Online trading is the exchange of financial products on the internet. These trades can use online platforms such as BCS Forex or Fortrade to buy and sell financial products such as currencies, stocks, commodities, etc.
Unlike conventional online trading technics where we need to rely on external brokers. In this article, we would discuss the basic concepts of online trading and how you earn with the comfort of your home.
What is Online Trading?
Online trading is buying, selling, or transacting through the internet. There are a lot of brokers online who have platforms that provide different kinds of financial assets like shares, stocks, futures, commodities, currencies, bonds, and ETFs (Exchange-Traded Fund)
In other words, you can trade in the comfort of your house. You only need a good internet connection and a smartphone, laptop, or tablet, and sign in to your trading account to start buying or selling currencies, shares, etc. This way, you can make money by just clicking the right buttons.
What is the Objective of Online Trading?
The objective of online trading, just like any other trade, is to make money.
There is a very thin line between profit and loss in online trading. You can be very successful or fail terribly at online trading. So how can you be successful in online trading? The answer is simple, learn the skill! Invest more time in learning the skills needed to trade in the online trade that you want to venture into, that way, you will be making very good profits.
What is the best Online Trade to Venture in Dubai?
Since I’m based in the Middle East, I’ll give you pro tips on the best trade to consider, especially if you’re in Dubai, UAE. I will be using Dubai as a reference, although these skills will work perfectly regardless of wherever you are.
In this article, I will give you an in-depth study of Forex Trading.
Understanding Forex Trading:
The foreign exchange market or Forex is the buying and selling of currencies and exchange them for other currencies. Forex is the most traded market in the world, so this will be a perfect example to use for a deep understanding of online trading.
How Does Forex Trading Work?
Forex trading is all about buying one currency and selling another. As a forex trader, you make profits by actively predicting the value of the currency you want to buy or sell based on its upwards and downwards movement. This right prediction of buying and selling will help you make profits.
Being the world’s largest market, it is easy to find a seller when you want to buy a currency and a buyer whenever you want to sell a currency.
As a forex trader, we need to be updated with business news all over the world. For e.g., if the United Arab Emirates is devaluing its currency to attract more foreign investments, this is a perfect opportunity to trade. As long as the UAE Dirhams’ value continues depreciating, the profits will be streaming in. When the value of Dirham starts to increase, then your losses will increase, therefore it is the best time to end this trade.
Understanding Currency Pairs:
It is very important to learn and understand the currency pairs before you even think of entering your first trade. The currencies are quoted in pairs because the trade involves selling one currency and buying another.
· The base currency is listed first in a forex pair and the quote currency comes second. The EUR/USD is an example of a forex pair. The euro (EUR) is the base currency while the US dollars (USD) is the quote currency.
· Each currency is listed as a three-letter code or symbol. Each code is specific to a certain currency. The most common ones are the USD (U.S. Dollar), EUR (Euro), GBP (British pound), and JPY (Japanese yen) among many others.
· Each pair has its market price. The value is arrived at by how much of the quote currency it takes to purchase one unit of the base currency. For example, EUR/USD = 1.3732 means, it takes 1.3732 U.S. dollars to purchase one euro.
Important terms in Forex Trade:
There are key terms that you need to understand before you start trading.
- Spread – This is the difference between the buying and selling price in a forex pair.
- Lot – These are batches used to standardize trades. Forex currency is traded in lots. A standard lot is 100,000 units about the base currency.
- Leverage – Since not all traders can afford the minimum 100,000 units to trade, leverage gives them exposure to bigger currencies by just paying a small deposit called margin.
- Margin – This is the initial deposit put upfront to open a leveraged position. It is usually expressed as a percentage of the full amount. For instance, if there is a 3.12% leverage on EUR/GBP pair, you deposit 3120 euros instead of 100,000 euros.
- Pip – These are the units used to measure the smallest price movements that a given pair makes in regards to the market conventions. For example, when the GBP/USD moves from 1.3456 to 1.3457, then the pair has moved by a single pip.
You can learn more about some of the best forex trading platforms below:
Sets of Skills You Need for Forex Trading:
- Resilience – Can take a loss without taking it to heart. Online trade involves profits and losses.
- Flexibility – You should be able to adjust to the changing market conditions.
- Confidence – Belief in yourself and your strategies.
- Self-control – Do not over-leverage or over-trade.
- Savvy – Always stay updated with the market trends at all times.
- Patience – Do not expect to be rich overnight. Seek to understand the market realities.
Advantages of Forex Trading:
- Forex is the world’s largest market with over $3 trillion circulating every day. This makes it easy to move between positions.
- You can trade at any time of the day. The foreign market is opened 24 hours a day for five days a week. This enables you to enter and exit a trade at any time of the day.
- You have the freedom to trade from any part of the world, provided you have an internet connection and a computer or a smartphone.
- There is ease of access. You can start trading with a low amount because there are a lot of brokers who can offer leverage.
- Traders have equal opportunities to make profits regardless of race or social classes.
While the forex is the largest market in the world to trade on, as a beginner be aware that it involves risks and rewards. Many people start by focusing on the rewards, so when the risks come along, it hits so hard. So before you venture into this market, be aware of all the risks and rewards that come with it.