerage firms and being equipped with online resources, the trader can buy, sell, or monitor the trading activities directly.
How online trading works. the process is quick. It takes only a couple of seconds to complete a trade. However, within that short duration, many things take place.
Registration of the order
Placing the order in the database
Searching and matching buyer and seller
Sending notification to both the seller and buyer
Signals of orders and prices are sent to the relevant regulatory authorities
After scrutinizing all the trading data, the authorities display the data to all traders
Storage of the trading history for future reference
Sending the contract to the brokers who bought and sold shares or stocks
Online trading came to hasten the processes and reduce the charges associated with traditional trading. In this article, we will walk you through some key headings below,
How do I do online trading?
Why trade online?
Which time is best for online trading?
Now, let us have an in-depth look at the topics shared above.
How do I do Online Trading?
To start online trading, you need to do research, identify assets, look for a brokerage firm, learn to trade, and finally decide. Remember, financial investments have their share of risks, therefore, portfolio diversification and investing in educational resources will help in reducing or managing the risks. To get started, let us walk you through some key processes.
Choosing the right online broker
Do thorough research on the type of brokerage firm to use. It is difficult to get the one that suits you best. If you get the best online broker, you will have a good start in your online trading. How do you choose the best online broker?
Look for past reviews, charges, its usability i.e. if it is easy to navigate or well documented.
Does the broker provide market news and learning materials?
Are there free easy-to-use trading tools?
What kind of trades do they specialise in, i.e. small or huge?
Is the broker regulated? This gives some authenticity of legitimacy.
You should consider other things before you conclude on which online broker to use. Do not be limited to what others are saying. Try to do a thorough research.
After you are satisfied, create your brokerage account. For beginners, starting with a demo account would be better. The account gives them the experience and confidence needed before starting off with real trading. As stated earlier, it is very important to decide on what to trade, for example, you can decide to specialise in a certain asset or diversify your trading portfolio by investing in several assets such as trading indices or forex trading.
A good deal of brokerage firms charges nothing when creating an account. You can also operate different accounts at once depending on your mode of investment. You do not need funds to open an account. However, to trade, you need to deposit some initial capital.
Choosing the assets
Once you are done with choosing a broker, the next step is equally important. Choosing the trading assets can become a nightmare to you if you do not understand how they behave or operate in the market. For a beginner, starting with ETFs (Exchange-Traded Funds) could be better. The reason is simple, ETFs allow you to buy many securities at a go. This eliminates the indecisiveness in choosing one firm over another. Another thing is that ETFs give the trader’s portfolio greater exposure, especially if one is trading in the US. Choosing bonds is another way of diversifying investments, hence creating low risk, especially during market pulldowns.
To choose individual items, use FAR (Financial Analysis Ratios) to see how they have been performing compared to their competitors.
Choosing the right trade
As you engage in your online trading, it is important to understand that there are different trading orders. We will look at the most commonly used orders. They include limit orders and market orders.
Market orders are the simplest since they are executed or transacted immediately once some set of conditions are met. The stock or asset being traded picks the best price.
Limit orders offer greater control on the paying or receiving a price of a trade. It does not mean that these limit orders are executed immediately, but you set your desired price for selling or buying a certain asset. By doing this, you expose yourself to higher profits.
Putting a trailing stop-loss on a sell order to keep the asset once goes up, also allows you to sell even when the price goes beyond a certain limit.
Choosing the right mindset
To be successful in online trading, you need to have the right mindset and attitude. Develop the right mindset in the following aspects:
Patience: do not rush. Allow the system to do it for you. Even if the system cannot actualise the market outcomes, do not lose hope. Try to move to the next trading position because trades never end.
Be real in your expectations: of course, sometimes the market can shock you by giving unexpected huge returns; you should understand that some other times this might go extremely low or even result in a loss. It does not mean you will always make huge returns. Being real is vital.
Stop being emotional and employ discipline: whatever the move, keep your cool, do not act emotionally. If you are using a reliable system, allow it to do it for you and stop relying on friends or busybodies. Stop having second thoughts or guesses, but allow the strategies you have put in place to bring the results.
