Last Updated on May 20, 2021 by MoneyVisual
If you are interested in investing your money and you are looking for options then online trading is one of them. Trade exchange and investment is a popular way of investing money in developed countries. But it does not mean that anyone can become a good trader and earn profit from it. Before getting into it you must understand what is online trading.
Online trading means trading in the financial market through the internet. You do not have to be physically present in an exchange building or remain constantly on the phone as it used to happen previously.
But the advancement in technology and the internet has made it very easy. You only need a computer with good internet access and an installed trading system to start trading online.
How Does Online Trading Work?
Before going into details of online trading let us first know how online trading works. Online trading allows you to make your deals in the financial market within seconds or sometimes even less as compared to earlier times.
But one thing remains the same. You still need a broker to trade as a private trader just like the pre-internet times. Your broker will provide you with a trading terminal software you need to use to conduct your online trading business.
Here is how this whole process works, explained in 4 simple steps:
- You, as a trader, want to make a deal (for example you want to purchase 100 shares of a particular company i.e. Samsung)
- You find this particular asset (Samsung’s share) in your trading platform, choose the quantity of shares you want to buy and place the order for purchase.
- The broker will get your request and he will start executing the order. He will find a counterparty (another broker) who is willing to buy the same asset for the same price.
- When the search is complete and the broker finds the counterparty the deal is made.
Nowadays, the trading process is fully automatic. The trading platform does all the work of finding a counterparty and clinching the deal which makes this entire process a work of seconds.
What Type of Assets You can Trade Online?
When it comes to online trading there are various types of assets you can use like cryptocurrencies, stocks, currencies, metals, indices, etc.
One of the oldest types of assets in trading is stock market share. A stock share is a specific share of a big company that is traded publicly. While trading in stock market share, there are two possibilities for you as a trader. You can either take part in as a speculator or as an investor.
- Trading as a Speculator: As a speculator, you make short term deals. Your main interest is to buy at a low price and then sell at a high price. You are not concerned with any other peculiarities as a speculator. The only thing that matters is the difference between the purchase price and sale price.
- Trading as an Investor: As an investor, you do not buy shares to only sell them at high prices but to invest your money into the business that has issued stocks. Your priority is to make a long term investment instead of a short term investment. As an investor, your main source of income is the dividend.
Currency is the main asset for Forex Trading. In online forex, trading Currencies are used in currency pairs e.g. GBP/USD and EUR/USD, etc. Trading is actually conducted in one currency relative to another. Currencies in a currency pair remain the same and do not switch places. For example, if as a trader you want to buy EUR for USD, you should open a deal to sell EUR/USD.
If you are really interested in forex trading you can learn a great deal through forex trading courses.
Digital advancement in every aspect of life has introduced a new asset in the exchange market. In the contemporary financial market, crypto currency is the newest addition in the asset. If you are not familiar with the concept of crypto currency then let’s have a look at what crypto currency is.
Cryptocurrency is a digital asset that is created by a complex program code. Bitcoin is the first-ever cryptocurrency and it is the most popular one. But it is not the only one, many more currencies were created on its basis, today the number of cryptocurrencies has reached to 2000 and it is still growing.
Crypto currencies are different in their structure, value and ideology. Some crypto currencies represent platforms for making different applications with advanced functionality or a wide range of other projects. On the other hand some crypto currencies are just another way of completing financial transactions. Crypto currency transactions are faster, more reliable and confidential than bank transactions.
As cryptocurrencies work as assets so their price changes. This means you can also use cryptocurrency to make a trade and earn a profit. Just like stock shares you can speculate or invest in cryptocurrency.
Precious metals are also popular in forex assets. Gold and silver are popular trading choices. Trading platinum is also available on many trading platforms. It is also possible to make trading deals with aluminum, copper, nickel, and other precious metals. But not all the brokers give access to these kinds of assets.