What is online trading: Learn how to get started!
What is Online Trading? Learn the Basics | Investing Compare

What is online trading: Learn how to get started!

Discover the world of what is online trading and kickstart your journey with our comprehensive guide. Explore more at Investing Compare.

Introduction to what is online trading

Starting online trading shouldn't be scary.

However, it is necessary to know some fundamental aspects of what is online trading.

In a hurry? Read our quick guide for people new to investing

Anyone can start trading with as little as $100.

Best trading options for beginners:

  • Stock Trading
  • Exchange-Traded Funds (ETFs)
  • Mutual Funds
  • Index Funds
  • Long-Term Investing

Before you start trading, it's crucial to educate yourself, develop a clear strategy, and only invest money you can afford to lose.

Disclosure: To keep our content FREE our website is supported by our users. We may receive a commission if you click through and deposit funds with a broker or exchange. Read the full affiliate disclosure.

Keep reading to discover how you can get started with what is online trading!

What is online trading? Start trading online is not scary

In this article we will go through all the fundamental aspects you need to know to what is online trading in a serious and professional way .

Making something complex simple is truly the great success that each of us can achieve.

In particular we will see how what has been said can also be applied to online trading which in itself is a complex system and can be scary. What does it mean to make it simple? It means really knowing him. We are all potentially good traders. However, only a few actually manage to make trading a constant income generating activity.

It takes time and perseverance and we must not give up in the face of the first losses on the market.

Below I list 8 steps necessary to understand if and what is online trading.

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What is online trading? Time to devote to online trading

I'm talking about both the initial time to cover the basics and learn how to trade, and the actual time you will have each day or week to trade the markets.

Based on this, there are various techniques suitable for those who have more or less time to dedicate.

The amount of time you should devote to online trading depends on several factors, including your trading style, goals, and level of commitment. Here are some guidelines to consider:

  1. Day Trading: Day traders make multiple trades within a single day, often holding positions for minutes to hours. This style requires constant monitoring of the markets and quick decision-making. Day traders typically need to be available during market hours and may spend several hours each day actively trading.
  2. Swing Trading: Swing traders hold positions for a few days to weeks, aiming to capture short- to medium-term price movements. This style requires less time compared to day trading, as you don't need to monitor the markets as frequently. Devoting a few hours each day or several hours per week can be sufficient.
  3. Position Trading: Position traders hold positions for weeks to months, focusing on longer-term trends. This style requires the least amount of time as you won't need to monitor the markets on a daily basis. A few hours each week for analysis and adjustments might be enough.
  4. Investing: Long-term investors make trades with a horizon of years, aiming to benefit from the overall growth of their investments. Investing requires minimal time for periodic portfolio reviews and adjustments.
  5. Scalping: Scalpers make rapid trades aiming for small price movements within seconds to minutes. This style demands constant attention to the markets and can be mentally taxing due to the high frequency of trades.
  6. Part-Time vs. Full-Time: Your available time also depends on whether trading is a part-time or full-time endeavor. If you have a full-time job or other commitments, your trading activity might be limited to evenings, weekends, or specific market sessions.
  7. Learning and Research: Apart from actual trading, you'll also need to allocate time for learning, research, and keeping up with market news. Staying informed is crucial for making well-informed trading decisions.
  8. Adaptability: The time you devote to trading can change based on market conditions. During periods of high volatility or important economic releases, you might need to dedicate more time to monitor your trades and react to changes.

Remember that trading should not consume all your time, especially if you're just starting. It's important to maintain a healthy balance between trading and other aspects of your life. Overtrading or spending excessive time monitoring the markets can lead to burnout, stress, and poor decision-making.

Regardless of your trading style, having a well-defined trading plan and strategy can help you use your time more efficiently. Allocate time for analysis, executing trades, and continuous learning. Adjust your approach as needed to fit your lifestyle, risk tolerance, and goals.

