Online trading refers to the trading of financial assets. Previously, a trader was an employee of financial institutions that operated in physical stock exchanges. Today, the activity has spread to the internet which has changed the situation to allow us to now talk about online trading South Africa. What is it really and what does this new activity consist of?
What is online trading?
The trading involves selling and buying securities on the markets. Trader in line returns to directly place orders through a stockbroker. Therefore, online trading is an order to buy and sell placed on the internet. Here, the stock exchanges are dematerialized and any individual investor can declare himself a trader on his own account. To exercise this activity, it is necessary to have a minimum of knowledge in the field and to know how the trading of financial assets works.
What are the tools you need to start trading online?
Online trading requires you to be well equipped. For this you need:
- A computer, tablet or smartphone;
- A good internet connection;
- A trading platform;
- A stock broker.
The basic trader’s equipment is not difficult to have. Similarly, it is easy to open a trading account with a broker in stock exchange and connect via a reliable platform. However, online trading is a risky business. It is therefore imperative to choose the right stock broker by checking its regulation by a regulatory authority.
What are the online trading investment markets?
There are a variety of investments in trading. More concretely, we can trade on different stock markets. These markets are among others: Forex or currency market, stocks, indices, commodities or cryptocurrencies. In addition, it is essential to know that the financial markets are accessible through different types of contracts.
These are futures contracts and contracts for difference. These investment contracts allow assets to be traded without their actual possession and speculation of their price fluctuations, downward and upward. Several investment proposals are on the internet.
What are the different styles of trading and what trader profiles are there?
There are different types of traders. We find the day trader, the scalping trader and the position trader. The trader, apart from choosing the financial markets to invest in, must also determine the style of trading he wishes to practice. There is a close relationship between the desired investment horizon and the style of trading; otherwise, the duration of the placements. We can identify three styles of trading. We have: the strategy basic trading, the strategy of short-term trading and the long-term trading.
Once you have mastered the basics of online trading South Africa, you can determine which markets to enter and what style of trading to adopt. You will be able to earn money through this activity. The activity itself has economic value and is positive for your personal economy.
How to get started in online trading South Africa?
To speculate on the financial markets from the web, you have to start by choosing a reliable and efficient broker, and to do this, you should not hesitate to seek help from online comparators. They will know perfectly how to guide each one towards the best forex broker adapted to your needs, according to your preferences and your level of online trading. There are still three different types of trader, between the analyst, the order executor, as well as the account or risk manager.
ALSO READ: Online Trading: What to look for in a Broker
However, to become an expert online trader, it is necessary to go through each of these stages, and to devote a good time to it, in order to be able to join the big leagues. And to have a head start on these competitors, it is even better to know how to decipher the fluctuations on the charts, in order to be able to act at the right time, while everyone is still waiting for a decrypted version. However, for a beginner, to trade without taking the lead, the ideal is to get into social trading, which is what has made online trading so successful. A trading strategy that allows everyone to ensure gains that meet their expectations.
Online trading for beginners
A practice that is rampant on the web at the moment, and which has given a boost to all those who one day wanted to have a chance to access the stock market. Online trading is simply the solution to their problem, knowing that it allows everyone to buy or sell financial assets from the web.
Therefore, instead of spending years studying finance and the financial market, you can directly place stock market orders, without going through Wall Street or any other agency. You can directly place your orders and execute them, especially since expert opinions are available all over the web, allowing everyone to choose the right platform on which to register.
Understanding social trading
A fairly recent online trading technique, which is already catching a good number of online traders at the moment. Social trading is a trading strategy that is based on mutual assistance between traders, allowing beginners to trust the most discerning to quickly make their investment flourish. With this strategy, all you have to do is take note, see how the order placement is going, as well as the evolution of your trader account.
All this, after having entrusted part of his trading capital to the trader of his choice, so that he trades it for you, and makes sure to return it to you with the interest generated. However, in the event of a bad investment, you must still take into account your risk of loss, and try to limit them as much as possible. Note that the rule for an informed trader is to trade only 1 to 2% of his trader capital at most, which allows to limit the breakage to the maximum, and leaves you enough to be able to bet on other assets.
Online trading is now the best way to access the stock market, directly from home, whether on your desk with your PC, or in bed with your smartphone.
Online trading requires the best training
Online trading platforms have been designed to suit a particular clientele. Indeed, they mainly target individuals who are interested in the trading activity but who do not have the financial or social means to become professionals. It also happens that this category of people corresponds to an astronomical number. Moreover, this can be seen in the number of subscribers that exist on the trading platforms. For this reason, they offer high quality guides and free training. They allow new traders to stay the course and not lose their investments quickly.
The platforms therefore benefit from a greater number of active customers who bring them more profit. In addition, the success of new traders will automatically give them excellent publicity. Thus, many platforms do not hesitate to bring their results to light to demonstrate the effectiveness of their guides. Of course, the ultimate goal of these is to help traders predict the movement of the price of the different assets they are trading.
For new traders, it is essential to study the activity of trading seriously and to devote months of learning to it before embarking on the practice. Trading platforms allow new registrants to use demo accounts. These allow them to get closer to the real experience of trading. In this way, traders will be able to assess their level without risking losing their capital. It is therefore essential to take advantage of this opportunity as much as possible.
Trading is far from being a game of chance. Online trading platforms allow traders to buy all types of assets, much like professional traders. They will therefore be able to trade in commodities, such as oil, and currency pairs.
With experience, the best traders will discover different affinities and find the types of trading that suit them best. This explains why there are no perfect methods for trading. Ultimately, each trader has their own way of working.
Investing in the stock market: strengths and weaknesses
In times of crisis, the whole market collapses.
The emergence of online trading activity has made investing in stocks even more important. On the other hand, the democratization of the internet has made this activity accessible to everyone.
On the other hand, many traders who worked in the traditional stock exchange migrated, with their know-how, to online trading. So it makes perfect sense that they have a head start on new traders. They are better able to recognize the risks of loss and manage the risks when making an investment. So here are some important tips for newbie traders:
We begin by indicating that online trading greatly facilitates the trader’s work. That said, we must not forget that we never trade independently of the market. Therefore, it is essential to establish a solid strategy, if one wants to avoid unpleasant surprises.
There is no shortage of online trading platforms providing data that was once difficult to access. For example, we think of the charts that we can now follow live and which are essential when we want to place ourselves on the stock market. On the other hand, all the information concerning the most important groups and companies is easily accessible on the internet. It is therefore rare that decisive information goes unnoticed. Moreover, it is important to mention that the race for information often makes the difference between a good and a bad investment.
It is also recommended to take a close look at the direct competitors of the group in which you are interested. Again, the advantage of online trading is clear, since traders can follow their stock prices live on charts made available to them by brokers. In addition, competitiveness can often affect the movement of stock prices. Beginners often make the mistake of focusing only on the stock they trade and end up neglecting a multitude of factors that can cause the stock to change.
However, it is important to be aware of the downsides of investing in the stock market and trading in general. Indeed, some traders take a position in an asset that is not very volatile. This causes stagnation and it becomes difficult to predict the movement of the price. It is for this reason that the vast majority of online traders prefer to invest in highly volatile assets. In addition, even if the price changes to an uptrend, it is difficult to know if it will continue its momentum. However, we cannot base ourselves on a period of stagnation to predict it.
To this we can add the fact that not all stock market investments can guarantee profits. Therefore, in order to avoid unnecessary losses, it is strongly recommended to use the various tools that limit the risks incurred during trading. In this way, the trader is sure to be able to stay in the race and have the possibility of making up for it in the event of failure.
How to best benefit from the advantages of online brokers?
A regulated broker is the platform on which the entire career of the trader is based.
Going to a regulated broker is the basis of successful trading. Unfortunately, it is not easy to find the best broker for us. It is therefore necessary to do individual research on each of them and choose the one that suits us best. Here is a small summary of the advantages provided by brokers:
- Online brokers give traders the flexibility to buy stocks or invest in specific assets as they see fit.
- They allow traders to follow the price live on the live charts.
- Brokers provide traders with an intuitive interface that allows them to change various parameters and customize the display as they wish.
- They help traders do the calculations automatically and quickly, making trading more accurate and profitable.
- Traders can benefit from technical indicators such as Bollinger bands or even moving averages, better known by the abbreviation MA.
- Brokers help traders save time and eliminate losses due to miscalculations.
How to find the best broker?
While many new traders take the matter lightly, it is essential to stress the importance of choosing the best broker out there. Unfortunately, there are still traders who gain confidence quite quickly and don’t bother to check the reliability of the platform or broker they come across first. While some of them may be lucky in choosing a good broker, many fall into the trap of some fraudulent brokers. The latter will not hesitate to extract all their capital from them. For this reason, it is advisable to refer only to regulated brokers, even if they do not offer particularly interesting offers.
After regulation, the trader can take an interest in the strengths of each broker and see if he finds them interesting. There are a lot of possibilities and not all traders have the same needs. For example, some brokers offer better assets to those who are day trading and make multiple short-term investments, while others favour long-term investments.
The most experienced traders are more often than not interested in the services provided by the broker. Indeed, these traders essentially promote the efficiency and responsiveness of the broker’s technical support. They do not seek other financial advantages since the return on their investments is already colossal.
How to start online trading in South Africa?
How to start Trading? There is so much information and offers dedicated to Trading that it is not easy for a beginner to know where to start. We can nevertheless identify 6 essential points for you.
Before embarking on the financial markets, it is necessary to assimilate the different concepts necessary for success. A training period is therefore strongly recommended to acquire the theoretical and practical knowledge essential to start trading, but also to discover the trading strategies best suited to your investor profile.
Designed by experienced Traders, our e-learning modules cover the skills you need to start Trading successfully, regardless of your current level.
Once trained, it is then necessary to open a Trading account with a broker in order to access the financial markets and to be able to carry out their first transactions. During this stage, it is essential to choose a regulated and serious broker in order to avoid unpleasant surprises.
Thanks to your online trading account, you will be able to buy and sell a large number of assets and financial products in a few clicks in order to bet on the rise in prices, but also on their fall (thanks to the mechanism of short selling). You will also be able to take advantage of the possibilities offered by leverage (an additional investment capacity made available by certain brokers) in order to reduce capital requirements and increase potential gains.
Once connected to your private ONLINE Trading space, you will access our list of partner brokers in order to opt for a quality financial intermediary fully adapted to all the services and tools of the ONLINE ecosystem.
The Trading Platform
Trader’s workspace, the Trading platform allows to display stock charts, to study them, but also to access a whole range of Trading tools and functionalities. The most popular and successful platforms thus offer everything you need to program and / or use your own trading indicators and algorithms.
The ONLINE trading ecosystem today relies on the MetaTrader platform. This free trading platform remains to this day the most used by independent traders and the most offered by online brokers. Our training modules will explain how to take it in hand to get the most out of it.
Exploitable thanks to any good trading platform, the decision-making tools and the algorithms of the Trader allow him to fill some of his gaps, and therefore to greatly increase his performances. Now essential, technological assistance has today become one of the main performance levers for investors.
Within the ONLINE ecosystem, we have worked extensively to provide you with a professional Trading algorithm that is easy to use on a daily basis. Thanks to it, manual tasks are eliminated, your capital is protected, your results are optimized, and you can finally detach yourself from your screens to enjoy your free time.
