If you have caught yourself questioning how people are able to trade online for gains, then this answer is for you.
Whether you’re at it to trade stocks, Forex or cryptocurrencies, the idea of online trading can be a little scary to begin with.
You’re not alone. Many new traders also feel the same way and asking a few questions before getting started isn’t out of the ordinary.
How to Start Commodity Trading: A Beginner’s Guide
Online trading tips
In this article, you will learn necessary online trading tips for beginners to get you on the right path. We will guide you step by step, show you how to avoid common pitfalls, and teach you to trade smart!
So sit back and get ready to start online trading with a solid foundation, and learn why Finbok is an ideal place to begin your trading journey.
What’s Happening in the Markets Right Now?
Global stock markets have grown more volatile as a result of rising geopolitical tensions and worries about inflation. For example, the US stock markets have fluctuated in recent months in response to the US Federal Reserve’s latest interest rate hikes to combat inflation.
Tech stocks have been particularly pummelled by rising rates, which increase borrowing costs for prospective buyers and dampen enthusiasm. In Europe, energy pricing continues to drive market volatility.
The UK’s FTSE 100 and Germany’s DAX 30 indices have also posted mixed results.
In forex trading, the US dollar continues to be strong against other major currencies due to aggressive monetary policy by the Federal Reserve and the clout of the US economy – which happens to be the largest in the world.
Emerging-market currencies have been hit hard by rising inflation and higher external debt, despite a flood of speculative money coming into the most attractive carry trades.
The British pound continues to be pressured by weak economic data and political problems in the UK.
And the price of other risk-sensitive commodities such as oil and gold are also going haywire. The price of oil surged as the cartel OPEC+ cut supply, only to collapse as demand concerns began to weigh. Gold, another safe haven, has slowed in its flight to safety as the yield on bonds was rising faster than the price of gold.
Cryptocurrencies:
Volatility still marks cryptocurrencies, with Bitcoin trading around $25,000 after peaking in 2021, while regulatory crackdowns in major markets, such as the US and China, continue to influence prices.
The market is also still reeling from high-profile collapses of crypto exchanges and stablecoins.
1. Understand What Online Trading Is
One of the first things you need to know about online trading is, well, what online trading is. While the term covers a wide range of activities, all of which involve the online purchase and sale of an asset, whether that be stocks, forex, commodities, or cryptocurrencies, it is often misunderstood as a get-rich-quick scheme.
Online trading is simply a flexible but risky way to trade money – the principle of which is more or less to buy low and sell high, although as with any trading market, the latter isn’t always as easy as it sounds.
2. Choose the Right Online Trading Platform
The choice of platform is probably the most important initial decision an online trading novice can make. Platform providers such as Finbok deliver user-friendly experiences, educational resources, and support.
Look for platforms with low commissions, easy accessibility, educational tools, customer support, and account services.
A reliable and informative platform can serve as the anchor you need to move ahead with confidence in online trading.
3. Start with a Demo Account
To get a feel for the process, first, try practicing on a demo account that doesn’t charge any fees.
Most online trading platforms, including Finbok, offer demo accounts where you can practice trading with virtual money on their service.
This is a safe place to get started. With a demo account, you can get familiar with market trends, test your strategy, and see all the tools the platform offers.
4. Create a Solid Trading Plan
Trading without a plan is a bit like driving without a map: you’ve got a vehicle and a destination, but no actionable idea of how to get there.
A good trading plan outlines what you’re trying to achieve, what your risk tolerance is, and what you’ll do under various market conditions.
Do you want to trade every day, once a week or once a month? Are you interested in forex or stocks? Crypto? Creating a plan will help you answer these trading questions and more.
5. Learn the Basics of Technical and Fundamental Analysis
Being a winner in online trading requires knowledge of how to analyse the market. Essentially, there are two main ways to analyse the market: through technical analysis and through fundamental analysis.
Forms of technical analysis use charts and patterns as a way of predicting upcoming price movements, while fundamental analysis looks at economic indicators, news events and company performance as a path to analysis.
For example, when Reuters reported on 23 March this year that OPEC+ countries are cutting their production levels substantially, that would be an example of a fundamental that would move the price of oil to peak in hours.