What is online trading? Starting capital to start trading online

You have to ask yourself what is the amount you are willing to invest, so that your lifestyle is not impacted. Better never invest all your savings. And above all, starting calmly and on a simulated platform is always good practice.

The starting capital you have when you begin trading online is crucial for several reasons:

  1. Risk Management: Adequate starting capital allows you to implement effective risk management strategies. Without enough capital, even a small percentage loss on a trade can significantly impact your overall account balance.
  2. Survival Through Losses: Trading involves both profitable and losing trades. With sufficient starting capital, you can weather the inevitable losing streaks without depleting your account entirely.
  3. Avoiding Overtrading: Starting with a substantial amount of capital reduces the temptation to overtrade, which can occur if you have limited funds and want to quickly make profits.
  4. Psychological Impact: Having a comfortable starting capital can ease the psychological pressure associated with trading. You'll be less likely to make impulsive decisions driven by fear or the need to recoup losses.
  5. Learning and Experience: Trading requires a learning curve, and it's common for beginners to make mistakes. Having enough capital allows you to learn from your mistakes without experiencing significant financial setbacks.
  6. Flexibility in Strategies: Different trading strategies require varying levels of capital. Sufficient starting capital gives you the flexibility to choose a strategy that aligns with your risk tolerance and market goals.
  7. Broker Requirements: Many brokers have minimum deposit requirements for different types of accounts. Having the necessary capital ensures you can access the trading platform and services you want.
  8. Diversification: With more capital, you can diversify your trades across different assets or markets, reducing the impact of a single poor-performing trade on your overall portfolio.
  9. Capital Allocation: Having a reasonable amount of starting capital allows you to allocate different portions to different strategies or asset classes, contributing to a well-rounded portfolio.
  10. Reducing Pressure: Starting with an amount you can afford to lose eliminates the pressure to make profits immediately. This gives you the freedom to trade strategically and make informed decisions.
  11. Margin Requirements: If you're interested in margin trading, a higher starting capital allows you to meet margin requirements without overleveraging your account.

It's important to note that the required starting capital can vary depending on the trading style, market, and personal financial situation. While more capital can provide benefits, it's equally important to avoid overextending yourself financially. Trading carries inherent risks, and there's no guaranteed profit. Always start with an amount you can afford to lose without affecting your financial stability or long-term goals. If you're unsure, consider seeking advice from financial professionals before investing your capital in trading.

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What is online trading? The market on which to operate

The financial markets offer a world of opportunities, over 10,000 assets to choose from.

You have to choose between 4 types of activities:

  • Shares listed on world stock exchanges and derivatives (options);
  • ETFs, i.e. stock indexes representing the main stocks of a stock exchange or sector;
  • Forex or Currencies;
  • Commodities or raw materials (gold, copper, oil).

Each of these has its own peculiarities that it is very important to know before launching into the world of what is online trading.

What is online trading? Market opening hours

Can the times of the market you would like to trade adapt to your lifestyle?

Market trading hours can vary depending on the type of market and the region it operates in. Here are the typical trading hours for some major financial markets:

  1. Stock Markets:
  • New York Stock Exchange (NYSE) and NASDAQ: Trading hours are usually from 9:30 AM to 4:00 PM Eastern Time (ET), Monday through Friday.
  • London Stock Exchange (LSE): Trading hours are typically from 8:00 AM to 4:30 PM GMT, Monday through Friday.
  • Tokyo Stock Exchange (TSE): Trading hours are generally from 9:00 AM to 3:00 PM Japan Standard Time (JST), Monday through Friday.
  1. Futures Markets:
  • Chicago Mercantile Exchange (CME): Trading hours vary depending on the specific futures contract but generally start on Sunday evening and continue until Friday afternoon (Central Time).
  1. Forex Market (Foreign Exchange):
  • The forex market operates 24 hours a day, five days a week, due to its global nature. Trading starts on Sunday evening and continues until Friday evening, with trading centers in major financial cities around the world, including New York, London, Tokyo, and Sydney.
  1. Cryptocurrency Markets:
  • Cryptocurrency markets also operate 24/7, allowing trading at any time. Various exchanges around the world offer continuous trading of cryptocurrencies.

