What is online trading? The complete guide on how to do online trading

Welcome to tradingonlineguide.com, the main guide to trading online for beginners. 

If you are asking yourself: what is online trading? Or how does online trading work? Then you are in the right place.

We’ll also be looking at how to do online trading, so you can learn the important basics of it.

Trading PlatformRatingMinimum DepositDemo AccountStart Trading
etoro $200 TRADE NOW *Your capital is at risk
EToro review
iqoption $10 TRADE NOW *Your capital is at risk
IQ Option review
plus500 $100 TRADE NOW *80.6% of retail CFD accounts lose money
Plus500 review
bdswiss $200 TRADE NOW *Your capital is at risk
BDSwiss review

‘CFDs are complex instruments and can come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You must consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.’

Here you’ll find all the answers to your questions about Forex & CFDs, cryptocurrency, commodities, indexes and stocks.

Our mission is to provide our audience with the most detailed information about online trading. This includes the meaning behind it, original content and images.

We also aim to provide you with the best support, so we cover every single topic that you’re likely to face when investing.

What is Online Trading?

The introduction of technology into our lives has altered a lot of things, including how we trade.

Nowadays we don’t need to physically go to places like Wall Street to buy stocks or shares. Today we can do all of this from the comfort of home.

This is called Online Trading.

online trading

It’s a very easy way to invest in the stocks & shares markets directly from your mobile phone or laptop via a website. There is a vast range of financial products that you can trade with, it doesn’t matter which ones you choose.

The idea is that you can either buy or sell a product through an online trading platform provided by a broker.

The main financial instruments you can trade online are Forex & CFDs (Contract for Difference), Cryptocurrencies, Indexes plus Options and Stocks.

Binary Options also used to be a popular product offered by brokers. However in Europe they are now completely forbidden since ESMA, (the European Securities and Markets Authority) placed an outright ban on them.

Internationally though and outside Europe, there are still a few regulated brokers who offer binary options.

What is online trading and who can do it?

Online trading is an opportunity open to everybody. Everybody can practice and learn it.

A very good benefit of online trading is that it’s possible to start with a very small budget. You don’t need too much investment to get started online.

Another important thing to remember is that good strategies and a good broker are the most important factors when starting to trade. These points can make all the difference between a success or loss.

What is an online trading platform?

We will explain in more detail later exactly what an online trading platform or website is, but here a quick definition.

An online trading platform is a digital place where people can invest in the forex, CFDs and stock & shares market. These platforms are owned by brokers and in there, people can open their personal account.

Once you’ve opened an account, you’ll need to deposit initial funds so that you can start investing.

And remember that trading simply means the buying or selling of shares, currencies pairs, cryptocurrencies or CFDs.

How to do online trading?

Now that we’ve answered the key question of what is online trading, we can move forward to explain to you exactly how online trading works.

Before you start to trade online, you should understand the essential points of how online trading works. The concept is simple.

For example imagine buying Facebook stocks in the shares market, once you’ve bought them, you become a small partner of Facebook on paper.

So in reality, you own a very small percentage of Facebook. This also means that you have no direct effect on how the company is run. For example, you cannot vote on company matters.

However, should Facebook’s stock value decrease in the market, you will lose part or all of your money.

facebook trading

But how is this share information relevant to online trading?

Because it’s important to remember that with online trading you can still make money even if the company value goes up or down. With trading, you are stating whether a companies value will go up or down, that’s all.

This is one of the main advantages of online trading. You don’t buy real shares but you invest in their movement, deciding if the price will rise or drop.

Another benefit is that you never personally own any share you buy. So you are never tied down to one company.

The last point to remember is that you can become a trader with an incredibly small amount of money. (Some brokers offer a minimum deposit from as low as $10). This means that this type of investment is open to everybody, including

If you’re interested in stocks, you can find more info about stock trading at stocktrader.com or tradimo.com.

What is online trading in Forex and CFDs (Contract for Difference)

If you’re still wondering – what is online trading? Hopefully not! Let’s now take a look at some information about Forex and CFDs.

The Forex market is the oldest instrument plus the one with the most cash flow in the world at any time.

In terms of volume, the total amount of trades in the market have a daily value of more than 5 trillion dollars. This means that there are millions of traders buying and selling in this market daily.

forex trading

But what is Forex exactly?

Forex is stands for foreign exchange market and it’s open to everyone. Anybody can trade in it: banks, credit institutes, companies and private individuals. Basically, anyone with an internet connection can do it!

The main thing you can trade in Forex is currencies. The most traded asset is the currency pairing of Euro/Dollar (EUR/USD). So you’ll be deciding whether the Euro will get stronger than the Dollar or vice-versa.

CFDs (Contract for Difference) means a contract between a trader and a broker. A trader decides to invest in CFDs because of the chance to trade in a selection of different types of assets. This can also include currencies.

Assets include things like:

  • Currencies
  • Indexes
  • Commodities
  • Shares
  • Cryptocurrencies

Maybe you’ve asked yourself: What is cfd trading? How does cfd trading work? How can I invest in so many assets at one time?

The answer is easy- you do not own anything you trade, but you invest through a contract for difference.

This means that you’re only speculating on a trend. Therefore you can make small but multiple financial investments at the same time.

One other important point about forex and CFDs trading is the financial leverage. This allows you to trade with a small amount of money and move capitals much bigger than what you have. Consider the leverage as a multiplier.

For example, if the leverage is 1:100, this means that with $10 you can trade about $1.000. On the other side you must remember that if it multiplies the profits, it also does the same with any losses.

Finally to start forex trading you just need to sign up with one of the regulated forex brokers from the list on this website.

Regulation is an important part of online trading as it protects the customer against fraud and scams. Official financial monitoring authorities have to approve brokers and provide them with a licence number. This is the only way a platform can be considered regulated.

Some examples of recognised authorities include CySEC and the FCA. They both monitor many platforms, especially for ones based Europe and the UK.

All brokers featured on this website are regulated, and you can check which licences they hold on the broker’s website or in our platform reviews.

For a detailed explanation about Forex&CFDs trading and to understand further on how to trade forex just follow this link to our Forex Trading page.

 

What is Cryptocurrency Trading

In the last few years, the big topic that investors and traders have been talking about is cryptocurrencies, also known as crypto. The number of traders starting to invest in crypto has boomed!

cryptocurrency trading

But what is a cryptocurrency?

A cryptocurrency is a digital currency used to trade or buy goods through an encrypted system which keeps the transactions secure.

There are a lot of digital currencies available such as Litecoin, Ethereum and Ripple. However, the most famous and globally recognised one is Bitcoin.

This means that cryptos are actual currencies, but different from the normal ones like Euro, Dollar, and British Pound because of a few features:

  • Security: all transactions are totally safe & secure because of the system which they’re traded on. This system is called blockchain which is fully encrypted.
  • Decentralized system: there aren’t any central banks controlling its flow or exchanges. What makes digital currencies unique is the fact that they’re free from authority control.
  • Anonymity: to complete a trade there is no need to declare your personal details.
  • Digital: with digital currency, there are no real coins or banknotes, this is because everything is digital and happens completely online.

Because all crypto exchanges happen online, you will need access to a crypto wallet where you can store any digital currencies. A crypto wallet holds all purchased crypto online in a crypto wallet.

Depending on what you’ve bought this could also be a litecoin or a bitcoin wallet, they are all types of crypto wallets.

Recently more people have wanted to trade digital currencies instead of buying them. But why?

This is because cryptocurrency trading at the moment with the recent market situation seems to be more profitable.

The concept of digital currencies is fairly new, and like most new products they can be affected by market volatility. For example in 2017, Bitcoin soared in price and 1 BTC was worth a crazy $19,783.06!

Then due to market volatility in 2018 the BTC price decreased quite a lot. It’s only now in 2019 that digital currencies are steadily growing in value again.

That’s why it is a better option to trade digital currency rather than buy it. Let’s explain why this option is better now.

Imagine buying Bitcoin. You earn money only if the value rises. Now imagine trading Bitcoin. Again you will earn money thanks to your speculative action of whether the value goes up or down.

Another important advantage is the financial leverage which allows you to trade with a small amount of money and not $5000.

So if the leverage is 1:100 and the Bitcoin price is $5000, it means that you can trade then with just $50. This is a great benefit for small investors who don’t want to risk too much money.

For a detailed explanation about Cryptocurrency and how to trade them, just follow this link to our cryptocurrency trading section.

Finally to start trading cryptocurrencies you just need to select one of the regulated crypto brokers listed on this page.

Online trading platforms

What is an online trading platform? It’s a place where you can trade online.

You can complete all trades online using online trading websites. These can be viewed as financial interfaces on the internet.

Each platform is hosted by a broker, and each platform has various settings. For instance, some platforms are suitable for more experienced traders and others for beginners.

But which one to choose?

how to choose a trading platform

What is important to take in consideration when deciding your broker:

  • Licence: the most important thing to check when you’re opening an account is that the broker is licenced and regulated. Regulation means that your broker is safe and secure to trade with.
  • Minimum deposit: the amount of money necessary to deposit.
  • Spread: the difference between an asset price in the reality vs the price in the trading platform. This difference represents the broker’s profit.
  • Commission: some brokers can apply a commission for each open trade instead of applying a spread.
  • Leverage: every platform has a different one available, so you can decide the maximum profit and risk you want to take.
  • Assets: they represent what you can actually trade in that platform. Every broker has a vast choice of currencies, crypto, commodities, indexes and stocks to choose from.

After having answered the question ‘how to trade online’, hopefully you understand better how to select your broker. Please see the page best trading platforms to find a list of best regulated brokers.

Benefits of Online Trading

trading online benefits

Online Trading is a new way to invest online and of course has its advantages and disadvantages. If it’s not clear what the benefits of online trading are, we will go through some of them now:

  • The opportunity to get trading from home. There is no need to physically go to a financial institute. You just need to open an account with a regulated broker with your laptop or mobile phone.
  • When trading you don’t own any of the stocks/shares because you are only speculating on the shares’ price movement. So even if the share value goes down you have the chance to still make a profit.

Let’s clarify a point: speculation doesn’t have a negative meaning. It is completely legal and it literally means “investment in stocks, property, etc. in the hope of gain”.

  • Starting with a small amount of money. Today it’s even possible to start trading with $10 as a minimum deposit.
  • There is a vast choice of companies and brokers you can open an account with. You are not stuck in a monopolistic market so you can choose the best company for you. See the list of best trading websites to choose yours.

Now let’s take a quick look at some of the possible downsides:

One of the main risks of online trading is the choice of the websites. There are many unregulated brokers out there who only want scam you.

Make sure that you avoid them by signing up with a regulated platform. This will prevent you from fraudulent and scam websites.

The main thing to do is to make sure that your broker is regulated. This means that they have to follow financial rules set in place to protect traders. On this website we only list fully regulated brokers, in the interest of user’s safety.

And finally like any investing, there is always the risk of loosing money as well making profits. Be sure to take this into consideration before starting.

What is online trading? The complete guide on how to do online trading late update: 2018-03-20T10:11:12+00:00 by Luke Robinson