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What is Online Trading?

¿Qué es el Trading Online?

Romina Iaconelli |

Today, online trading is gaining more and more ground as traders have the option to buy and sell a wide variety of financial instruments.


Online trading is based on getting involved in financial markets through the Internet. This is where traders or investors come in, they are responsible for buying and selling financial instruments through a trading platform offered by a broker.


Some features of online trading:


1️⃣ All trading decisions can be made on a single online platform and are immediately sent to the broker , so an Internet connection is required.

2️⃣ This activity involves speculating on the price of assets in financial markets , trying to take advantage of changes to make money between the time of purchase and sale, or vice versa, through an online platform.

3️⃣ It should be understood as a profession and not a way to make quick money without knowing about it.


What is a trader?


A trader can be defined based on three different but mutually necessary characteristics: analyst, trader and risk manager.


In this case, the trader must analyze the environment in which a certain instrument is located, using both basic analysis and technical analysis. Sometimes it may be common to use only one of these two. In the meantime, the trader buys and sells instruments, such as contracts for difference , to try to make a profit whether the price goes up or down.


Finally, the trader must manage the risks he takes on in the markets so that he remains profitable and thus continues his activity.


In conclusion, a trader is a professional in the financial markets, since he studies and interprets market operations, understands and reads market fluctuations in order to benefit from them.

Evolution and advantages


Before the advent and innovation of the Internet, traders and investors had to manage all transactions and requests via mail, telephone or fax.


Traders often made decisions about buying and selling over the phone with their broker. This process was slow and tedious because brokers had to first confirm the details of the transactions (price, volume, type, etc.).


The digital age has impacted trading in a positive way. Here are some advantages that the revolution of this era has brought with it:


✔️ Transaction costs are significantly lower.

✔️ Transaction speeds are faster.

✔️ There are a greater number of financial instruments available to everyone.

✔️ The platform can always make trading decisions as long as there is an Internet connection.

✔️ You have access to a large number of tools and indicators.

✔️ No manual work is required as most tools can be calculated automatically and instantly.

✔️ More accessible services, such as training, analysis, online trading courses and websites.

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How does an online trading platform work?


A trading platform is nothing more than software that allows you to make transactions and control various accounts with the broker.


These platforms usually come with other useful features such as charting tools, real-time quotes, news feeds and research.


It is advisable to thoroughly review a platform before using it, to ensure that it offers what is expected and what is needed. This will make trading more efficient.


Types of trading


1️⃣ Scalping: This involves trading at a high frequency. Trades can last a few minutes or even seconds.

2️⃣ Day Trading: the trader opens and closes trades within the same day.

3️⃣ Swing Trading: Trades are left open and usually last approximately ten days. This type of trading lasts longer than the previous ones.

4️⃣ Trend trading: they do not have a time limit and consist of taking positions in the market in favor of the trend.

5️⃣Long-term trading: trades last more than a month.


What does it take to trade?


Some tools that are needed to start trading are the following:


✅ A computer, tablet or smartphone

✅ Internet connection

✅ A broker

✅ A trading account

✅ A trading platform

✅ Training


The first two are usually already installed at home. However, the others are interrelated: when you hire a broker, they provide you with the trading account and the trading platform.

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The broker


It is the intermediary that places orders on the market. The first step to trading is to choose a reliable broker. It is necessary to know the spreads they offer, the types of assets to trade, platforms and commissions.


Trading platform


It is nothing more than the software that allows you to open and close positions, analyze the market with charts, use indicators for your strategy.


Training


It is not advisable to jump into the waters of trading without understanding some basic concepts. In order to understand all these concepts, which will allow you to use them correctly and get the most out of them, it is ideal to take trading courses. To explore the financial markets, training, dedication and discipline are required.


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