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How to Become a Successful CFD Trader – 7 Tips for Rookies and Pros AlikeIf you’re new to CFD trading or have been in the game for a while but feel like there’s still something …
Succeed in Online Trading by Finding the Right Online Broker
Binaly.com wants to make it easier for traders to make money in the financial markets by helping them choose the right broker. We check out brokers in markets such as cryptocurrencies, stock trading, forex trading, CFDs and binary options and provide reviews of the best ones we find. We also provide other services such as the latest industry news, comprehensive online trading guides as well as deals from the brokers that traders can take advantage of.
Best Brokers for New Traders
Products: Forex, Stocks, Indices, Cryptocurrencies and Commodities
Products: Forex, Stocks, Commodities, Equity Indices, Precious Metals, Energies
Products: Forex, Cryptocurrencies, Stocks, Indicies, Commodities and CFD
Products: Forex, Cryptocurrencies, Shares, CFD
History of Online Trading
Online trading involves the buying and selling of assets over the Internet, using the trading platform of a broker. In the past, if a trader wanted to place an order with their broker, it would be a cumbersome process. For instance, if you wanted to buy some shares of stock, you would call them on the phone. The broker would tell you the current market price and confirm your order, as well as the commission for making the trade.
Once you confirmed your order, the broker would place it in an electronic system linked to the major exchanges such as the NASDAQ or New York Stock Exchange. The trader would then receive confirmation of their order via snail mail, as well as a monthly or quarterly statement of their investments. These days, everything is done through the trading platform. The trader can place orders through it and manage their trades. He also has access to real-time news feeds and price data as well as charting software to analyze the markets and identify trading opportunities.
The platform also allows the trader to view documents such as investment and confirmation statements and tax forms.
Online trading dates back to the early ‘80s, when NAICO-NET, the first full-service software for buying and selling stocks was introduced. It allowed traders with home computers to directly send their trades for clearing. However, its growth was hindered by the 1987 stock market crash as well as high costs for licensing the software, which prevented many retail investors from participating.
The growth of the Internet in the ‘90s made online stock trading more accessible and caused a boom in its popularity. By the mid-‘90s, it was estimated that some 20% of the country’s population had invested in stock and resulted in an explosion in the number of online brokers. By the end of 2000, the number of online brokers had increased to over 140 from just 12 in 1994. It also resulted in more people making online trading their career.
Online Trading and the Trading Options Being Offered
Once online stock trading took off, it was only a matter of time before you could also trade other assets over the Internet. In this section, we will briefly discuss some of the most popular markets for online trading.
Stocks are shares issued by a corporation that gives shareholders a claim over its assets and earnings. This means that shareholders are entitled to receive dividends (shares in profits) if the company declares them, and vote during shareholder meetings. Contrary to common belief, however, stocks do not give shareholders ownership rights.
Generally, you make money from stock trading by buying shares when the price is low and selling them when the price increases. Traders can also make money when share prices fall by short-selling, or selling shares of borrowed stock when the price is high and then repurchasing them when the price falls, and pocketing the difference as your profit.
Foreign exchange trading involves buying or selling currencies. Since every forex trade involves exchanging one particular currency for another, the value of a currency is determined by how much of another currency it can buy. This is known as the exchange rate, i.e. 1 euro = 1.22 US dollars. The trader makes money by taking advantage of the price fluctuations in the exchange rate.
For example, the trader buys 1000 euros, paying 1220 US dollars. If the exchange rate falls to 1 euro = 1.24 US dollars, the trader can sell the euros and get back 1240 US dollars, or a profit of 20 dollars. Since short-term price movements of currencies are very small, the trader generally avails of leverage, or borrowed money from the broker, to be able to make larger trades and increase their potential profits.
Commodities are primary agricultural products or raw materials that can be traded. Examples of commodities include crude oil, corn, wheat, gold and sliver. Traders usually make money not by trading the physical commodities themselves, but rather trade futures contracts that give them the right to buy or sell a certain quantity of a commodity at a particular price and by a certain date in the future.
The commodities markets can be very volatile and thus, trading futures contracts is not recommended for inexperienced traders. They can instead trade options contracts or exchange traded funds, which allow them to profit from price fluctuations of commodities without investing directly in futures contracts.
Binary options are a way to make money from the price fluctuations in various markets without having to directly invest in an underlying asset.
The basic way they work is that the trader has to choose between two possible outcomes, and buys an options contract based on his choice. If he guesses the correct outcome, he earns a fixed amount or payout. If not, then he loses the amount he paid for the contract.
Unlike other types of trading, the trader knows in advance how much he is risking and what his reward is if his trade is successful.
A contract for difference is another way of making money in the markets without actually having to invest in an underlying asset. Instead, the trader buys or sells the CFD, a tradable instrument whose value reflects that of an underlying asset. The asset can be virtually anything, including stocks, currencies, commodities and indices.
To illustrate how you make money from CFDs, let’s say you want to invest in ABC stock. Normally, you would have to contact a broker to buy the shares for you. Once the shares have reached the price level where you believe you can make the maximum profit, you sell the stock. But doing this trade would require that you have a high amount of capital since stockbrokers will only give you a relatively low amount of leverage.