Nothing replaces experience. To avoid beginner mistakes and progress faster, it is better to seek to benefit from the experience of more experienced Traders. These are not always very easy to access, but their knowledge is a real gold mine for any beginner trader.
By joining online trading, you will be able to participate in the weekly Traders Room to follow live the analyses of our specialists and benefit from their advice. You can also participate in monthly Masterclasses in order to be coached live by our referent Traders.
The mutual aid community
Finally, it is always interesting to surround yourself well to embark on the adventure of Trading. Joining a supportive community in order to exchange with other beginner Traders will allow you to share your fears, your doubts or your questions, and to motivate you.
Financial products traded by the Trader
To earn money, the Trader can trade a wide range of financial assets divided into 5 main categories:
- The shares correspond to small shares of companies and grouped together in stock market indices
- State or corporate bonds correspond to small portions of debts;
- Currencies, traded in the form of currency pairs;
- Raw materials (agricultural or mineral);
Each of the opportunities present in these asset classes can then be exploited through financial products traded on organized markets (stock exchanges) or directly between companies and individuals on so-called over-the-counter markets.
The Contract for Difference (CFD) is today the most widely used financial derivative product by independent traders due to its ease of use. The CFD is content to reproduce the performance of a given financial asset.
To bet on the rise of an asset, you just need to buy the associated CFD. If the asset’s prices rise, the CFD’s quote will rise as well and you will earn money. Conversely, if the prices go down, you will lose money. Your gains or losses will then be proportional to the size of your position. As an example, if the traded CFD has a value of 1USD per point, you will gain or lose 1USD per point change.
Other more complex financial derivative products such as Futures or Options are also used by Independent Traders, but they remain for the time being the prerogative of the most experienced Traders.
5 things to know before starting online trading
Online trading platforms have revolutionized the world of finance by making stock market investments accessible to all. However, we must not lose sight of the financial risks that such an activity represents. To limit your risk, there are some things that are important to know before you start.
Knowing how to choose the right online trading platform
To get started in online trading comfortably, it is important to choose the right trading platform. To choose it, you have to learn about the markets to which it gives you access, such as Forex which is ideal for beginners. It is also better to choose a platform that offers the possibility of opening a demo account for free to train.
Choose the right market to start
In general, online trading specialists advise beginners to get started in Forex first. Why? If you find out what Forex is, you will quickly understand that it is one of the easiest financial markets. Since it is primarily based on the exchange of foreign currencies, it is easy to understand and does not experience such large variations as some other markets less accessible to beginners.
Know the different styles of trading online
There are different types of trading and it is important to know them when choosing one. There is scalping which consists of investing and selling a few minutes later to earn little money, but several times a day. Day-trading which consists of investing at the start of the day and selling at night, then long-term trading. Obviously, you can mix the styles, but on different values, some lending themselves more to one style than another.
Stay informed at all times
Trading is often a dream because it looks like a technique for making money without making any effort. However, trading online is a permanent job. It is not difficult or physically grueling, but it does require to always be alert and on top of the latest financial movements. The stock market never stops and neither do traders.
Imitate the best
Trading is, in many ways, a social experience. It must be admitted that many stock market movements can only be explained through the social prism and the inevitable tendency to imitate human beings. When you are starting out, it is therefore in your best interest to follow specialized sites and get to know the best traders. By imitating them, you will learn a lot quickly.
When to buy and when to sell
Without these questions, you will not be able to define your entry and exit points, which will be the conditions for success in trading, an activity that can be risky if you do not define these factors beforehand.
The major criterion defining your trading strategy is your risk aversion. Here we detail 3 basic strategies, from the least risky to the most risky so that you can adapt it.
“Dollar-Cost Averaging” or long-term purchase
Dollar-Cost Averaging is to be seen as a recurring purchase of an asset in which we have confidence. The goal is to acquire a certain amount of an asset (Bitcoin, Ethereum, or Gold) at regular intervals by betting on a future rise.
