What is Online Trading
Since the dawn of the internet age, many traditional industries and professions have been revolutionised through technology. Stocks and trading, a profession originally restricted only to those in the city, or through tedious phone lines and agents, is a fine example. By trading stocks and shares through the internet via a brokerage firm, online trading, you are given a degree of freedom and liberty not seen in the past to buy and sell securities at unprecedented speeds all over the world. You are in control of what happens in a much more direct sense, you are not subject to the delay and reliance on middle men compared to traditional trading. In short then, online trading is the process of buying and selling securities over the internet, a process which is arguably more efficient and open to all than such trading has been in the past.
What do you trade?
Online Trading refers to the trading of securities, but this may seem a little bit vague. Securities is a financial term referring to stocks, shares, but also government bonds and currency. Stocks and shares are equivalent to partial ownership of a company or firm, meaning their financial value goes up or down depending on the performance and public confidence in that firm. Organisations like the FTSE 100 in the UK or S and P 500 in the US act as a measure of an economy’s largest businesses, and can give a general feel of how the economy as a whole is performing. Government bonds are issued by sovereign financial bodies and are sold at a fixed, guaranteed rate of interest from the government. They are used to inject liquid capital into a country’s central government to use for investment and other spending. The value of government bonds changes based on public perception and confidence in the government in question and the economy it is responsible for managing, but importantly it is the overall value that changes – the interest rate is fixed. Currency is a financial asset and can be traded based on market exchange rates. The exchange rates are subject to huge fluctuation based on political events all over the world, but usually reflect trust in a country’s economy. For example, the value of the Great British Pound fell compared to other currencies after the United Kingdom voted to leave the European Union, as the uncertainty in the UK’s economy rose significantly. Online trading is all to do with trading financial assets all across the world, assets which have an ever changing market based value subject to going up and down.
How do you start trading?
Online trading is usually done through a brokerage firm, an organisation that facilities and secures transactions between buyers and sellers. Such firms have become more open for new investors since the rise of the internet age because of the way in which online trading platforms have developed. Such platforms usually consist of web based programmes through which an investor can make an account, link it to their bank account and freely buy and sell commodities. There is no shortage of such websites and user platforms, meaning you are free to compare and contrast to find the platform that suits you best. Platforms vary in terms of commission, and many investors have preferences over the user interface in terms of ease of operation and appearance. Of the copious sites out there, CMC Markets is an example of a brokerage firm which has developed an easily accessible online interface.