Learn Online Trading: Essential Tips for Beginners
Have you ever wondered how people make money from online trading? Did you know that you can trade stocks, buy/sell currency pairs through Forex (FX) trading, or trade cryptocurrencies like Bitcoin?
Online trading can be done from the comfort of your sofa! However, you have to know what you are doing, as trading involves risk.
It’s essential to understand the basics before you commit. This article outlines some top online trading tips for beginners to help you make safer choices.
Online trading tips
By the end of this article, you will understand how to approach online trading with caution, and why online trading platforms such as VPTrade are suited for beginners.
1. Understand the Basics of Online Trading
Online trading refers to the act of buying and selling financial assets such as stocks, forex or cryptocurrencies via online trading platforms for the purpose of trading.
In general, when buying and selling stocks, new traders should generally get stocks at a low price and then sell them when the price is higher.
However, the stock market is unpredictable and losses can occur. In short, everyone should know this basic idea. Financial markets can change quickly as a result of economic news, interest rates, and geopolitical events.
New traders should want to make trades as soon as possible, but this is not how the market works. Trading is a process that requires learning and practice.
2. Choose a Reliable Online Trading Platform
The decision of which platform to use is perhaps the single most important one for a new trader.
Not only should your chosen brokers’ site offer reliable and intuitive interfaces for entry into markets and placing orders, it should also help you to learn through its e-tutorials or live classes.
VPTrade, for example, offers an experience that ticks a number of boxes: a low-fee, well-rounded environment, easy-to-use, and feature-rich; but with below-market minimum deposits and a very low bar to reconcile with in trading or learning styles via text chat, email, or phone support.
Not even a top-notch platform, though, can remove the inherent risks from trading. Be sure that any platform you choose has an open policy regarding its fees, the various risks it presents in its offerings, and the tools available to help you mitigate losses.
3. Start with a Demo Account for online trading
I cannot recommend highly enough that you start your trading career with a demo account. VPTrade’s demo accounts give you the feel of a live market without exposure to a real money win or loss. Test the waters in a safe space and make yourself familiar with the platform.
Demo trading might familiarize you with the mechanics of trading but not the emotional impulse that hits when a real money account is involved.
4. Create a Thoughtful Trading Plan
Developing a trading plan is the best way to overcome emotional decision-making, which will ultimately lead to losses and wasted time and money.
A good plan will have the following elements:
1) What returns are you seeking on your money?
2) What is your risk tolerance level? Stocks? Forex? Commodities?
3) What are specific criteria you will use to get in and out of a specific trade, particularly to avoid losses, such as stop-loss orders, which automatically close your trade when your set loss limit has occurred?
Studious traders abide by their plan religiously.
Those who deviate will make poor choices. A plan will not engender trades for you, but a plan can help incur losses.
5. Learn Both Technical and Fundamental Analysis
To do this, you have to know how to analyze the market – something that’s divided into technical analysis and fundamental analysis. The former uses price charts, indicators, and patterns to predict price movements.
The latter uses macroeconomic data, company earnings, and market news to determine if the price of an asset reflects its true value.
For example, mid-2023 oil prices rose in response to OPEC+ production cuts, as was reported in Reuters, and traders were able to see that fundamentals should capture it in their positions; but even accurate predictions aren’t guaranteed to be profitable, because unexpected news, such as a hurricane or a sudden interest rate change, can affect market conditions in a split second.
Both kinds of analysis involve a gamble, and no method can predict with certainty the direction of future markets.
What’s Happening in the Markets Right Now?
Global stock markets are unstable. Many traders are worried about inflation and higher interest rates. The benchmark S&P 500 had sharp swings in 2023, especially in technology and energy.
Shares of energy companies jumped after the price of oil rose on fears that there weren’t going to be enough refined products to meet demand. Yet oil prices dropped after data about how much inflation there was was released.
The greenback has been strong against most currencies in the forex market and this is the result of the monetary policy of the Federal Reserve, which is far tighter than for most other central banks, including the Bank of Japan, whose monetary policy is far more accommodating.
This means that opportunities do exist across the forex spectrum. But forex prices move frequently, and traders can incur losses if they are caught off-guard by a central bank decision, even professional traders who are supposedly inundated with the latest news and data.
For instance, while oil prices have surged on OPEC+ production cuts, they’ve also slumped on fears over global demand. The price of gold – usually a haven against the storms of financial disruption to investment markets – also tumbled as the rise in interest rates encouraged traders to hoard bonds instead.
Trading commodities is exceptionally lucrative, but these markets are also among the wildest, where volatility can drive sharp price movements that quickly turn into spectacular losses.