Why Trade Online?
Considering the number of people that are constantly running errands online, we can for sure say we are yet to witness the best from the internet. Talk of shopping, entertainment, and many other tasks that are continuously growing daily and we can courageously admit that in the coming days, we will witness the next online trading explosion. The modern reality cannot be complete without trading online. People are generating revenue in the comfort of their homes. It is so simple, i.e. an online broker allows a trader to interact with a huge marketplace where there are circulations of trillions of USD daily. The market has the potential to accommodate great online investors. Let us consider some statistics,
Online trading volumes are growing each passing day. The digital era has been the catalyst behind this new wave of trading. Before the rise of the internet in the early 1980s, nobody would have thought that online currency trading or online forex trading could become the next source of huge returns. However, what could be the reason (s) behind the tremendous growth in the internet trading volumes? Well, this forms the basis of our subheading, “why trade online?”.
Online trading figures are continuously growing. By 2017, the figures were approximately more than 9 million and after 2018, the figures were approaching 14 million. If we go by the projection, within the next 5 years, we will stare at approximately over 30 million users.
According to Equities.com and others, in 2018, there was an enormous surge in the number of American youth that embraced digital trading. When we thought laptops or computers were the entry points to online trading, smartphones came into play. The adoption of digital trading is so enormous nowadays.
Why trade online? Below are the key reasons.
Entering online markets is cheaper compared to other conventional ways of trading. A trader can access extra funds through leverage once they open their account through online brokers. Another critical aspect is that, some broker accounts require minimal or no deposits at all. The transaction charges are also extremely low compared to other ways.
The availability of learning materials or opportunities across various brokers enables users to make informed decisions on the best strategies to use.
The speed with which the traders execute trades is outstanding. While one-on-one trading can take days, weeks, or months, with your smartphone you can close your trade deals instantly. Online trading ensures potentially fast results.
Finally, a trader takes full control of their trade without relying on intermediaries. Intermediaries only increase the cost of doing business and deprive the trader of full control of their investments. This also encourages the trader to invest more in learning to expand the trading skills.
Which Time is Best for Online Trading?
There has been a lot of discussion on the best time to conduct online trading. Of course, there are laid down timings, however, the best time depends on various factors.
The opening and closing hours of every trading session realise the most volatility and trading volumes that could be beneficial to the trader. The increased volatility can be very crucial for experienced traders to move into the market and make good returns. The ever-flowing geopolitical and business news have affected the markets and distinct assets at different times.
For some traders, certain weekdays or particular week/month could offer favourable trading opportunities to different market segments. This could be true if certain patterns become more predictable. Below are some widely known US trading market hours:
Pre-market– starts at 8 A.M. EST, however, trading takes place as early as 4 A.M.
Regular market– starts at 9.30 A.M. EST, closes at 4 P.M. EST.
After Market-, it starts with the closing bell at 4 P.M. and goes on until 8 P.M. EST.
After understanding the market hours, we will give you the best day, week, and month to either buy or sell stocks or assets.
When selling, the best day of the month is any day leading to the last online trading day of the particular month. Towards the end of the month, the prices of the best performing assets are higher.
About stock buying, the best day is the 10th or 15th. During the middle of the month, the prices will go down, triggering buying opportunities.
Many day traders close all outstanding positions to evade overnight trades. This means that the chosen assets would decline towards the close, hence enabling the traders to make profits.
Finally, many traders buy assets during the trading day’s first 2 hours. Usually the market rises the most during the initial 2 hours of the day, so trading immediately after market opening (9.30-11.30 A.M.) especially for NYSE, is preferable. The reason behind this theory is that the good news released during market closure will see the asset rallying well. Online trading does not need many skills to get started. All one needs is research and passion to learn the basics of trading better. The secret of success is reading the numerous online trading resources in the market. Once one attains the skills, it is important to employ both money and risk management techniques. Brokers have invested heavily to make sure that there is adequate security. However, it all begins and ends with you. Do your research well before, on, and after trade to avoid disappointments.
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. FXCess is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication