Every year, millions of people try out online trading with hopes of making so much money. Sadly, many of them end up losing their entire funds and subsequently leave the market poorer than they were when they came in.
Many do not master the skills of online trading and others are just clueless about what they are getting themselves into.
However, this article will provide a guide on how to start online trading the right way and not lose many funds along the way. To be a successful trader, you need to follow the steps below:
Getting Started With Online Trading
- Select a Niche
Online trading is a very diverse environment, made up of various markets and industries. Let’s quickly take a look at some of the popular asset groups that are traded online.
Forex, short for “Foreign Exchange”, trading is one of the most popular online trading markets. It involves the buying and selling of currencies from various countries.
Online forex trading allows traders to speculate on the prices of different currencies.
Stocks are equity investments that represent part ownership of a company. These stocks are released by the company, either to gather funds for an additional project or to increase public participation in the management of the company.
Traders tend to buy stocks at lower prices and sell them off when the forces of demand cause the price to increase.
These refer to financial instruments issued by the government and some corporations when they want to raise money. When traders buy bonds, they are giving the issuer a loan and they agree to pay back the face value of the loan at a particular time.
This is the most popular asset group among new traders in the online trading space. Commodities refer to the trading of natural resources ranging from precious metals like gold, silver, platinum, to natural gas, oil, and many more.
Cryptocurrency trading involves the buying and selling of virtual currencies that are not issued by any government. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, Monero, and many more.
These cryptocurrencies are sold on the platforms of various exchanges. Some top crypto exchanges include Binance, Coinbase, Bitfinex, and more.
Derivatives trading refers to the agreement between two parties, the buyer and the seller, regarding an underlying asset and its price movement.
Traders in this space do not need to buy the underlying asset rather, they speculate on the future price of the asset – whether it increases or decreases.
Selecting a particular online trading market to join is the first step in your online trading journey.
- Be Realistic
Irrespective of the market that you choose to participate in, it is very important to have realistic expectations. Many traders have high hopes of getting millions within a short time of trading.
Having realistic expectations prevents bad trading decisions and helps to maximize profits, no matter how small they are.
- Learn to Read and Analyse
Many traders have lost huge sums of money in trades because they refused to read more about the nature of the market. There are numerous materials to gather information.
Learn to read everything that pertains to the market, even if they may seem irrelevant at the moment. Don’t just focus on a particular aspect of trading because online trading starts a journey that often ends up at unanticipated destinations.
Additionally, study the basics of technical analysis and carefully study different types of price charts.
- Open a Trading Account
Find a good online broker or exchange and open a trading account with it. Become familiar with the user interface and make use of every trading tool and research that is made available for users by the brokerage firm or exchange.
- Practice Trading
It is important to start trading as soon as possible with the knowledge that you have accumulated. Although it can be risky, starting with small-scale trading which involves the least amount of resources prevents you from losing much.
Practicing small-scale trades gives you the experience needed to take on larger transactions in the future.
It is important to start online trading with a deep understanding of the financial markets by reading every available material about its concepts. Study charts and watch price movements.
Bear in mind that online trading is highly speculative and although knowledge lowers the chances of financial risk, it does not completely remove them. Even the most experienced traders suffer losses but what separates them from rookies is that they learn from those mistakes and readjust their trading strategies.
Take trading lessons from these experienced traders and apply them in your trading journey. The online trading market is risky but several traders have succeeded in it and you can too.