Despite the hype, the prices of cryptocurrencies such as Bitcoin and Ethereum continue to be volatile, with a significant impact on market behaviour following regulatory change and sentiment.
For example, in 2021, the price of Bitcoin hit close to $65 000, before a dramatic fall the following year.
This means that, for those who made it out of the market in time, it was a fast and easy way to make money, while other traders lost a significant amount of their trades when the bottom dropped out of the market.
In other words, trading on the digital dollar is extraordinarily risky.
6. Start Small and Manage Risk Effectively
You should start with a small trading capital and grow your trades from there. Inevitably, be prepared to experience losses from time to time. Beginner traders, in particular, often risk too much in their trades.
They rely too much on luck with their first few trades, which often leads to disastrous outcomes. You should use risk management techniques, such as position sizing and stop-loss orders, to minimise your losses.
Take the recent volatility of the cryptocurrency market: Bitcoin’s price skyrocketed in 2021 to a record high of $65,000, dropping to $30,000 in 2022. Traders who did not properly oversee risk could see enormous losses by overcommitting.
Risk management is about never risking anything you can’t afford to lose, and putting stop-loss orders (a tool that allows traders to exit their trades at a predetermined point) on the table at the beginning.
7. Stay Informed with Market News
These financial markets are always reacting to news of interest rate decisions, geopolitical events (eg, in Europe, the UK and the US), company earnings reports or other developments.
For example, in 2023, geopolitical tensions in Europe were very influential on global stock markets, and traders pulled out of risky assets into bonds. Keeping up with market news from credible sources such as Reuters will help you make good trading decisions.
8. Avoid Emotional Trading
When it comes to online trading, perhaps the most difficult skill to master is overcoming your emotions, particularly the fear (which can result in hanging on to a losing trade for too long) and greed (jumping in to a trade because of a feeling that the market is going to run, often triggered by a well-publicised earnings release).
Successful traders are always looking for opportunities that align with the plan and the data, not their feelings. Many traders – even the experienced ones – are unable to overcome the influence of their emotions.
Emotions are a constant battle and need to be addressed on a daily basis rather than once and for all.
9. Learn from Your Mistakes
That’s fine, because even the great ones lose money, and they’re mostly concerned with not repeating the same mistakes.
Maintaining a trading journal – a document where you chronicle every trade, your reasons for taking it, your profit or loss – serves to track your progress and where the wheels come off.
It can make you a better trader, though it won’t guarantee you will be profitable.
10. Why Trade with VPTrade?
VPTrade is also a useful place for beginner traders since it provides educational resources, demo accounts, and stop-loss orders that help traders manage their risks.
Low trading fees and 24-hour support contribute to a more accessible CFD trading experience.
While the VPTrade platform can help you become a profitable online trader, please note that it cannot eliminate risks entirely. VPTrade offers the necessary tools to limit your losses, but success in trading still depends on your strategies and discipline.
Best Trading Practices and Risks Involved
Diversify Your Portfolio:
One of the most important online trading best practices is diversification. If you place your capital into one asset class only, you run a very big risk, as losses in one area can easily result in you losing a large part of your capital.
Diversification can reduce risk, as losses in one area might be compensated by wins in another, so the overall exposure reduces.
Manage Expectations:
Although there are opportunities for profit, realistic expectations should be set: online trading is not an easy way to make some money on the side or even a full-time job.
As traders will surely face both winning and losing trades, they should prepare themselves for this fact.
When you put your money at stake, you should bear in mind that its unpredictable movement has one thing in common – it just moves.
Constant Learning:
For this reason, financial markets are full of traders who are continuously learning on the job. Market rules, regulations, and trading strategies can change overnight.
Educational materials, market news, and economic statistics need to be consulted regularly to stay on top of the latest developments.
Online trading is a great opportunity, though it comes with the corresponding risk. Every trader must manage this risk.
Create a trading plan, manage the risk, use a good trading platform (like VPTrade), and follow and understand the risky environment of the markets.
There’s no certainty in this world, and no magic tactic to make it safe.
Disclaimer:
The information presented herein have been prepared by VPTrade and does not intend to constitute Investment Advice. The Information herein is provided as a general marketing communication for information purposes only.
Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and education purposes. Personal Opinion of the Author does not represent and should not be construed as a statement, or an investment advice made by. Recipients of this information should not rely solely on it and should do their own research/analysis. Indiscriminate reliance on demonstrational or informational materials may lead to losses. Past performance and forecasts are not reliable indicators of the future results.
Therefore, VPTrade shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein.