Getting started with online trading

Approach the financial markets with caution

Getting started with online trading

There is a good reason why you might decide to start trading on the financial market. That being to see a better return on your investment than is provided by savings accounts. Although it certainly isn't a "get rich quick" scheme, it is a good way to put any spare money you might have to work, hopefully in order to accumulate further capital. Online financial trading allows you to work from home and set your own hours; which is particularly helpful if you need it to fit in with raising children or running a household. Access to the markets couldn't be easier: there are many online brokers available with low fees and commissions. All you really need is a PC and a decent internet connection to get started.

However, many of us still approach the financial markets with caution. That's a good thing: as the saying goes, your investments can go down as well as up. Throwing money at the market without knowing what you're doing is a sure way to lose it. That said, learning the ropes is easier than you may think, and there's no reason why you shouldn't be trading profitably in a matter of months.

Different markets

First of all, you need to understand the different kinds of trading that are available. The most common is trading in stocks or shares in publicly listed companies. You can also buy and sell currencies with the intention of making a profit as they rise and fall in value in relation to each other. That is forex (foreign exchange) or FX trading. You can also trade in options, which are the rights to buy or sell underlying assets at a predetermined price. Variations on this include binary options and contract for difference (CFD) trading. You can find out everything you need to know about trading CFDs here.

The next step is to select an online broker. A good broker should have a clear and easy to understand website. If they seem out to bamboozle you with technical jargon, steer clear. Look for competitive rates of commission and make sure there are no hidden fees, especially if the commission seems suspiciously low. As a beginner, you'll want a broker with a good range of educational resources and trading tools that you'll actually use.

It's advisable to open a demo account first where you can practice trading without risking actual money. Most brokers will let you open a demo account free of charge. Another option is copy trading, where you follow a successful trader and copy their trades. As well as standing a good chance of making a profit, you'll learn about expert trading strategies by executing them yourself. Copy trading sites also include a social element which means you can ask questions and discuss strategy with traders of all experience levels.

A trading strategy is a kind of business plan. Consider your long and short-term goals. Do you need your trading activities to provide you with a regular income, or are you working towards accumulating a nest egg over time? Don't trade with money you can't afford to lose and don't put more than 5% of your total capital into any one trade. Stay up to date on world and business news and be prepared to put the hours in. If you do that you'll be trading like a professional in no time at all. 

Poppy Watt