It's important to note that trading hours can be affected by holidays, special events, and daylight saving time changes. Additionally, different brokers and platforms may have slight variations in their trading hours, so it's always a good idea to verify the specific trading hours for the market you're interested in through a reliable source or your trading platform.

What is online trading? Consider the risk in online trading

We can distinguish three types of risk:

  • risk of fraud,
  • capital risk,
  • psychological risk.

Scam risk

The  risk of fraud  is the least “burdensome” risk because it is now very easy to avoid. In fact, it is enough to inquire well before registering and making a deposit, on the reliability of the broker. The names of the best brokers for online trading are known all too well and you will have no difficulty finding them and immediately starting your trading activity protected by the law, but also by the high quality service that the best brokers are able to offer today offer: low minimum deposits, secure accounts, encrypted personal data, fast withdrawals and platforms with real-time data that cannot be tampered with. Ultimately, the risk of fraud is null if you choose official brokers regulated by authorities such as CONSOB and CySEC, in this case you run absolutely no risk and you can operate in maximum security.

Risk of loss

The  risk of loss  once you have deposited your capital with an authorized broker, you must also avoid wasting it. I'll explain how he is part of the 20% of traders who make money while still making losses from time to time. Yes, because losing from time to time is normal, almost physiological. Even the best traders lose money from time to time. This is one of the most important reasons when we explain what is online trading.

The important thing is that they are limited losses, contained and managed in the best way. Your trading must be planned in every detail. A good practice  is to never risk more than 2-5% of your total capital .

Psychological risk

Psychological risk is a purely individual fact which, however, must be faced in the best possible way. For example, very often it can happen that you immediately make large profits by investing in online trading. You might think this is a good thing, but it's not a bad thing. This great advantage very often turns into a problem especially for inexperienced traders because it leads us to think that earnings rain from the sky and are not the result of a reasoned and organized activity.

A secret of professionals in the sector lies precisely in knowing how to remain impassive and controlled in the face of every event. Even in the face of very unfortunate days with large losses, the more experienced know how to remain impassive because they have the absolute awareness that times will change and they will return to triumph. Furthermore, their losses were contained by respecting the risk rule.

What is online trading? Study

Even if the theory doesn't put the money in your pocket, as you will have understood the basic theoretical knowledge of trading is necessary to understand which instruments are the most suitable for you. By studying, reading books , and following online courses you can educate yourself and avoid putting your capital at risk.

Studying for trading is essential to build a strong foundation of knowledge and skills before you start actively trading. Here's a comprehensive guide on how to study for trading:

  1. Basic Financial Literacy:
  • Understand key financial concepts, such as stocks, bonds, ETFs, mutual funds, options, and futures.
  • Learn about market orders, limit orders, stop orders, and other basic trading terminology.
  1. Market Fundamentals:
  • Study the functioning of financial markets, including how supply and demand affect prices.
  • Learn about market indices, sectors, and how economic indicators impact the markets.
  1. Trading Strategies:
  • Explore different trading strategies like day trading, swing trading, trend following, and value investing.
  • Understand the pros and cons of each strategy and how they fit your risk tolerance and goals.
  1. Technical Analysis:
  • Learn about chart patterns, candlestick formations, moving averages, and other technical indicators.
  • Understand how technical analysis can be used to make trading decisions.
  1. Fundamental Analysis:
  • Study how to analyze financial statements, earnings reports, and other company-specific data.
  • Understand how to identify undervalued or overvalued stocks based on fundamentals.
  1. Risk Management:
  • Learn about position sizing, risk-reward ratios, and how to manage your capital effectively.
  • Understand the importance of diversification and not putting all your capital into one trade.
  1. Psychology and Emotional Control:
  • Study the psychology of trading, including the impact of emotions on decision-making.
  • Learn strategies to control emotions, avoid impulsive decisions, and stick to your trading plan.
  1. Simulation and Practice:
  • Use paper trading or virtual trading platforms to practice trading without real money.
  • Test your strategies in different market conditions to gain experience.
  1. Education Resources:
  • Read books, articles, and online resources about trading. Look for reputable sources and authors.
  • Consider taking online courses, attending webinars, and watching educational videos.
  1. News and Current Events:
    • Stay updated on financial news and global events that can impact the markets.
    • Understand how geopolitical factors, economic data, and corporate announcements can influence prices.
  2. Learning from Experienced Traders:
    • Follow experienced traders and investors. Read their books, watch their interviews, and learn from their insights.
    • Join trading communities or forums where you can ask questions and share experiences.
  3. Start Small:
    • Once you've gained some knowledge, start trading with a small amount of money that you can afford to lose.
    • Gradually increase your exposure as you become more confident in your trading skills.

