Trading is a viable means of earning profits from investment. Online trade is both attractive to high-income and low-income investors. There is little to discourage you from joining this trend with a variety of trading platforms in the market. From the comfort of your home, you can trade assets and make decent returns. These trading platforms also have educational resources that ease new investors into forex. In this article, we shall be addressing online trading, how to start, and everything that you need to know.
What is Trading?
In its most basic definition, trading is the exchange of goods. For this article, we have an interest in the financial markets. In this industry, you can trade in commodities, cryptocurrency, options, forex, and more.
Forex trading is the buying and selling of currency, while stock trading involves shares. Different brokers offer the trade of different assets. Therefore, they have to create platforms that support these trading instruments.
How to Start Trading
Now that you understand the meaning of trading, how do you go about it? There are factors that every trader should consider before they can start trading. Below are some of the things that you should consider as a trader:
- Know the Market: Forex trading is different from stock trading, cryptocurrency trading, or futures trade trading. Get acquainted with the market.
- Find Your Purpose for Trading: What are you looking to accomplish? Do you want to become a full-time trader, or are you looking to supplement your income? Depending on your purpose, you can explore day trading, position trading, and momentum trading.
- Your Budget: Your capital will define the trading options available to you. With little capital, you can take advantage of leverage and make moves in the forex market.
- Find the Right Broker: Your budget and purpose will define your brokerage choices. Are you looking to trade in cryptocurrencies? Find a broker that offers the asset. Consider the cost of trading with this broker. Does it fit your budget?
- Practice: Forex trading and other forms of trading are high-risk and high-reward ventures. With a little experience, you can lose all your investment. Most brokers offer trading accounts that allow you to practice. The demo accounts allow you to trade with virtual money. In this way, you gain experience without losing capital.
How to Open a Trading Account?
Opening a trading account is simple. Trading companies have made it simpler by setting up online registration programs. Registration can take as little time as 15 minutes, and you are good to go. You will need valid identification documents to register.
What are The Existing Trading Instruments?
Trading instruments are the many types of markets that you can trade. They range from stocks to commodities futures and CFD’s, to metals and currencies, and more. The most common markets are the forex and stock exchange.
How do you identify the right instruments to trade? This will depend on your strategy, volatility, and spreads. Check out our article on the best currency pairs to trade in forex.
Best Trading Strategies
It is essential to know the basics of trade before looking into trading strategies. When buying stocks, you bet that the shares will go up, and then you will sell the stocks later to earn a profit. Similar when selling, you predict that the stock price will go down so that you buy the asset at a lower price to make profits. Here are the most common strategies in trading:
- Trend following
As the name suggests, this is the buying of assets when prices tend to rise and to sell when they go down. Traders follow the trends of the shares.
- Range trading
This strategy allows traders to place bets within a range of periods. Traders can determine the highs and lows to place appropriate bets. Trader determines a range by looking at the price and volume charts.
Scalping is a strategy benefiting from small changes in prices. The aim is to make small profits as possible. This strategy is common among day trading platforms.
- Contrarian investing
This strategy aims at going against popular opinion. Placing bets hoping that the crowd is wrong. You could make huge profits with this upon success.
- News Trading
This strategy involves making trading decisions based on events in the news. These events could be natural disasters, the state of the economy, company announcements, and rumors.
- Price Action
This strategy focuses on the price movement in recent and past times. Traders rely on these movements to predict future prices.
- Chart Patterns
Here a trader focuses on the charts to draw patterns that help predict future trends. The trader uses graphical tools to analyze charts and make predictions.
- Technical Analysis
This strategy focuses on trends that may repeat themselves. A trader analyses the pattern to place future bets.
Start Your Trading Journey Today
I would advise against trading with little experience. You may be wondering, “How do I get this experience?” Many platforms offer demo accounts and comprehensive educational resources. With the demo account, you can try out different trading strategies. Play around with your virtual cash until you gain enough confidence to go live.
Below are some of the best demo accounts in the forex market:
- IG Markets: You have the choice to practice your trading from a selection of two different demo accounts.
- Plus500: You can trade with €40,000 in virtual funds. Leverage is available up to the 1:30 level.
- FXCM: Their demo account is rich with trading tools and indicators.
How will you know when you are ready? Making consistent profits on your demo account is an indication that you can start trading with real cash. Check out our review on 500.Trade; it could be the broker for you.