Traders who understood this analysis could hedge the upside (by which we mean reducing exposure) or capitalise on it.
But if you knew to employ both types of analysis, the markets could make a lot more sense for you.
6. Start Small and Manage Your Risks
One of the best tips for beginner traders is to start small. It’s tempting to get greedy and trade big when you think you’ve seen an opportunity, but by trading a smaller amount you can both test out strategies and reduce your financial risk.
Always use risk-management techniques such as stop-loss orders when placing buy or sell orders, and never bet money that you can’t afford to lose.
For instance, the volatile cryptocurrency market experienced a wild ride in recent years. Bitcoin prices hit a record high of close to $65 000 in 2021, but sharply tumbled later that year.
Those traders who had implemented proper risk management manoeuvres mitigated their losses, while those who had gone all in suffered major losses. Risk management should always be front and centre.
7. Stay Updated on Market News
The market is volatile. Events on a global scale can affect asset prices in unexpected ways. Keeping up to date with market news, for example, from agencies such as Reuters, is essential.
In 2023, political tensions in Eastern Europe sparked a temporary drop in world stock markets. Being aware of these events helps traders avoid risky trades.
8. Stay Emotionally Detached from Your Trades
Emotions is one of the hardest things to control in the field of trading. Trading ignites the greed inside you. Once you see your stock is gaining a position, you are engulfed by an immense feeling that you are invincible.
You might not be stopping at anything to maximise your profit or you might panic when you see your stock going the opposite direction. To overcome these emotions, stick to your trading plan no matter what.
If you are in a centre of emotional upheaval, the last thing you want to do is cut your position according to your written methodology. Trading is about data and the facts at hand, not about feelings or emotions. The best traders in the field remain completely level-headed under pressure.
9. Learn from Your Mistakes
Every trader makes mistakes. It’s unavoidable. The key is to not make the same one twice. Keep a trading journal. Record every trade in it, including what you were thinking at the time and, most importantly, the outcome. Review your trades on a regular basis to see if you can spot any trends, and also improve your decision-making over time.
10. Why Trade with Finbok?
Finbok is an excellent product. It’s easy to use, and it’s set up for beginners. It has a clean UI, well-explained education material and top-notch customer support. Finbok is a good broker for beginners, helping them to realise their dreams of becoming a trader, and offering them the chance to trade online.
Finbok also offers good tools and features for beginners – most notably risk management features and competitive fees. These features help them avoid common pitfalls.
– Diversify your portfolio: Effective trading means spreading your money over a variety of assets. If you have your money in one place, a downturn can wipe out your savings entirely. A portfolio that’s traded in a variety of assets will experience losses in some and gains in others, thereby mitigating, or reducing, the total risk of the portfolio.
– Be realistic: making money online trading is not easy, in fact you could make losses. Set realistic goals. Always remember that online trading is a long-term activity.
– Educate Yourself: Markets never stand still. As they evolve, so should your learning curve. Explore innovative approaches – Finbok offers several educational pieces, keep your eye on the news on the markets, and learn about the global economy.
However, with any opportunity comes the risk. Online trading carries a risk and before you begin, one should understand the risk involved. The market could be volatile and at the same time, you might make money but the possibility of you losing your money cannot be ruled out.
A good case in point is the stock market crash in 2020 due to the COVID-19 pandemic. Even seasoned traders could not foresee a sudden wipe-off of the market value worth billions of dollars.
Risk Management in Online Trading
As a beginner, it’s crucial to learn how to manage these risks:
1. Stop-Loss Orders: Set a price at which you’d automatically get out of a trade to avoid any further loss.
2. Position sizing: Never risk more than a small percentage of your total capital on any one trade.A simple rule of thumb is to never risk more than 1-2% of your total capital on any one trade.
Finbok offers built-in risk-management tools this way, which makes it suitable for new traders. With this technology at your disposal, you can use stop-loss orders and learn from it.
Armed with these tips and the information provided, you will have laid the foundation for a great online trading career.
The key to trading success is knowledge, patience and good risk-management. Finbok provides you with the tools to start your journey with confidence.