Remember that trading involves risk, and there are no guarantees of success. It's important to approach trading with discipline, patience, and a continuous willingness to learn and adapt. If possible, consider seeking guidance from a mentor or a professional financial advisor before you start trading.

What is online trading? Practice simulated with a demo account

Always try to put into practice what you have studied in simulation. This until you reach the level of maturity necessary to operate on the real market while safeguarding your capital.

Practicing with a demo account is highly beneficial for beginners in trading for several important reasons:

  1. Risk-Free Learning: Trading involves risk, and beginners are more likely to make mistakes while learning. A demo account allows you to make these mistakes without the fear of losing real money. It's a safe environment to learn the ropes and understand the mechanics of trading.
  2. Real Market Experience: A demo account simulates real market conditions, giving you a chance to experience how prices move, how orders are executed, and how various trading strategies work without any financial consequences.
  3. Strategy Testing: As a beginner, you'll want to test different trading strategies to see what suits your style and risk tolerance. A demo account allows you to experiment with various approaches and learn which strategies are more successful for you.
  4. Technical Proficiency: Using a demo account helps you become familiar with the trading platform's features and tools. This includes placing orders, setting stop-loss and take-profit levels, and analyzing charts.
  5. Emotional Control: Trading can trigger powerful emotions like greed and fear, which can lead to impulsive decisions. A demo account allows you to practice emotional control and develop the discipline needed to stick to your trading plan.
  6. Refining Skills: Regular practice with a demo account enables you to refine your skills and improve your decision-making over time. This process can enhance your ability to identify opportunities and manage risk effectively.
  7. Building Confidence: Gaining experience through demo trading boosts your confidence. It helps you feel more comfortable with trading concepts, strategies, and market conditions before committing real money.
  8. Tracking Progress: You can track your performance on a demo account over time. This helps you see your progress, identify areas where you're improving, and pinpoint areas that need further attention.
  9. Understanding Risk Management: Learning how to manage risk is crucial in trading. With a demo account, you can practice setting stop-loss and take-profit levels, adjusting position sizes, and determining risk-reward ratios.
  10. Preparation for Live Trading: Once you've consistently shown profitable results on a demo account and feel confident in your skills, you can transition to live trading with a smaller amount of capital. The experience gained from demo trading will help you make more informed decisions.

Remember that while demo trading provides an excellent learning platform, it doesn't completely replicate the psychological aspects of trading with real money. The transition from demo to live trading should be gradual and accompanied by a thorough understanding of risk management and emotional control.

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What is online trading? Build a TRADING PLAN

As with all businesses, it's important to start with a structured plan. A trading plan is a document in which you define your goals, your strategies, the markets you want to trade on, how much time you want to dedicate to trading. In short, a more detailed summary of everything we have seen in this article.

