Online trading is becoming a more and more popular way for people to maximize their disposable income or savings and try to make a profit from changes in the financial markets. Using online trading platforms and mobile apps, it is possible to start trading in all kinds of things fairly quickly and easily. Of course, you will have a lot more success as a trader if you know what you are doing, and you choose a style of trading that fits with your interests and your lifestyle.
While there are lots of resources to help you learn how to trade in your chosen way, the first step is to learn about your different options and make sure you choose something you’ll have fun learning and doing.
Here are the main types of online trading you can choose from, and some things to consider in terms of whether or not they might be the best choice for you.
Foreign exchange, or Forex, is where you trade currencies against each other to try and gain a profit by buying and selling a currency at the right time. Forex has become very popular since online platforms made it possible for normal people to get on board with it. Prior to that, only banks could really trade currencies, and regular people only really had to worry about exchange rates if they did business with people in other currencies or wanted to spend money when they went abroad.
Forex can be a good choice for a number of reasons. Firstly, unlike a lot of markets, you can trade Forex at almost any time. This is because it involves global currencies, and so trading is possible during the business hours of any country. This means that aside from a part of the weekend, you can trade 24 hours a day – ideal if you want to have your trading sessions in the evening because you work full time.
Another advantage of Forex is that currency fluctuations tend to be affected by macroeconomic events. These are often things you may already be following news about, like major elections, rather than smaller events in the business world that affect stock prices. This can make Forex a bit easier to understand in terms of how it is impacted by the news and means you can use a lot of what you already know about what is going on in the world.
Binary options are where you don’t trade actual assets like stocks, currencies or commodities, but instead, trade options on whether the price of something will behave in a certain way. As you might expect from the name, with binary options, you can only be right or wrong – you predict a stock will rise in value, and if it does, you profit.
Binary options can be good if you are looking for things you can take short term positions on and can make decent gains straight away if you are right. They can also be a good choice if you don’t want to be tied to one market, like stocks or Forex, because you can take out binary options on anything you like, so you can mix your interests and look at currencies, commodities, share indices and specific stocks if you want to.
Contract for Difference (CFD) Trading
Another very popular type of online trading you might consider is CFD trading. As with binary options, here you do not actually buy a given currency or stock, but instead, try and profit by predicting how markets will move. The difference here is that you may not be taking a binary ‘rise or fall’ position, but looking at how much a market will fluctuate.
CFD trading can be very interesting, and while not as simple as binary options, it can be more rewarding. You can trade CFDs on all different markets, and so again, it is well suited to people who don’t want to focus on just one area of the financial markets.
Stock Market Trading
Finally, there is perhaps the best-known kind of trading – trading company stocks. For this, you choose a stock exchange, for instance, the New York Stock Exchange or the London Stock Exchange, and trade stock aiming to buy them low and sell them high. This kind of trading allows the most flexibility in terms of the strategies you can use, and you can try and day trade or take long positions where you aim to buy a stock that will increase in value significantly over time.
Of course, the fact that there are so many ways to trade and so many stocks you can get involved with means that stocks are about the most complex form of trading, and can definitely require a lot of knowledge to feel confident with. If you are interested in business in general, this may be an interesting learning curve for you, however it can be harder for casual investors to stay on top of all the business news in an industry that can help determine which stocks are good picks on a given day, then it can to keep up to speed with events that might make a given currency a good buy, or drive a stock index up or down.
As you can see, there are plenty of different ways to trade that you could start doing online, but each has its own pros and cons. Think about how much of a learning curve you are willing to commit to, when you would like to have your trading sessions, how long you want to hold positions for, and what type of information you are interested in staying up to date on before you decide. Many trading platforms let you have a demo account so you can play around first before you start using real money, and this can also be a helpful way to assess if a style of trading is interesting to you.
Question: Do you know what kind of online trading Is right for you? You can leave a comment by clicking here.