What is Online Trading?
When a trader places buying or selling orders for financial securities or currency using an internet based system, they are carrying out Online Trading. Online trading platforms have practically replaced all of the traditional floor traders in the ‘open outcry’ trading environment.
What Can be Traded Online?
The trading of bonds, stocks, options, currency and futures, can all be done online through most reputable brokers. A demo account can be opened very easily and for free with many of the well known online brokers including CMC Markets.
Online Bond Trading
There are different types of bond that be traded online and include treasury bonds, municipal bonds and corporate bonds. The cost of trading in bonds online will differ depending on whether the broker used and whether it is a new issue or not. New Issues attract bond prices which include the broker-dealer markup, so no additional costs are involved. Other brokers claim that they charged a fixed price but research several reputable online bond brokers before deciding on which one to open an account with.
Trading Stock Online
Trading stocks online has been a game changer that has made stock trading more accessible to those who may never have entered into the trading environment otherwise. The ability to open free online demo accounts allows stock traders to try the particular online trading platform before committing to a live account.
Online Options Trading
An option is a contract to buy an asset at a particular time and for a specific price, for a fee. The trader has the ‘option’ not to go through with the purchase and allow the option to expire but the fee, or initial investment, is lost. This is the ‘call’ option. The ‘put’ option is where the holder agrees to sell at a specified price by a certain date. An options trade derives value from an underlying asset and has no true value itself, so it is classed as a derivative. The underlying asset in an options trade is often an index or a stock. There are two types of buyers (buyers of calls and buyers of puts) and two types of sellers (sellers of calls and sellers of puts). Online options trading is made easier by the many resources available such as Volatility Optimizers and other research tools.
To keep it simple, a futures contract is similar to an options contract but differs in that the buyer is obligated to purchase at the expiration of a futures contract. So, the difference is in the obligation to buy as opposed to the option. Most of the reputable online brokerages offer futures trading.
Trading Forex online involves the speculation of whether a currency pair will rise or fall by ‘going short’ (selling) or going long (buying). Speculating a rise or fall in a currency pair is actually referring to the ‘base’ currency in relation to the ‘counter’ currency. That is, when the GBP/USD falls it is the GBP that has fallen in value in relation to the USD. Traders predict whether a currency pair will rise or fall, with the help of online tools and resources, and buy/sell to take advantage of their successful predictions, or lose as the result of a wrong prediction.
The Benefits of Trading Online
The benefits of online trading are many. Multiple trades can be executed in a split second and online trading has also cut down the cost of commissions and other fees/charges in general. Automated software has been developed to make a trader’s job easier with all of the major online trading platforms embracing this revolutionary technology. Binary Options Bots have revolutionized the way market data is crunched and enables seasoned (and newbie) traders to analyse huge amounts of information to arrive at well researched predictions with encouraging success rates.
Can Anyone do Online Trading?
Yes, anyone can trade online. However, no one should attempt at doing so unless they have properly researched the area of intended trading and taken some level of training to prepare themselves. There are so many online trading tutorials offered by reputable online brokers that getting enough information should not be a problem. Use a demo account while learning and do not rush into live trading until you are absolutely ready. Only invest what you are prepared to lose.