Building a trading plan is essential for beginners (and traders of all levels) because it provides a structured framework for making informed and consistent trading decisions. Here's why creating a trading plan is so important for beginners:

  1. Clear Direction: A trading plan outlines your trading goals, strategies, and approach. This clarity helps you stay focused and avoid impulsive decisions based on emotions or market noise.
  2. Risk Management: A trading plan defines how much you're willing to risk on each trade relative to your account size (risk per trade) and how you'll set stop-loss and take-profit levels. This is crucial for preserving capital and managing losses.
  3. Consistency: Following a trading plan ensures that you approach every trade in a consistent manner. This consistency is vital for evaluating the effectiveness of your strategies over time.
  4. Emotional Control: Trading plans include predefined entry and exit criteria. This helps you avoid making emotional decisions in the heat of the moment, reducing the impact of fear and greed on your trades.
  5. Reduced Decision Fatigue: With a plan in place, you won't have to make on-the-spot decisions for every trade. This minimizes decision fatigue and allows you to trade more objectively.
  6. Risk-Reward Ratio: Your trading plan should outline your desired risk-reward ratio for each trade. This ratio helps you evaluate whether a trade is potentially worth taking based on the potential reward relative to the risk.
  7. Time Management: A trading plan includes your preferred trading times and frequency. This prevents overtrading and ensures you're trading during periods when you're most focused and alert.
  8. Asset Selection: The plan should specify the assets you'll trade (stocks, forex pairs, commodities, etc.) and the criteria for selecting them. This prevents you from randomly trading unfamiliar assets.
  9. Adaptability: While a plan provides structure, it should also be adaptable to changing market conditions. This allows you to adjust your strategies as market dynamics shift.
  10. Evaluation and Learning: By recording your trades and the outcomes in accordance with your plan, you can analyze your performance over time. This feedback loop helps you learn from both successful and unsuccessful trades.
  11. Goal Setting: Your trading plan can include short-term and long-term goals. These could be related to percentage gains, account growth, or improving specific aspects of your trading.
  12. Minimize Overtrading: With a well-defined plan, you're less likely to make excessive trades due to boredom or the desire to chase losses. This helps you maintain discipline and avoid unnecessary risks.
  13. Professional Approach: Treating trading as a business requires a structured plan. This approach helps you take your trading more seriously and fosters a mindset of professionalism.

Remember, your trading plan is a dynamic document. It's important to periodically review and update it based on your experiences, changing market conditions, and any improvements you identify. A trading plan provides the foundation for consistent and disciplined trading, increasing your chances of success in the long run.

If you follow the 8 points we have listed, online trading will no longer scare you because you will have the tools to master what is online trading.

What is online trading – FAQ

What is online trading, and how does it work?

Online trading is the buying and selling of financial assets (such as stocks, bonds, and cryptocurrencies) through internet-based platforms. It works by connecting traders to financial markets electronically, allowing them to execute trades from their computers or mobile devices.

What are the benefits of online trading compared to traditional methods?

Online trading offers convenience, lower fees, real-time access to market data, and the ability to trade from anywhere. It also provides a wide range of investment options and allows for more control over your portfolio.

How do I get started with online trading and choose a platform?

To get started, you should research and select a reputable online trading platform, open an account, fund it, and start placing trades. Consider factors like fees, available assets, user-friendliness, and customer support when choosing a platform.

What are the risks associated with online trading, and how can I mitigate them?

Risks include market volatility, potential losses, and technical issues. To mitigate risks, diversify your investments, set stop-loss orders, and educate yourself about trading strategies and risk management. Only invest what you can afford to lose.

Can I make a sustainable income from online trading, and what are the key strategies for success?

While it's possible to earn a sustainable income from online trading, it requires skill, discipline, and a sound strategy. Key strategies for success include conducting thorough research, using risk management techniques, and continually learning and adapting to market conditions. It's important to be realistic about your expectations and avoid high-risk approaches.

Risk Disclaimer

need to rewite There is a very high degree of risk involved in trading securities. With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses.

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