It is beyond dispute that online trading has revolutionized the way the business operates. Seen at one time as simply an activity to be conducted by a few fortunate enough to have the know-how, the access to expertise and a small fortune with which to deal with, it is now accessible by anyone who owns a computer.
That is slightly simplistic. Though anyone can now trade online, they should have the finances to allow it and should know a little about stocks and shares and markets to be able to enjoy the experience and hopefully make some money as a result.
Differences in online trading
Trading online differs in that, as opposed to a human broker, you will use an online version to buy and sell stocks. That obviously places more of the emphasis on the individual themselves who, shorn of the advice of a broker, has to make more of the decisions.
However, if that seems daunting it may not be. Many online brokerages offer good advice before you get started, have chat rooms to allow you to talk to an individual while many also offer a free demonstration to get you started and give you an idea of what awaits you when you start dealing for real.
If you have the financial means and a little of the know-how, then it is time to choose which online broker to use and this should be done carefully. Many offer a good service but it should be the right one for your individual needs, according to how much you can invest, how active a trader you intend to be, how much experience you have and if so how much of a service you need from the broker.
So, a trader well used to the markets, with good previous experience, obviously demands a different service from a novice trading for the first time. Look at the individual brokers and try and find one that is suitable for your individual needs. It should also be borne in mind that some brokerages can freeze an account if they decide that an online trader is making too many trades and is therefore deemed to be a “pattern day trader”.
Discount brokerage firms
These online traders are the most common and allow the buying and selling of stocks, charging a small commission, though it should be noted that this will be less than would be paid to a human broker.
Commodities trading firms
These firms deal primarily with the trade of ownership of physical commodities including wheat and oil. Many of these firms also deal in futures trading, a form of trading which sees the trader having to speculate on the price of a commodity going up or down in the future. This can be a risky form of trading and experience is useful for those interested in futures trading.
Forex online trading
These firms deal mainly in foreign currency and, as with futures, it tends to be riskier than the normal stocks and shares dealing, therefore the individual investor should educate themselves before venturing into this form of trading. It is also a form of trading that needs more regular involvement and checking so the trader must be committed to monitoring the markets more often than they may need to on other more standard stocks and shares.
CFDs
Standing for Contract for Difference, this is a more flexible way of trading online, which essentially allows you to take advantage of both a rising and a falling market.
They are a leveraged product, so you only need to put down a small deposit for bigger market exposure. It can allow you to speculate on the future position of an asset and while it does enable you to have that greater flexibility it does need significant risk management.
