What is Online Trading?
In simple terms, online trading (or stock trading) means trading in various securities through an online trading platform. It encompasses activities relating to the buying and selling of shares and other financial instruments such as ETFs, bonds, FX, Futures, etc. Online trading platforms facilitate trading by assisting investors and traders with various trading tools, and by providing them with real-time access to online trading.
Why Learn Online Trading?
Many people are keen on doing online trading but do not know where to start. Thinking about online trading may give the jitters to novice investors. Before taking the first step towards online trading, it is important to understand financial instruments and basic trading terms that take place in the stock market. It is an ongoing learning process, where one learns as they trade.
The Initial Steps to Learning Online Trading
Learn online trading by following three simple steps –
Open a Demo Trading Account
It is the primary step in learning online trading. Take help of an online broker to open a demo trading account (an account, offered by online trading platforms, that is funded with simulated or virtual money to enable nascent investors to experiment with trading activities). Various online trading platforms offer demo trading accounts for free. These accounts give a real-time experience of the trading activities of the stock markets.
Study and Analyze the Market
The key to learning online trading is to gain as much information on the stock market through reliable resources. Visit reliable financial websites and follow business news to keep a tab on all the latest events of the market. Read financial articles, take online tutorials, and go through stock market books to improve conceptual knowledge on online trading. Enrolling in online/live trading classes and attending seminars/ webinars and workshops conducted by proficient and experienced traders or investors is also a good way to learn the theory of online trading.
Technically analyze the stock market to master the skill of online trading, even if it means sitting for late hours in the night to scrutinize and comprehend the market activities during the day! Make a wish-list of the stocks you would like to trade and study the financial statements of the companies. Also, meticulously analyze and follow the price charts that show price movement or changes of these stocks. Hence, conducting a detailed study and analysis of the stock market helps in quick learning of online trading practices. It also aids in taking wiser investment decisions in the future.
Follow Hands-On Trading
Gain practical experience by trading regularly and repeatedly. Virtual or simulated trading using a demo trading account is the best way to master the game. It allows beginner investors (like you) to follow the real-time actions of the stock market and get a deeper understanding of online trading mechanisms. Virtual trading helps in planning investment strategies and builds confidence while getting familiar with stock market conditions. Use them to practice online trading with financial instruments to get accustomed to online trading techniques and their salient features on trading software, and to become skilled at the nuances of trading before risking your own money in the real stock market.
The path to learning online trading encompasses trading in diverse stocks of different prices, having dissimilar holding periods, and using varied trading strategies. The more one trades, the more are the prospects of analyzing the flaws of the results (that are bound to happen in the initial stages as a beginner investor). As it is famously said, ‘take chances, make mistakes. That’s how you learn and grow’. Hence, scrupulously examine the outcomes of your trading activities to have a deeper understanding of the stocks. No sooner you can find yourself in a situation where you can start predicting the stock prices!
Final Thoughts
The best strategy to learn online trading is to trade as much as one can. Follow the simple guidelines given in this article to start the online trading journey. Acquire a comprehensive understanding of the stock markets and employ knowledge in virtual trading using demo trading accounts to avoid burning fingers too early in the learning journey.