Beginner’s guide to digital trading

Making Sense of Financial Markets Trading

Financial markets trading is the simple process of purchasing and selling financial instruments with the aim of profiting from the price differences. Trading the financial markets can help investors earn consistent profits over time – but can result in losses too.

Beginner's guide to digital trading Residential LandlordThe introduction of online trading towards the beginning of the twenty first century has exponentially increased access of financial instruments trading.

Prior to that, only high net worth individuals could meet the requirements necessary to participate in the financial markets. Currently, less than £100 is enough to earn any person a chance to partake in the global financial market as a trader. The list of instruments available for trading online includes commodities, currencies, futures, options, and shares.

How to Begin Getting Knowledge of Financial Markets

Before betting a trader bets his/her fortunes on the enticing profit potentials that online financial markets have to offer, it is critical that they gain relevant and adequate knowledge of financial markets. For instance, statistics indicate that over 90% of retail traders fail to make a profit through trading, with less than 5% being able to make a living from trading.

Firstly, a novice in financial markets trading has to know how to analyse financial information, both quantitative and qualitative. Quantitative financial information can be analysed using technical analysis while qualitative information such as the impact of major news events on prices of financial instruments can be understood through fundamental analysis.

Additionally, a beginner has to understand risk management, especially for leveraged trading. Finally, practice and experience are required so that the trader can make consistent profits through trading.

Trading On the Go Using Mobile Gadgets

Online stockbrokers and other players in the online financial markets have made available several online trading platforms, many of which were initially intended for trading through desktop terminals. However, advances in mobile technology have ensured that traders can now execute their trading decisions through smartphones and tablets.

Online Trading using Derivatives Like CFDs and Spread Betting

Derivatives such as Contracts for Difference (CFDs) and spread betting are very popular trading vehicles for novice investors. The value of a CFD is based on the value of the underlying asset, which could be a share, commodity, currency and so forth. The benefit of CFD trading is that very little margin is required, as small as 5%, so the potential for magnified profits and losses is substantial. Furthermore, CFDs do not attract commission.

Spread betting on the other hand involves predicting the direction that an instrument’s price will move. One
benefit of spread betting is that, for instance, in the UK, no tax is paid on the profits.

Online Stockbroking of Actual Shares

Some traders may prefer to buy actual shares through online stockbrokers. The benefit of this approach over the traditional method is that traders and investors can enjoy the benefits of online trading such as flexibility, broader access to the markets, and access to data analyses tools.

Remember spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

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