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Online trading: understanding the business from all the angles

 “My own business? From home? Good profits? Yes! I accept!” Wait! Do not jump to conclusions; let’s understand this online trading era.

Along with the online trading era and its recent changes, traders have been given the right to make all their decisions by themselves, and this is such a great thing considering the independency it provides in a society ruled by technology.

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Hands in action for online trading…

Independency on your own business decisions as an online trader differs from using a stockbroker, as what generally happens. A broker usually provides input and advice, and this is not a bad thing at all, but there is nothing like the freedom of choice and the comfort it results in on a great decision taken; besides, some brokers in ABN AMRO have a biased opinion.

Regardless of the way anyone decides to trade, something must be clearly said: risk is always present, and that is why the rules of the game have to be clear. Knowing the advantages and disadvantages of trading is essential to make better decisions and get better profits; that is a fact.

It has been seen that online trading has come to significant growth in recent years, and it seems not to stop in its increasing popularity. Numbers say that over 14 million households in the U.S. have signed up online trading service, according to highly respected statistics companies. At a significant amount, then, it is crucial to where we are standing on, either on positive or negative aspects.

First things first, online trading can be very positive…

On the one hand, some of the positive aspects can be that online trading represents lower fees in general, and this is one clear advantage. The traditional brick-and-mortar brokerage firms that generate high fees in business and finances reduce a lot in transaction costs and high fees associated with them.

Also, with the structure of the online trading every user has a lot more control and flexibility in the business, the speed that online trading portals provide is a benefit to many investors, a trade can be executed almost immediately. Opposite to what traditional brick-and-mortar brokers mean over online, phone, or personal appointments to initiate a trade.

As said before, and without any negative connotation per se, brokerage bias is also possible in traditional trading; with the online concept, this is not necessary. Prejudice happens when a broker provides financial advice that benefits the broker, and this is logical; after all, it is business. Such a thing is eliminated with totally independent online trading.

Another good thing about online trading is that there is the accessibility to a universe of online tools. When we are trading online, it is easy to see that a lower cost doesn’t necessarily mean a shoddy product. Then the tools to make decisions over such a thing are very helpful. Very respected online trading companies can offer customers an impressive suite of tools so they can have valuable information and optimize their trades better.

Last but not least, on the functional aspects of online trading is the possibility to monitor all of that in real-time. With the technology of today, many online trading sites offer stock quotes and trade information; with all of the elements existing, it easy for people to see the performance of their investments in real-time.

…not all that glitters is profits!

Another harmful and hazardous thing that some people do not see is that in online trading and without a complete vision of the performance of the market,
it is very easy to invest too much too fast, this is because online trading is so easy, practically everything is one click away, so if we do not look back for a
second, at that same second, we could end up overinvesting or making poor investment choices.

On the other hand, it is also imperative to know all the possible disadvantages of the online trading business; this is first to be clear on what could happen to your investments at any extent, and also to be ready to face any situation and make the best results possible.

We have all heard about the risks from the worldwide economy business, and that is what we are doing, as there are many points in the economy when inflections may be harmful (or positive at times) for traders and investors. Take the case of the very relevant example of ABN AMRO that is running on some problems now that can, of course, affect the people investing in its platforms.

Another harmful and hazardous thing that some people do not see is that in online trading and without a complete vision of the performance of the market, it is very easy to invest too much too fast, this is because online trading is so easy, practically everything is one click away, so if we do not look back for a second, at that same second, we could end up overinvesting or making poor investment choices.

Also, and as another negative point, there is a very distant or even no existing relationship with brokers. Even when before there was an element of a biased perception in their suggestions, brokers are there also as a great deal of help. Traders are generally pretty much left to their own devices, from getting advice on how to make investment strategies to literally understanding what the effect of the results of feedback mechanisms in their market is. Of course, it all depends on how anyone feels about this kind of autonomy. If anything, the advice of experts is that it is vital to research, particularly in the case of new traders. It is essential to learn as much as possible about the companies in which investment is being made.

This, as delicate as it may seem, is a very well-conducted study from the journal Addictive Behaviors. There is a substantial similarity between the feeling of people gambling and the people trading, of course, talking about excessive trading. This financial activity has to be seen like that, and when the coloring goes out the line, then we have to step aside, think, and get back on track.

Another minor but yet necessary to mention elements noticed at a disadvantage side is the fact that we become dependent on the internet connection. When it is not reliable, then problems may start. Also, errors of clicking twice or assuming over the completion of transactions even when there is no confirmation message at sight has cost significant investment to some traders. 

At the end of the day, we can all say that online trading is a business (as any other) with highs and lows, and it all depends on how well we are taking it can be very profitable for its investors. Trying online trading will, for sure, be an excellent thing for those wanting to have some independence in the system.

Step 3: Trading plan

Online Trading: How to make a good profit with just 160 Euro

Start trading now to receive a 20 pounds welcome bonus!

Starting with online trading is much easier than you think. In this article we will explain to you how we trade and how we made a profit of 422 euro with only a small deposit of 160 euro.

