Different Types of Online Trading

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Once upon a time only rich people owned stocks. The only way to trade on the stock markets was to have a personal broker. But now thanks to the internet, anyone can use an online broker to get involved in the markets.

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There are many different ways to trade online, so read this rundown to decide which one is suitable for you.

 

Day Trading

As the name suggests, day trading is a short term strategy where you buy and sell securities on the same day. It is one of the most common forms of trading that used to be available only to professional traders. Now non-professional traders can use the technology provided by online brokers to day trade. (You can compare respected brokers on our Broker Listing page.)

The advantage of day trading is that you can make big profits in a short amount of time. It’s a good way for a novice trader to see the results of their decisions quickly. Of course, the disadvantage is that you can make big losses fast too!

 

Swing Trading

Swing trading is another short-term trading strategy, that is based on the swings or price fluctuations in the market, usually overnight. The trader tries to accurately predict when these highs and lows will happen and open a position to take advantage. Trades are usually held more than a day to maximise the gains made when a trend gains momentum.

Swing trading requires research and accurate data, and it can be a lucrative way to benefit from volatility.

 

Position Trading

This is a medium-term trading strategy that ignores minor price fluctuations and focusses on large price movements of the stock over weeks or even months. The trader researches market trends in order to predict future changes in the market.

Accurate data is essential in order to make predictions about when trends start to gather momentum.

 

Long-Term Trading

As the name suggests, this involves holding a position for months or even years. It uses fundamental analysis of company financials rather than technical analysis.

Short-term price fluctuations do not influence investment decision in long-term trading; instead, it’s all about the fundamentals as traders make a long-term assessment of the stock’s prospects.

Long-term, traders or investors are looking for company growth as well as dividend payments.

 

Online CFD Trading

CFD’s, or Contracts for Difference products, are different from the other types of trading discussed above, because the trader doesn’t actually own the stock. Instead they speculate on the price movements – like making a bet on whether it is going to rise or fall in value.

The returns from CFD’s can be high, because you an use leverage to increase the size of your stake, but it is also high risk, and around 73% of people who trade in CFD’s lose their money.

 

Whichever of these trading styles you adopt, you will need an online broker. You can compare respected brokers on our Broker Listing page.

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