You can make the same trade using a CFD with a lower capital outlay, since the broker would give you higher leverage. When the stock reaches your desired price level, you simply exit the contract and collect your profits. Although your net gains will be less with CFDs than with traditional trades, you are not charged commissions or other fees that can eat into your profits. They are popular with traders since they can avail of higher leverage compared with trading traditional assets, which means they only need a smaller amount of capital while boosting their potential returns. They are ideal for day traders who will only hold onto them for a short time.
These are digital currencies that have no physical existence and are not issued by a central authority such as a central bank.
They are secured by cryptography, which makes them hard to counterfeit. The first cryptocurrency, and the most popular, is Bitcoin, and its success has resulted in a host of competitors, including Ethereum and Litecoin.
Cryptocurrencies are traded in the same way as other assets. But they are currently popular among traders because of the possibility of making huge profits, since the prices of Bitcoin and other popular cryptocurrencies have shown sharp increases recently. At the same time, trading cryptocurrency is inherently risky since prices still remain volatile.
Before getting involved in crypto trading, make sure to do your own research and determine which cryptocurrency you would like to trade with. Once you are sure about your choice, please have a look at our top list presented on the top of this page. The top list will help you find a broker that offers cryptocurrencies.
Something else to keep in mind is that there are only few licensed brokers who offer crypto trading online. On Binaly.com we are only listing licensed brokers. The license details are presented on the review pages.
Online Trading – How to Start?
Before you can start getting involved in online trading, you need to open an account with an online broker. Your broker will be the intermediary between you and the markets. They will take your orders and implement them by placing them in the exchanges. They can also provide you with a range of other services, such as providing you with investment advice.
There are two types of brokers within online trading – full-service and discount. Full-service or traditional brokers will essentially provide you with assistance throughout the whole trading process, including recommending investments. They can also provide other services such as transferring some of your shares as a gift. Of course, the commissions they charge for providing these services will be larger than those at a discount broker.
Discount brokers, on the other hand, will simply provide you with an online platform and the minimum level of service. You will have to do everything yourself, and if you do something stupid, they will not stop you.
When choosing a broker, start by thinking about what services you need. Can the broker provide them? What investment tools will they provide you? Will they provide you with research assistance?
Next, look at the minimum deposit required to open an account. What balance do you need to maintain in the account? If you fall below the required balance, what fees will you be charged?
If possible, sign up with a broker that will provide you with an online trading demo account. These accounts provide you with a certain amount of virtual money that you can use to trade in the markets without having to risk real money. Once you feel you are ready, you can make live trades.
Many brokers also have apps that you can download for your smartphone or other mobile devices. This allows you to trade while on the go. Although you can access a mobile-enabled version of the trading platform, online trading using the app is more convenient.
Once you have chosen a broker and signed up for an account with them, you can start trading. Choose a market to focus your investment activities on. Do you want to specialize in forex trading or stock trading? Would you rather trade more exotic investment options such as CFDs or binary options? Make sure you do your homework and are familiar with the market you choose before you make your first trade. Practice with a demo account first so you can develop your skills without having to risk your trading capital.
It is also very important that you become familiar with the different types of orders that you can make on the trading platform. Apart from being able to open and close trades, you can also choose the price at which you will buy or sell an asset, as well as setting a ‘trigger’ price level which will close or open a position in order to reduce losses or lock-in profits.
Why Online Trading?
There are many benefits that you can enjoy from online trading that makes it a great way for you to make money in your spare time, or even as a full-time career.
It is cheaper. The fees that are charged by online brokers are more affordable than those that are charged by traditional ones. If you choose forex trading, you won’t even be charged commission fees since the broker will take his money from the commission, or the difference between the buying and selling price of the currency.
You have more flexibility as to when to trade. With online trading, you can trade anywhere as long as there is an Internet connection. Forex trading also lets you trade 24 hours a day since the currency markets are decentralized.
You have access to a variety of online resources. Through the online trading platform, brokers provide traders with trading tools such as charting software for analyzing price data and access to real-time news feeds. In addition, many brokers also offer educational resources such as ebooks and webinars to help their users learn about the markets and build their trading skills.
It is easier to monitor your investments. All you have to do is to log-in to the trading platform and you can view the status of your investments. You also have the opportunity to take corrective measures such as adjusting stop-loss or take-profit orders or even closing a position before you lose too much money.
You don’t need to have a lot of trading capital. Since online brokers will provide you with leverage, you can trade with as little as 2% of the value of your position in your trading account. This means that you can potentially make a lot of profit with a minimum investment. Of course, using leverage also increases the potential losses you can suffer so you have to weigh the risks and advantages carefully.
Online Trading as a Career
There are many people who are attracted to online trading as a career. After all, who would not want to be their own boss and make money on their own time? The problem is that online trading as a career is not for everybody and it is not a decision that you should not make lightly.
Before you even consider trading full-time, you should make sure that you are ready. This means that you have enough training and knowledge to be able to trade successfully. How familiar are you with the market you are interested in trading in? Keep in mind that it is not enough to know the basics, but you should also be familiar with the various techniques for analyzing the markets.
