The information provided in this article aims to help anyone interested in online trading get started. This material can be easily applied to any market. It has been designed for those who might have heard that online trading is a great source of income, but have no idea how it works.
Choosing a Way to Trade
Since high-speed internet has become available for almost everyone, online trading is very popular these days. Today anyone can trade anywhere any financial instrument.
If you are an online trading novice, there is no need to worry, because there is a huge amount of trading platforms, products, markets, and brokers. For a beginner it is better to use a popular trading method.
It is simple. A dealer offers a Buy and a Sell price for the market you are trading. The difference is the spread. If you believe the market will grow, you open a trade at the Buy price, which is known to be going long. But if you think the market will fall, you open a trade at the sell price which goes short.
CFD is the abbreviation for Contracts for Difference. Similar to spread-betting, CFDs allow to benefit from rising and falling markets with buy and sell prices set by the dealer.
CFD traders would trade a particular amount of shares or lots at a certain buy or sell price. CFDs have tighter spreads if compared to spread-betting, but funding taxes and dealer commission are applied.
ETF is the abbreviation for Exchange Traded Fund. ETFs are like shares, but rather than purchasing a stake in an individual firm, you buy a share is a fund that tracks the price of a commodity. ETFs are bought and sold similar to stock market shares, paying commission to a broker.
As opposed to CFDs and spread-betting, ETFs don’t provide the opportunity to leverage, although this means that losses cannot exceed your initial investment.
Choose Your Market
It is very important to decide what to focus on and then become a specialist.
Forex represents a form of global exchange that estimates the relative value of various currencies compared one against another. Forex trading is popular all over the world and operates 24 hours, except weekends.
Every market is represented as a currency pair. For example GBP/USD is the value of the British pound against the U.S. dollar. When trading the forex, you speculate on the value of one currency against the opposing pair.
Indices are used to measure the value of the chosen selection of the stock market. For example, the FTSE 100 index represents a rating of the top 100 companies that are listed on the UK stock exchange. When trading indices, you speculate on the rise or fall of the value of any selected index.
There is much more to learn, but for novices in this industry it is important at least to have some idea to start with and after that dig deeper into the philosophy of online trading.