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Online Trading Explained

By Edited Jan 19, 2014 0 0

Online Trading is one of the new money making opportunities that popped up with the internet. Special Network programs have long been used by professional traders to buy and sell stocks, bonds and other investment instruments, but now these tools are available to the public directly. While most people will have heard of online trading, many don’t know much about it beyond the fact that it involves trading on the Internet. The risks, rules and underlying principles of trading have to be learned and understood before getting into trading online. 

The basics of online trading are those of traditional trading with the exception of the tools used to buy and sell directly. Almost everything a broker deals with (stocks, bonds, foreign exchange) can be traded once you open an account as a trader online. Additionally there are commodities like gold, bullion, palm oil as well as funds and stock futures and options that you can invest in. The defining characteristic of online trading is that investors usually perform their own buying and selling transactions after opening up an account.

Trading online is almost free as there are no brokers involved. Often banks and investment firms or professional web services act like a virtual broker and offer online trading accounts. As a matter of fact they will charge a transaction fee of some kind depending on your transaction but that will still be significantly less than what a broker would charge. You also have full control over your portfolio which is a major benefit of online trading. Once you have the information you need, you do not have to depend on your trader but act immediately. Usually the company that offers the online trading account will also provide information on investments, research and analysis tools.

It is a good idea to review the features, fees and  rules of the many available online trading accounts to find the one that is the best match for your needs. The profitability of you efforts can be significantly lower if the account type you need is not available or rules and restrictions apply that contradict your trading habits. Check out and decide on the difference between standard cash accounts and margin accounts that offer a kind of credit based on your prior investment. 

Invest time and even some money in sufficient research in investment if your experience is limited, it will save you more in the end.  More experienced investors will find that much of the online trading terminology is similar to that of regular trading, for example, After Hours Trading, Stop Order and Limit Order. Regardless of your investor profile, the Internet is an invaluable tool which will not only allow you to trade from the comfort of your own home, but will also help you make better investment decisions with a wide range of free and paid information in the form of books, online courses and stock tips packages. When approached with knowledge, caution and common sense online trading, as any other investment can make you a lot of money.

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