You should also be emotionally prepared if you want to trade full time. This means accepting that you will not be financially stable since there are times that you will suffer from losses. You have to be ready to accept this so that you will not panic when it happens.
In addition, you will need self-discipline. This means setting a consistent schedule for your online trading activities. But more important, it also means that you should stick to your trading plan even when it seems that your trades are moving against you. You should not panic or react emotionally when this happens, since you may end up chasing your losses, i.e. not closing your trades and letting losses pile up in the hope that the trend will reverse and move in your favor.
You should also keep your expectations realistic. If you believe that online trading can make you a millionaire, you should probably not be a trader. It involves a lot of hard work and preparation before you can even make a consistent profit from your trading activities. And it probably will not happen overnight, but will take some time before you can make a living from trading.
Of course, you don’t need to actually be a full-time trader to make money from trading in the markets. You can trade in your spare time and be able to earn some extra income to supplement your salary from your day job. The good thing about online trading is that it gives you the flexibility to decide how you will make money from the markets.
How to Make Money from Home
There are two main ways that you can trade in the markets – as a day trader or long-term investor. A day trader is a trader who buys and sells an asset in the course of a single trading day. They are usually engaged in forex trading or stock trading since these are the markets where they can take advantage of short-term price movements in order to make profits. Long-term investors, on the other hand, buy assets and hold on to them for months or even years since they are waiting for the value of the assets to grow over the long-term. Both types of trading activities are ideal for full-time traders as well as those who are doing it on a casual basis.
However, day trading is an inherently risky activity and should only be undertaken by those who have a deep knowledge of the markets and who have developed strategies from how to make profits in the short-term. And, of course, they should have a high tolerance for risk.
Long-term trading is less risky but should be undertaken by those who are not interested in short-term profits. In this type of trading activity, profits are accumulated over a longer period of time. This makes it ideal for those with a long-term savings goal, i.e. investors who are saving money for their retirement.
One of the best things about making money through online trading is that you can work from home. But these days, you don’t literally need to be chained to your desktop computer in your home office. Because mobile trading platforms and apps are now available, you can actually work from a coffee shop or any place where there is a reliable Internet connection. In fact, you can even trade while you are travelling.
This means that you can spend more time doing things that are important to you while still making money. For instance, you can take care of the children while your spouse is at work, and then trade when they arrive home and take over. You can also choose to devote just a few hours a day to trading, and then spend the rest doing something that you really enjoy.
It is also worth noting that trading can also be a source of passive income. For example, in long-term stock trading you can buy stocks that pay dividends, which are shares in the profits of the company. Of course, these are not big amounts but you can use them to reinvest in more shares of stock or other assets.
Most of the traders that are recommended on binaly.com offer trading platforms that are mobile-enabled or have trading apps that you can get from Google Play or the Apple Store. These will allow you to trade from literally anywhere you are, so you’ll never miss a trading opportunity. They also provide you with a wide range of resources to help you succeed as a trader, ranging from trading tools such as charting software, to access to news feeds and economic calendars listing the release of economic indicators and other events that could affect the markets.
How Much Time Do You Need to Dedicate for Trading?
How many hours a day should you spend on online trading? Obviously, there is no one answer to this question. There are some people who treat it as a job and spend eight hours a day on it, while there are others who only trade a few hours a week. As you continue to work on your trading activities, you’ll surely find the time commitment that is right for you.
There are two aspects of online trading that you need to consider when deciding how much time to devote to it – preparation and the actual trading itself. Preparation involves doing research on the markets you have exposure in, including analyzing price activity and looking at upcoming economic and political developments and thinking about how they would affect the prices of the assets you are trading. The majority of your trading time will actually be spent doing research with comparatively little time spend on trading itself. Some traders actually spend only an hour or two a day actually trading. You also don’t need to spend big blocks of time in front of the computer since
Another consideration is when the markets you are trading are open. If you choose forex trading, for instance, you can trade at any time of day or night. If you are into stock trading, you are only limited to the hours when the exchanges are open.
As for how long it will take before you start to become consistently successful at trading – once again, the answers will vary. In general, however, it will take you from six months to a year of practicing your trading before you can start to generate a regular income from the markets. Before this point, while you might make some money, you should expect to bear some losses. This is why you should only trade with a demo account while you are learning, in order to avoid losing too much money.
Fortunately, the prerequisites for opening an account with an online broker are usually very minimal. Registering for a free account just takes a few minutes and requires you to only provide some personal information.
Before you can start trading, however, even with a demo account, you are generally required to make a minimum deposit in your account. In order to make deposits and withdrawals into your account, you will need to provide some personal ID as well as proof of address (by submitting a bill that is addressed to your home). These documents will need to be verified although it will not take that long.
In conclusion, the time you want to spend trading is a personal decision you make based on how much money you want to make as well as which markets you are trading in. In addition, since you can trade using your mobile devices, you can check on your accounts while doing other things outside the house. That is the one good thing about online trading is that it is flexible enough that you can spend only the time you want and still make money.