This long-term investment technique allows you to gradually capitalize on an asset in which you have confidence, that is to say for which you think its price will appreciate in the years to come.
In addition, by investing constant amounts, it allows you to smooth the entry price at which you bought your asset. And the advantage is that it takes away the constant stress of: “What if I could have bought lower?” Do I have to sell now and wait for the price to drop? “. These questions, while natural, will only increase the risk of making an irrational decision and should be avoided.
You therefore invest for the long term while reducing the impact of short-term volatility, this is called “HODL” in crypto jargon, derived from the English word hold meaning “to hold, to keep”.
The “swing” trading
Swing trading is a medium to short term strategy of buying an asset at one point and sticking to it for days or even weeks. It is interesting to operate this way when the market is experiencing significant movements.
Assuming that the market always operates in cycles, when the market experiences strong bearish movements it is often advisable to invest after-market consolidation at low levels. This phenomenon is commonly referred to as “Buy the dip “, literally meaning “to buy at the bottom”.
Example: On March 13, 2020, the cryptocurrency market collapsed with Bitcoin, Ether and Litecoin losing around 45% of their value. If you had chosen to buy a few days after this crash, you would have won more than twice your stake on these three assets today.
This strategy allows you to be relatively detached from the market without having to check the price of crypto-assets every hour (which you will probably do at the beginning anyway).
The “Day Trading
Day trading is for more experienced traders. It aims to buy an asset with the aim of reselling it higher after one or more hours of waiting to take advantage of market volatility.
This method is used by professional traders for buying and selling commodities, currencies, and crypto assets over short periods of time. The goal is to be able to generate small profits many times over in order to grow your capital day after day.
However, while day trading can be profitable, it is important to understand that it is a risky trading method. The more you expose yourself to the market by investing, the greater the risk of loss.
As this strategy is particularly exciting, it requires impeccable composure and discipline. Because the nemesis of the good trader is emotion.
For the more seasoned: automated trading
As explained before, your worst enemy as a trader will be emotion, stress, leading to irrationality, which can be dangerous when you are exposed to the market. And a good solution to the influence of emotion on the trader is automated trading.
So what is automated trading, and why is it that you are only hearing about it now?
Here is the explanation:
In traditional market finance, so-called “automated” trading has often only been within the reach of professional traders. But if this technology has long been kept in the hands of banks and investment funds, this is no longer the case! Especially in the cryptocurrency industry (which has only existed for ten years), where trading bots have been making a name for themselves for several years.
These bots therefore allow you to trade currencies, commodities and cryptocurrencies through online platforms made available to you. This allows you to plan a strategy when you have a cool head, without negative emotions, and without requiring very extensive computer skills.
These small programs will do the buying / selling for you. You will only have to check if it works as desired and above all, that it is profitable! The Japanese Bitflyer exchange, which we presented to you a while back, offers this service thanks to the APIs it makes available for cryptocurrency trading.
Where to buy, where to sell?
Now that you have the elements in hand to choose the strategy that suits you best, the next logical question is: where can I buy and sell cryptoassets? Because unfortunately, if the “crypto-sphere” grows and grows, it can still be difficult for the trader to be in the process of knowing where to point his nose. If we often mention the names of Binance and Coinbase that we no longer present, many alternatives offer you to buy and trade cryptocurrencies with unparalleled fluidity and ease of access, all the more so when you have been able to form an idea of the strategy that suits you! Having aroused the interest of regulatory professionals and in place for many years on the other side of the globe, bitFlyer will be your (market) place of choice for buying and selling cryptocurrencies, thanks to its simplicity and ease of use.
Once your account is created, the platform will quickly and easily teach you to use their purchase interface, thanks to which you will be able to carry out your first trades in Bitcoin, Ether or Litecoin, thanks to euros deposited on the platform beforehand.
We will come back a little later for a presentation of their advanced trading interface, for the more robust of you!
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