What is Online Trading?

Trade exchange and investments have been a part of people’s lives in all developed countries for years now. However, it doesn’t mean that anyone can become a trader. In fact, until recently, it was quite an arduous task to get into this business – auctions were held exclusively in exchange buildings and one needed a license to have access. The Internet made the entire process of trading on the stock exchange much easier for everyone. This gave birth to a whole new trend – online trading. For some, it became a hobby, and to others, it became a full-time profession. And even though it has spread so widely among people, there still are many who do not know what online trading is, why it is so popular, and how simple it is to become a trader.

Online trading definition – What Is online trading?

Online trading is trading in financial markets via the Internet. Previously, all trading was held in the exchange building in person or by phone. Now, every deal is concluded with the help of an electronic terminal. 

All you need to start trading is a computer with Internet access and an installed trading system.

How does online trading work?

Internet-trading allows you to make deals on the financial market within seconds or even less. However, one thing still remains the same with pre-online times: a private trader still needs a broker in order to trade. A broker provides a trader with a trading terminal –  the software that a trader uses to conduct his business.

It goes like this:

1. A trader decides to make a deal (for example, to purchase 100 shares of Apple).

2. He finds this asset (Apples' shares) in his trading platform, chooses the quantity (100 pieces or 1 lot) and places an order to buy.

3. The broker gets a request from a trader and starts executing the order. He needs to find a counterparty – another trader, who is willing to buy the same asset for the same price. 

4. The broker looks for a counterparty on the stock exchange. When the search is completed, the deal is made.

Nowadays, the trading platform does all the work to find a counterparty and clinch a deal. The trading process is fully automatic; that is why the time needed to make a deal is no more than a couple of seconds. 

But it wasn’t always like this. In the early days, the whole process took a lot of time even though the chain “trader – broker – stock exchange – broker – trader” was the same. The trader used to give a call to his broker and ask to open the deal, and the broker would personally try to find a counterparty on the stock exchange. 

Pros and cons of online trading

Now that we know a bit more about online trading, it’s time to evaluate it objectively and state its pros and cons.

Pros of online trading:

• Potentially unlimited income.
• The possibility to set your own work hours, without a strict timetable or location.
• Can be combined with your main job.
• This kind of work can be interesting for people who like finance, analyses, etc.
• You can start trading, even without a large amount of capital.
• Constant self-development and new experiences.

Cons of online trading:

• Financial risks.
• You are your own boss, and you are responsible for your actions.

Can anyone become a successful online trader?

One can easily say that the recipe for becoming a successful trader is simple: have a lot of patience and emotional stability, be ready to be a better version of yourself and pursue your goal no matter what. 

There are a lot of people who have the potential to become a good trader. Unfortunately, 99% give up in the early stages.

But there is no common path to success, there is no one-size-fits-all plan on how to turn anyone into a professional and thriving trader that can make a fortune overnight. However, there are certain steps that are compulsory for anyone interested in investments or trading:

1. Create an online trading plan. You’ve got to decide how and when you are going to trade, how much time you are ready to spend, etc. What are your goals? Will it be your main occupation or just a hobby?
2. Set up functioning risk management. Both trading and investments require risk evaluations beforehand. Even though you start with a demo account, you have to assess the risks. Only invest the amount of money you can afford to lose. You also have to calculate the risk for each and every deal or trading session.
3. Choose your trading style. A successful trader must have a trading strategy. That is why you have to know your methods of analyses, your market, type of assets and other nuances. You can start by using someone else’s strategy, but a truly large financial gain can only be made by implementing unique strategies.
4. Take your first trading steps with your demo account. When you chose a strategy, try it out using the demo account. It would be wise to not switch to the real account unless your demo account is steadily gaining profits. 

Conclusion

Online trading is an interesting, perspective and profitable occupation. It allows you to gain financial independence and the possibility of spending your time the way you want to. It is a long path of working and learning before you can become a successful online trader. Though nothing worth doing is easy, right?

Traders and investors who have just recently started out have a good possibility of starting their online trading career with a Libertex platform. You will get a demo account for absolutely free, allowing newbies to practice and test their strategies. Moreover, Libertex was purely constructed for novice traders. That’s why it’s easy to learn how to use, and it is functional; even for a person who has never dealt in the high stakes arena of online trading before.