If the stock market remains a complex concept for many, the stock markets are nevertheless more accessible than ever to retail investors. The rise of the Internet has indeed truly democratized the practice and online trading has met with great success among savers. So concretely, what is trading? Explanation.
All About Online Trading: Definition
Let’s first see what trading means. English Language Word, trading in French means the trading of financial assets, but it is the English word that is commonly used.
Trading therefore consists of selling and buying securities on the stock markets. Online trading amounts to placing orders directly on the Internet, through a stock broker. The online trade is simply an order to buy or sell placed on the Internet.
Today, the frequent question “what is a trader” is actually not so trivial since the Internet has greatly changed the game. Originally, traders were employees of financial institutions that operated on physical exchanges. Today, these are dematerialized and any individual investor can declare himself to be a trader on his own account.
Understanding Online Trading: How Does it Work?
Now let’s take a closer look at what trading is all about. To trade online, you must first equip yourself as follows:
- A computer, tablet or smartphone,
- An Internet connection,
- A stock broker,
- A trading platform.
The basic equipment of the individual trader is therefore not very sophisticated, the computer or smartphone and the connection to the Internet being very common goods today.
For the rest – trading platform and stock broker – nothing very complicated either. It is very simple indeed to open a trading account with a stock broker and to connect to it via a reliable platform such as MetaTrader for example. But online trading presents significant risks, it is imperative to choose the right stock broker, checking that it is well regulated by a European regulatory authority such as the AMF or the FCA.
Online Trading: on which Markets to Invest?
More concretely still, trading takes on a variety of possible investments. You can thus trade on different stock markets: Forex, or currency market, shares, indices (the Dow Jones or the DAX 30 for example), commodities, or even crypto-currencies, to name but a few. examples.
Financial markets are accessible via different types of contracts, such as Futures (futures contracts) or CFDs (contracts for difference). These investment contracts have this in common that they allow you to trade assets without actually owning them and to speculate on fluctuations in their prices, both up and down.
Example: What is Forex Trading?
Among the most popular stock markets is Forex, which is very popular with retail traders. So what is Forex?
English acronym for Foreign Exchange, Forex simply refers to the foreign exchange market, also called the currency market. The Forex trader bets up or down on currency fluctuations. In Forex, currencies are traded in pairs, for example the euro dollar (EUR/USD) or the euro Swiss franc (EUR/CHF).
What is Trader? – the Different Trading Styles
Just as one must choose on which financial markets one wishes to invest, the trader must also determine which style of trading he wishes to practice.
The trading style is closely correlated to the desired investment horizon, ie the duration of the investments: basically, short-term or long-term trading.
A long-term trading strategy relies on swing trading. This consists of keeping your positions open for several months, or even several years. A short-term trading strategy is based on day trading, or intraday trading. Here, the positions only remain open for a few minutes or even a few seconds during the same trading session. The fastest intraday trading technique is scalping. To go even faster, you can use trading robots (Expert Advisors or EA). We are talking about automatic trading. A trading robot literally trades for you according to an algorithm that you have configured and can therefore trade very quickly. The robot can of course also be used for swing trading.
Trading, what is it? – Conclusion
At the end of this article, you now know everything about trading. It’s up to you to decide which markets you want to enter and which trading style to adopt.
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