Looking for a new way to earn money? Trading may be a perfect alternative for you. Today, investing in different international markets is more accessible to the general public than ever before. However, to achieve optimal results, it is important to dedicate some time to understand the markets, constant practice, and cultivating patience.
Today we want to give you the basics so that you can take your first steps in the dynamic world of trading. We will explain the basic concepts and practices and provide you with a guide so that you can understand the notions you need to handle before placing your first order.
In addition, we also bring you a list of the different types of trading that exist and which is the best for those who are just starting in this world.
First of all, what is online trading?
Today, online trading is gaining more and more importance as traders can buy and sell a wide range of financial instruments with a single click from their personal computer.
Trading refers to the buying and selling of listed assets with high market liquidity (stocks, currencies and futures). Financial markets today are electronic and strongly regulated. The objective of trading is to obtain an economic benefit when the operation goes well and generates a capital gain.
Buying and selling financial assets has become one of the fastest growing professions in recent years, mainly due to the enormous progress in information technology. For this reason, nowadays we speak of online trading, since trading operations are carried out via the Internet and by sending buy and sell orders with computer terminals.
Main characteristics of online trading:
- All trading decisions can be implemented on the same trading platform and are sent instantly to the broker, so you need to have an Internet connection (hence it is called online trading).
- The activity of online trading is, therefore, speculating on the price of assets in the financial markets, trying to take advantage of changes to make money between the time of purchase and sale, or vice versa, through the Internet.
- Online trading is a serious activity that can be understood as a profession and should not be taken as a way to quickly earn a lot of money without risk and without knowing anything about it.
- Online trading is accessible to all those who are ready to put some understanding work to the financial positions they enter into, and are ready to accept the potential losses. The mental side of trading is indeed a daily challenge, so it is better to trade with extra money you don’t need.
Markets where you can trade
Trading can be done with any asset traded in a financial market: company shares, stock indexes, commodities, currencies, cryptocurrencies. In all cases the concept is the same: knowing how to decide the best time to buy and sell. Among the variety of asset markets for trading, we must highlight:
- Forex trading: the foreign exchange market is the largest financial market in the world. The high liquidity of this market allows trading currencies at a minimum cost. In Forex trading, currency pairs are traded, being the key to buy or sell the appreciation or depreciation of one currency against the other.
- CFD trading: because of their flexibility and versatility, Contracts for Difference or CFDs are one of the most widely used instruments in trading. CFDs allow trading on a wide variety of assets: shares, stock indexes, commodities, currencies, cryptocurrencies, etc. Being a derivative product, it is not necessary to acquire the asset, nor is a high capital required to invest. The profit (or loss) is proportional to the variation of the price of the asset throughout the operation.
Types of trading
In addition to the type of asset traded, there are different types of trading according to the duration of the operation or, in other words, the time that elapses between the purchase and sale of the asset:
Scalping (intraday trading)
This type of trading is very short term, with operations that can take only a few seconds. Several can be made on the same day and the profit is usually very small.
When scalping lasts more than five minutes and lasts for a few hours, it is called intraday trading, and is usually used when a certain trend is expected and you are waiting for it to manifest itself.
If you consider yourself to be a decisive person with a quick reaction time and the time to be aware of small variations in the market, this option may be the right one for you.
Day trading or intraday trading, works similarly to scalping with the difference that traders wait a few hours before closing the sale. This type of trader closes all his trades at the end of the day to prevent opening fluctuations from affecting his trades.
Daytraders are not usually as patient as those who choose to take long positions. If in your case, you also prefer to see profits as soon as possible, this may be a good option.
This type of investment consists of buying securities and waiting for them to reach the estimated price to put them on sale. The time to wait for the forecast to be fulfilled is undetermined, it can take days or even several weeks.
The patience and psychology of trading are fundamental for those who use it, since they must commit and maintain their position for the previously stipulated time, even if its value presents momentary drops. If you think you can tolerate the pressure of waiting, swing trading can be a good alternative.
Position trading is a long-term investment that consists of buying a stock or security that is estimated to appreciate in value in the future and holding it for long periods of time, which can be several years.
It is one of the most profitable, but only for those traders who do not need immediate results. It is important to develop the patience and discipline to adjust to the initial plan, avoid falling into the temptation of following trends and closing positions.
The reality is that it is up to you how you want to start trading. However, the best option for amateurs is to start with what may be the least risky. From there, with patience and experience, you can start taking riskier and more profitable options.
Steps to start trading
Before you start trading, and especially if you have no previous experience, it is very convenient to dedicate time to train yourself in a proper way. This training should cover these topics:
- Market analysis. The analysis of the evolution of the market is a key element in trading, since it will allow you to know which is the best moment to buy and sell.
- Types of trading orders. Once you have chosen the best time to buy or sell, the next thing you need to know is how to issue the corresponding buy and sell orders. A market order is simply a request to buy or sell a certain financial instrument.
- Risk management and leveraged trading. Risk management is the measure within our trading strategy that refers to the control and management of our capital. They determine the position size, leverage and profit and loss limits we can afford.
Rizeapp: fast and easy trading in a secure space
Rizeapp is a Meaningful Finance App focused on raising your lifetime value. Our mission is to make people feel safe and happy with their money, so that everyone can live a healthier and more fulfilling financial life.
With Rizeapp you can trade currencies, commodities and indices, or invest in shares of global companies at the touch of a button. Plus, you can buy, sell and hold digital currencies with no hidden fees. We offer you an easy and convenient way to access the crypto world as it has become a very important asset class.
Our AI will act as your personal financial coach, advising you and helping you make the best decisions based on your personality and goals, to maximize your long-term financial well-being.