As for any other type of investment or strategy, educating yourself on the subject is extremely important.
In this guide for beginners regarding online trading we will give you a starting point and walk with you step by step through the basic knowledge needed to operate in this financial sector.
For those intended to educate themselves alone, you can check our main sources of information on this financial site.
Online trading is mostly done on over-the-counter (OTC) markets, which means that, in opposition with the past, there is no physical place where action happens: all operations are performed online or via phone. Meaning trading takes place anytime and anywhere, and when one broker rests, another is always around to keep the market going.
While this may sound odd in an interconnected society where smartphones and computers are omnipresent, the complete digitalization of financial markets carried important consequences for investors. To start, it goes without saying that the fact of not having an actual place in the real world gives OTC markets the chance of being open 24h a day for 5 and half days and therefore the chance of having a constant money flux.
It’s not a coincidence that the Forex market, which is completely performed on the OTC market and one of the main interests for online traders, is the most liquid market in the financial world.
CFDs: How Do They Work
There’s plenty of trading strategies to trade but they are all based on a simple principle: trade a financial asset with another and gain profits from the exchange.
In the online trading world of today, brokers are promoting for their retail trader base a financial derivative product CFDs. “Contracts for Difference” are a form of investment which lets traders invest on a prediction regarding the quotation fluctuation of an asset caused by constant trades instead of the asset itself.
It means that by using CFDs you can invest not only on the expectation of a quotation going up, but also on its downfall. In that case, we’re speaking about short selling, commonly referred also as “short squeeze”
Why Become A Trader?
While there are many ways of making an income while trading, there are also many others that lose money.
As any other form of investment, there is always a certain risk involved in these operations. Still, there are many reasons to become a trader. For instance, online stock trading may give you the financial freedom for investing and gaining directly from home, without the stress of going to work.
In other words: if you’re trading passes from being a hobby to a full time job, you may even make a career inside this world.
To reach that level though newbie traders will have to involve themselves with this activity, be patient and commit to it in order to gain experience step by step.
Choosing The Right Broker
For all those people who are really interested in starting this activity, from those who just want to try out a trading platform until the ones who want to become their own bosses, there will be the step of choosing a broker.
There are many names around the internet of broker firms, but we want to make clear one thing before you may lose yourself on the net: you must narrow down the list to regulated brokers only.
Which means that you should only rely on those brokers who are regulated by a regulator entity such as CySEC for the EU or the Australian ASIC. This must be clear to all of you future traders, because opening an account with a non-regulated broker will lead to an inevitable money loss or a straight forward scam.
Therefore we decided to close the article with our picks for the best regulated brokers for online trading today.
- CMC Markets: a broker with an outstanding reputation for being one of the best CFDs brokers available today. With CMC Markets you can trade on over 10,00 instruments comprehensive of 330+ FX pairs, 80+ indexes, 14 cryptocurrencies and 100+ commodities and 50+ treasures. MetaTrader platforms are available in the offer.
- eToro: an outstanding brokerage service known globally to be the pioneer of Social Trading. It is also extremely appreciated by newcomer traders for the Copy Trading feature included in the service, which allows you to copy other successful traders (aka on the platform as “Top Investors”) in an automated way.
- TD Ameritrade: especially famous in the American continent, this broker is mostly known for their proprietary platform called Thinkorswim, which is available on both Web version and App version. Thanks to it you’ll have the possibility of trade stocks, ETFs, and options with a very easy and intuitive order entry and editing while exploring integrated charts with different indicators, real-time quotes and other advanced tools.