Traditional trade involves the transfer of goods and services between two parties in exchange for a valuable thing like money. Markets have a system that allows traders to do trade and earn profits while using a single, organized platform. Instead of involving money, trade can also involve the exchange of goods and services among people, but this method was effective before the arrival of money. so let’s talk about online trading a bit:
1. Online trading:
Online trading is different from traditional, market trading in every possible way. For example: in place of a market (a physical place), online trading uses online trading platforms (like forex exchanges). This system of exchanges is internet based and includes various trading options like commodities, shares, and forex.
As you may already know, commodity and share trading is already a grown-up market, but forex trading has got a lot of hype lately, thanks to its amazing financial benefits and huge profit potential.
2. Starting online trading:
If you are keen to dive into the vast universe of online trading, here are some crucial steps you’d have to follow carefully to ensure a safe journey.
• Choosing a broker:
To start online trading, first, you’ll have to open a brokerage account with a trusted broker. Keep in mind that every stockbroker charges a fee for your actions. So, try to choose a low-cost broker to open a brokerage account with. You either choose a prime brokerage or other brokerages to start exchanging stocks.
• Types of trades:
After opening an account with a reputable stockbroker, you’ll now have to analyze your options and choose the one that fits you best. There are several types of trades like market trade, day trading, limit trade, stop loss, trailing stops, good till canceled trades, bracket trades and some more that you can choose from. You can search for each of these trading options to learn stock trading.
• Avoid unnecessary expenses:
There are many types of unnecessary expenses in stock trading that can ruin your trading portfolio and career. For example, a broker with high commission and exchange with high fees can take away all of your profits. So, learn to avoid such unnecessary expenses, as they can drain your wallet pretty fast.
• Trade on margin:
Trading on margin means borrowing some money from your stock exchange to spend on speculation. Trading on margin is especially beneficial for new traders with little to no capital, but this can also be very dangerous if you lose some trades in a row. So, choose wisely, and never place a trade without analyzing the market beforehand.
• Learn the local taxing system:
Before starting stock trading, it is a good idea to learn about the local tax laws to avoid any unexpected expenses. Many countries charge a bigger tax if you hold a stock for a lesser time. They do this to promote long term investment.
So, you better get in touch with a taxation expert or consult your lawyer before making your trading strategy.
3. Pros and Cons of online trading:
Online trading is becoming more and more popular with every passing day. Millions of people around the globe have registered themselves with exchanges to trade stocks and earn profits.
But online trading has its own pros and cons. Let’s take a look at some of them to get a better idea.
Here are some of the benefits of online trading.
• You have the control:
Timing is very important when it comes to placing trades. That is why online trading has an edge over its offline counterpart. Online trading lets you place the trades immediately without any delays. While with traditional brokers, you’ll first have to book an appointment to place any trade, and that takes forever to happen.
• Low fee:
Low fee is one of the biggest advantages of online trading. You can save many bucks in the shape of reduced transaction and brokerage fees.
Some online brokerages even allow you to transact for free for promotion purposes. On the other hand, offline, the traditional stock market has some type of fees on every step; it drains your capital pretty fast.
• No bias:
Many offline brokerage firms and brokers would give you biased financial advice for their own good. For example, they’ll make you buy a stock that gives them more commission.
That is why choosing an online platform for trading can help you big time. It allows you to think clearly about what’s best for you, not for your broker or exchange.
• Online tools:
Many of the online trading forms give you access to a lot of online tools. These tools can be used to monitor your investments, make good investing decisions and analyze the performance of a stock over a specific period of time. This gives online brokerages an edge over their offline counterparts.
Online trading also comes with its own disadvantages. Let’s take a look at some of the major disadvantages of online trading.
• Making poor decisions:
With online trading, you’re at the risk of investing too much too fast. Because all you have to do is press a button, and all of your money can go in a blink if you make an unwise decision.
You are fully responsible for your actions, and there are no brokers or trusted friends to help you out immediately.
Your computer or mobile phone can err at any time during the placement of a trade. Many investors end up forgetting that they’ve already completed a trade and accidentally place another trade. So, they end up investing twice as much as they intended to.
The slightest typo can convert $100 into $1000, and you won’t be able to reverse that. While in offline trading, there is always a chance of the error being caught during the due process.
• Its internet dependent:
Since online trading is fully dependent on your internet connection, you can miss out on important trades if your connection is slow. Also, you won’t be able to monitor any ongoing trades without a strong internet connection 24/7.
we are doing our best to provide you with the best content we can possibly create, we are not a certified investments broker or agent or anything like that, trading can be beneficial but can be very risky as well, please be responsible