 

Why online trading?

Trading used to be only for banks and big companies. Now, with the internet, it is possible for anyone with an internet connection to trade. This means you can not only trade from home, but from wherever you are and whenever you want. Besides this awesome fact, you can also trade with leverage. Leverage? Yes, with a leverage of 1:20 you can trade in stocks (CFD’s) 20 times more worth than your deposit. The advantage of this is that you can receive a very high profit with a small deposit.

For example:

Let’s say you have 100 pound and the leverage is 1:20, with only 100 pound you can open a position worth of 2.000 pound (100 * 20).

You can see with only a small deposit, you can make a big profit. This is perfect, because even if you don’t have a lot of money, you can make good money with online trading.

 

So how can you start online trading?

First of all, sign up to an online broker. Compare the best online brokers here and receive a 20 pound bonus to practice with. There are no obligations when you sign up, so go ahead and try it out. Find out how to receive more bonus here.

In our previous blog “Smart online trading in stock CTRIP: 1019 profit”, we have explained one of our trading strategies:

Guide-to-profit

  1. Find a reason to trade
  2. Open and close a position
  3. Evaluate your trade

Now how can you start doing exactly this? What sources do you use? This article explains just that. We will also use a real example of one of our own trades. Now you can follow these quick steps to begin to trade right away. The steps below follow the strategy that we learned before, but this time we put it in action! You can even use these steps below as a checklist for your own trading.

 

Step 1. Choosing the stock

First of all find a good earnings announcement calendar like the one from Yahoo:

  • Review which stocks have an earnings report coming out today.
  • Pay attention and only choose the ones that are available in your online broker stocklist.
  • Only choose stocks that have a time supplied. Write this down.
  • Find out what the leverage is, the higher, the better.
  • Find out about the company.

A real example:

On the 10th of June, 2015 we looked at the earnings calendar and we found Box Inc (NYSE: BOX). First thing we did was:

  • Find out if this stock was on Plus500, it is. Now let’s check the leverage: 1:20. Great!
  • The time of release is after market close. Love it! We tend to like these stocks more, because during after- and pre-market, you usually can predict what direction the stock is going. So at market open, we would be more prepared.
  • Now a little Google search helped us learn about this company, it is a technology company much like Dropbox. They use the cloud to give people the chance to back up or share their files online, so it can be accessed anywhere. This sounds good! Let’s move on.

 

Step 2. Should I open a long or short position?

After learning about the company, follow this checklist:

  • Find out whether the announcement will be good or bad. It doesn’t matter which direction it goes, because either way, you can profit. You should already know that the movement of a stock is almost always volatile whenever an earnings announcement gets released. To be sure, you could check the volume of the stock on Yahoo Finance, for example here.
  • StockTwits: one way to find out whether the earnings announcement will be good or bad is by reading what other people say about this stock. We tend to read StockTwits for this. For BOX the link is: //stocktwits.com/symbol/BOX.
    You can insert your own stock in the search field and then view what other people think about this stock. You can even see whether or not they think it is going up (bullish) or down (bearish). If you see a lot of bullish, it most likely will be bullish.

As for BOX, we could see it go up, not only because of what we read online, but also looking at the past quarterly earnings numbers. Where do we find these numbers? At the website of the company itself. All companies where you can invest in has an investors page. BOX’s investors page can be found at: //www.boxinvestorrelations.com/. Also, Google is your king.

 

Step 3. Open the position at the right timing

All this together has decided it for us. We think BOX will go up. Next we did the following:

  • Open a position not too early: we opened a buy position on BOX just before the news came out. As noted before, this is just before market close. Don’t open the position too early, because the normal daily volatility could give you a disadvantage.
  • Money deposit: also, we only deposit money that we want to use: 160 euro. Not more and not less, because this will help us not lose more than we want to. This is important! Only use money that you can afford to lose.

Now we wait.

 

Step 4. Closing the position

News is out! The market is still closed though. All we can do is check the stock price (the aftermarket/premarket one) constantly, you can use the NASDAQ after hours website for this. Yahoo Finance also provides this information. It is in the small font just under the open market price.

So what now? Be sure to be ready when the news comes out, the stock will now go up or down very fast. Our stock BOX moved up, we could already see the numbers in the aftermarket. The next day just before market open, check the numbers again. You will see at what price the stock will open. At this point we already knew that we had a win. The next thing to do is preparing ourselves to close the position as soon as possible. At market open, at the first possible opportunity we closed the position, grabbing our profit of 422 euro. Amazing!

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Remember this: don’t ever be greedy. Unless you know how to use a stop loss, you can wait before closing the position. More about stop loss strategies will come later.

 

Step 5. Withdraw your money unless you want to use it for a future trade again

Don’t let your money sit on your account. Withdraw it, use it, enjoy it! Online Trading isn’t all work, it should be fun too.

Now don’t forget to evaluate your online trading today, you can always learn from it for future trades.

Got questions? Feel free to ask them below.