Welcome to tradingonlineguide.com, the main guide to trading online for beginners. If you are asking yourself: what is online trading? How does online trading work? And how to do online trading then you are in the right place.
Here you will find the answers to all your questions about trading Forex and CFDs, cryptocurrency, commodities, indexes and stocks.
Our mission is to provide our audience with the most detailed information about online trading, the meaning of it, original content and images. Plus the best support regarding every single topic faced when trading.
What is online trading?
As we have all seen, the introduction of technology into our lives has changed a lot of things, including the way to do trading.
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.
Ok, so what is online trading?
It´s a very easy way to invest in the stocks & shares markets directly from your mobile phone or laptop on a website. There is a vast range of financial products that you can trade, it doesn’t matter which one you choose, the concept is that you either buy or sell it through an online trading platform provided by a broker.
The main financial instruments you can trade online are Binary Options, Forex & CFDs (Contract for Difference), Cryptocurrencies plus Options and Stocks.
Today we hear a lot of trading scams horror stories that have happened online. Our suggestion is to always trade with one of the listed regulated brokers you can find above.
These regulated brokers are trustable and compliant to work within the financial markets because they must be registered under the Cysec Authority (or the local trading authority of your country.)
What is online trading and who can do it?
Are you still asking yourself: what is online trading? I don’t think you are. The concept should be clear now.
Let’s see now who can do it.
Online trading is an online investment opportunity open to everybody. Everybody can practice and learn it.
A very good benefit of it, it’s that it’s possible to start trading online with a very small budget. Good strategies and good trading websites are the most important factors which can make the difference between success or loss.
And what is an online trading platform?
We will explain better later what an online trading platform or website is, but here a short definition.
An online trading platform is a digital place where people can invest in the forex, CFDs and stock & shares’ market. These trading websites are owned by brokers and in there, people can open their personal trading account with the amount of money they want and start trading.
The meaning of trading is buying or selling shares, currencies pairs, cryptocurrencies or CFDs.
This is actually the real answer to your original question ‘what is online trading‘.
How does online trading work?
After having answered the big question what is online trading, we can move forward to the rest.
But before you start to trade online we need to understand some essential points of how online trading works. The concept is really simple. For example imagine buying Facebook stocks in the shares market, once you buy them you become a small partner of Facebook on paper.
In reality, you own just a very small percentage of Facebook, but of course, this means that you have no direct effect on how the company is run. You cannot vote for instance on company matters.
However, should Facebook´s stock value decreases in the market, you will lose part or all your money.
But how is this share information relevant to online trading?
Because it’s important to remember that with online trading you can make money still 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.
Then lastly you can become a trader with an incredibly small amount of money (even from $10 with some brokers). This means that this type of investment is open to everybody.
How to trade online
To begin online trading you need to focus on 2 things:
- Earn as much money as possible
- Avoid losses
Online trading involves the risk to lose all your investment – unless you are trading in an online demo account.
Only with a demo account, you can trade without any risk, because if you win or lose you are using virtual money. It isn´t a real trading account.
This, of course, means you won´t earn any money, but it’s a very useful tool to practice with and to learn how to trade online.
So whilst it’s important to remember the risk of potential losses it is important to mention that there are ways to maximize your profits. Professional traders do this by adopting trading strategies aiming to achieve this.
The most important thing is to be profitable at the end of the month. Your earnings should be more than your losses – because naturally there will be some losses. A trader who has never lost from time to time doesn´t exist. It’s all about your risk management and your trading strategy.
Once your goals are clear you need to decide on what to trade and where to trade.
The main financial instruments we will explain in this guide are Forex & CFDs (Contract for Difference) plus Cryptocurrency or Crypto. You have probably heard of them.
What is online trading in Forex and CFDs (Contract for Difference)
Are you still asking yourself – what is online trading -? Hopefully not! Let’s see some information about Forex and CFDs.
Forex market is the oldest market and the one with the most cash flow in the world at any time. Today 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 every day.
But what is it exactly?
Forex is known as a foreign exchange market and everybody 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) where you can decide if 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, which also includes currencies.
Assets such as:
Maybe you’ve asked yourself: What is cfd trading? How does cfd trading work? How can I invest in so many different 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 are doing the only speculation on this trend. Therefore you can make small financial but multiple investments at the same.
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 we have to remember that if it multiplies the profits, it also does the same with the 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.
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 period, everybody has been talking about cryptocurrencies, also known as crypto. The number of traders starting to invest in crypto has boomed!
But what is a cryptocurrency?
A cryptocurrency is a virtual currency used to trade or buy goods through an encrypted system which makes the transactions more secure.
There are a lot of them today, such as Litecoin, Ethereum, or Ripple; but the most famous one is Bitcoin.
This means they are actual currencies, but different from the normal ones like Euro, Dollar, and British Pound because of a few characteristics:
- Security: their exchange is totally safe & secure because of the market where they are traded on, called blockchain which is encrypted.
- Decentralized system: there isn´t a central bank controlling its flow, what makes them unique is the fact they are 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 of these characteristics you can save digital currencies online in a crypto wallet which could be a litecoin or bitcoin wallet, depending on what you have bought.
Recently more people have wanted to trade them instead of buying them. But why?
Cryptocurrency trading at the moment with the recent market situation seems to be more profitable.
Imagine buying Bitcoin. You earn money only if the value rises. But now imagine trading Bitcoin. Again you will earn money thanks to your speculative action of whether the value goes up or down.
Another important trading advantage is the financial leverage which allows you to trade them with a small amount of money and not $8000.
If the leverage is 1:100 and the Bitcoin price is $8000, it means that you can trade them just with $80 which 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 crypto 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 is the place where to trade online.
You can trade online in online trading websites which can be defined as a financial interface on the internet.
Every trading platform is hosted by a broker with their own settings. For instance, some are indicated for a more experienced type of trader and others for beginners.
But which one to choose?
What is important to take in consideration when deciding your broker:
- License: the most important thing is to check you’re opening an account with a regulated broker to make sure your money is safe.
- Minimum deposit: the amount of money necessary to start trading.
- 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 commision for each open trade instead of applying a spread.
- Leverage: every platform has a different one 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.
‘CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.’
After having answered the question “how to trade online”, if you want to understand better how to select your broker, see the page best trading platforms.
Benefits of Online Trading
Online Trading is a new way to invest online and it has his advantages and disadvantages. If it isn´t clear what the benefits of online trading are, here we will summarize them:
- The opportunity to do trading from home. There is no need to physically go to a financial institute. You just need to open a trading 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 movement. So even if the share value goes down you have the chance to still make a profit.
Let´s clarify here 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 trading 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 you are probably asking yourself what the other side of things is, right?
One of the main risks of online trading is your choice of the websites. There are a lot of unregulated brokers out there online who only want scam you. If you manage to avoid them, you can be sure to invest your money in a securely.