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Different types of online trading

Learn all about online trading and the different types of trading from Forex to penny stocks

/ Last updated on 15th October 2017

Since the beginning of the Internet and the dawn of the digital age, the global trading landscape has been flipped upside down. If it were a coin, most traders would agree it landed on the best side. Over time, a prosperous online world has emerged, enticing people to engage and promising the chance to cash in around every corner. For the more advanced, experienced traders, the plethora of platforms and the wealth of information now at our fingertips means there’s now a likelihood of earning more money with less risk.

Related: An entrepreneurial approach to online trading

Trading online today can take many forms, some differ in the types of commodity that are traded, others differ in the way these commodities are traded, and a small proportion are centred entirely around speculation and do not trade commodities at all. Let’s have a look at a few of the most popular types of online trading:

Forex

Forex is currently the world’s most traded market. Mainly, it is built around buying one currency while selling another. This trading is based entirely on speculation and is affected by factors such as economics and geopolitics, making it an exciting market to trade in.

Since the market has no physical location and runs 24/7 through a network of corporations and individuals, currency prices are constantly fluctuating, meaning there are always opportunities to trade.

Penny stocks

Investing in Penny Stocks is often appealing for newcomers to online trading as traders can buy a large number of shares in companies due to their low price. As a result, the price of shares doesn’t have to increase dramatically before the trader has doubled their money.

On the flip-side, it’s easy to lose your money fast. Penny Stock markets are often unregulated and have sometimes been associated with fraud. For a new trader, it’s essential to do some research and find out if the company has released any financial statements. Analysis of these should reveal the company’s true nature.

Other tips include: buy and sell for a reason, trade during regular hours, don’t chase your losses!

Binary options

Binary options differ from other forms of trading in the sense that the trader places a bet on whether the price of a commodity will increase or decrease over a certain period, as opposed to buying or selling the commodities themselves. The trader can select from a wide range of commodities and dictate the expiry time for the bet. In this sense, the trader is in complete control. The trader is then offered odds based on the volatility of the good and the expiry time allocated.

For example, if you think the price of petrol is due to decrease following a natural disaster in a region well-known for oil production, you could bet a desired amount of money on the chance of oil decreasing in price by a specified time or date. If you’re correct, you get your stake back and earn an amount dictated by the stake and the odds offered. If you’re incorrect, you lose your stake. You can, like other types of bets, also cash out at an agreed price.

Hopefully, this brief breakdown has given you an insight into what market you might begin to trade in. Remember – the key to becoming a successful trader is to understand which platform best suits your nature and set yourself a list of short-term and long-term goals. Finally, before any trading, it’s important to have a clear idea of how much money you can afford to set aside to pursue your new adventure into this exciting world!

Related: Recognising Trends in Forex Price Movements

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