What is online trading? -SBF 120

While the stock market remains a complex concept for many, stock markets are still more accessible than ever to retail investors. The rise of the internet has truly democratized the practice and online trading has found great success among savers. So, concretely, what is trading? Explanation.

All about online trading: definition

Let’s first see what trading means. Word in English, business in French it means trading in financial assets, but it is the English word that is commonly used.

Trading therefore consists in the sale and purchase of securities on the stock markets. Online trading is equivalent to placing orders directly on the Internet, through a stockbroker. Online trade is simply a buy or sell order placed on the Internet.

Today, the frequently asked question “what is a trader” is actually not that trivial as the internet has changed the game dramatically. Originally, traders were employees of financial institutions that traded on physical exchanges. Today these are dematerialized and each individual investor can declare himself a trader on his own.

Understanding Online Trading: How Does It Work?

Now let’s take a closer look at what is meant by trading. To trade online, you must first equip yourself as follows:

  • A computer, tablet or smartphone,
  • An Internet connection,
  • A stock broker,
  • A trading platform.

The basic equipment of the individual trader is therefore not very sophisticated, the computer or smartphone and the Internet connection are now very common goods.

Even for the rest – trading platform and stock broker – nothing very complicated. It is really very simple to open a trading account with a stock broker and connect to it via a reliable platform such as MetaTrader for example. But online trading presents significant risks, it is crucial to choose the right stock broker, making sure it is well regulated by a European regulatory authority such as the MFA or FCA.

Online Trading: Which Markets to Invest in?

More concretely, trading assumes a variety of possible investments. You can thus trade on different stock markets: Forex, or currency market, stocks, indices (the Dow Jones or the DAX 30 for example), commodities, or even cryptocurrencies, just to name a few.

Financial markets are accessible through different types of contracts, such as futures (futures contracts) or CFDs (contracts for difference). These investment contracts have this in common that they allow you to trade assets without actually owning them and to speculate on fluctuations in their prices, both up and down.

Example: what is Forex Trading?

Among the most popular stock markets is Forex, which is very popular with retail traders. So what is Forex?

English acronym for Foreign exchange, Forex simply refers to the foreign exchange market, also called the currency market. The Forex trader bets up or down on currency fluctuations. In Forex, currencies are traded in pairs, for example the euro dollar (EUR / USD) or the euro Swiss franc (EUR / CHF).

What is the merchant? – the different trading styles

Just as the trader must choose which financial markets he wishes to invest in, he must also determine which trading style he wishes to practice.

The style of trading is closely related to the desired investment horizon, that is the duration of the investments: basically, short-term or long-term trading.

A long-term trading strategy is based on swing trading. This consists of keeping your positions open for several months or even several years. A short term trading strategy is based on day trading or intraday trading. Here, positions remain open for only a few minutes or even seconds during the same trading session. The fastest intraday trading technique is scalping. To go even faster, you can use trading robots (Expert advisors or EA). We are talking about automatic trading. A trading robot literally trades for you according to an algorithm that you have configured and can therefore trade very quickly. The robot can of course also be used for swing trading.

Commerce, what is it? – Conclusion

By the end of this article, you now know all about trading. It is up to you to determine which markets you want to enter and which trading style to adopt.

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