How to start online share trading: Beginner's guide 2021

How to start online share trading: Beginner's guide 2021

Nowadays, the number of traders grows with the advent of the booming popularity of online trading and the competition between the brokerage companies doing their best to offer better conditions than those of the peer company. Indeed, trading in the stock market is one of the most common (and also profitable) ways to invest, which can also lead to complete financial freedom. Since not everyone is aware of such thing as shares trading, and 90% of traders opt to focus on currencies, we feel that we need to provide an insight into the world of trading shares.

In this article, we will learn how to choose the best account and trading platform will talk about the criteria of choosing a reliable broker and much more.

 

What is online share trading?

Prior to moving to the details of online shares trading, let us start with the definition itself. By trading shares, a trader buys or sells the stocks of the company. For example, you buy shares of Apple before some important event and sell them after the price goes up. Your profit will equal the difference between these two prices. So, if you buy at $100 and sell at $150, you earn $50. Quite easy, isn't it?

What is more, today it's all done online within a few seconds - you click several buttons and that's it. No contracts, no calls to your personal broker, nothing. What you need is a laptop/smartphone and the desire to make money with the help of online shares trading.

 

Why trade shares online?

In fact, in order to trade real shares on the stock exchange, you have to own capital of tens of thousands of dollars, and if you buy shares, the exchange charges you a commission for adding you to the list of shareholders.

It does not only take money but also time, because of which you cannot earn on the exchange rate difference here and now. Also, to make money on exchange rate differences you need to own an asset, so on the stock exchange, as opposed to trading CFDs, you cannot sell what you do not own.

When trading CFDs, it is like you are trading air, so there is no time lag and there is no commission. CFD is a derivative asset, which is calculated on the basis of an underlying stock.

Trading shares online with the help of CFDs can be really beneficial for any investor. Here are some advantages of that:

  • Leverage

The principle behind selling CFDs is that you can trade them on margin, another name for leveraged trading. When you trade on margin, you only pay part of the initial payment; you are effectively borrowing the remaining capital from your broker. Leverage provides more exposure with a smaller deposit, making global markets more accessible.

  • Speculation

People trade CFDs to profit from price movements in the short term. It is often referred to as "swing trading" and is done in both bullish and bearish markets. You don't need extensive research or in-depth market analysis to trade with CFDs. The trick is that it is sometimes very difficult to pinpoint the exact date or time when the price correction will end.

  • Hedging

CFDs offer an excellent insurance option to hedge your existing portfolio because you can place short positions while speculating on a downtrend. Let's say you have a portfolio of blue chips. You want them to hold for the long term, but you feel the market is ready to show a shortfall, and you're worried about how that will affect the value of your portfolio. In a leveraged trade, you can short this market to hedge. If the market goes down - your losses in your portfolio can be offset by gains from your short hedging with CFDs. If the market goes up, you will lose from your hedge, but gain from your portfolio.

  • Short positions

You can benefit from a falling market. If you open a short trade when the value of a position falls sharply, you can benefit from the falling price.

 

How to do online share trading

In order to participate in trading on the stock market, it is necessary to have, as a minimum, basic knowledge of economics and exchange operations, in addition to having some spare money to invest. At the first stage, you have to learn some fundamentals from the special literature - there is no way to skip this moment; at the second stage, you have to choose a brokerage firm and open an account there. And only at the third stage, having accumulated some particular experience of victories and defeats, the luggage of knowledge, and a sufficient amount of free money, you can finally start trading shares on your own.

 

1. How to choose the best online share trading account

As a share trading account is that very thing enabling you to perform any actions on the stock market, either sell or buy shares of famous companies, the choice of the account should be of high priority. Taking into account that brokers offer a wide range of different accounts with various conditions, a trader needs to figure out what he is looking for. only in such a way it is possible to pick the best account for trading shares.

For instance, AdroFx offers its clients four types of accounts (not mentioning the Non-Swap one) thoroughly tailored to meet all possible needs and preferences. One can choose from the following accounts: Micro, Standard, Premium, and Pro. And we are talking about trading shares, stocks are available for trading on Premium and Pro accounts. Click here to find out more.

 

2. How to choose the best online share trading platforms

How to choose the best online share trading platforms

An online shares trading platform, or trading terminal, is nothing more than software that allows you to be interactively present in the exchange market and to make various trades on it. Of course, the high functionality of a trading platform is very important but sometimes you can find programs that have less functionality but are more adjusted to certain trading conditions. For example, there is a popular program MetaTrader (MT4 and MT5), and a lot of its modifications from different companies, among them MetaTrader Gain and IFX Trader, optimized for certain conditions of shares trading. This platform remains highly efficient even today and is very important for brokerage companies - on a moderately powerful computer it can serve over 10,000 traders at a time!

MetaTrader 4 includes an advanced security system, mobile and automated trading, tremendous analytical functionality, the flexibility of settings, and programming capabilities.

 

3. Online share trading basics: Choosing a strategy

The chosen strategy will determine the way of standard online share trading: for a conservative investor, it is the choice of the most profitable shares with the highest dividends, the strategy of trading on the exchange for scalpers - trading of highly volatile assets, for classical investors who consider Warren Buffett their idol - is the purchase of undervalued, promising shares, with long-term goals and reinvestment of profits.

Someone, in addition to fundamental analysis, can focus on technical levels of moving averages (MA) with periods of 200 and 50, which show how overvalued the stock is or vice versa, and other tools of graphic analysis.

The main guiding line in the choice of the strategy is the size of initial capital, professional knowledge, free time, and temperament.

Only by taking into account these parameters, you will be able to choose the best trading strategy. Trading shares is an individual thing, that is why using the same strategy by different traders rarely gives the same result. Here we have prepared several basic strategies for you to get acquainted with. If you are absolutely new to trading shares, make sure to test all of them on the demo account and adjust if needed to suit you perfectly.

 

3.1. Day Trading Strategies

Day trading implies trading shares during the day. In this case, all positions are closed during the day, occasionally can be carried over to the next day. Day trading is characterized by increased risks and profitability in comparison with long-term trading, and a large number of trades. Day traders pay much attention to technical analysis and much less to fundamental analysis. This type of trading suits traders who are fast-acting and can instantly react to the received information (news, statistics, market situation) and make decisions without delay.

 

3.2. Swing Trading Strategies

Swing trading is a method of trading using the moments of a pullback (correction) that occur during the formation of a trend. Swing trading is not a strategy, but rather a way of trading. It is based on following the trend on a medium-term range (daily, maximum weekly time frame). Trades may have a duration of several hours or several days. They are opened only if there is a clear trend. A sluggish market and periods of strong volatility are better to be ignored.

Using swing trading gives traders a relatively safe income with little effort. Working on the trend without using complicated patterns or strategies, as well as the short duration of trades helps in achieving success. On top of that, swing trading has a flexible system of analysis, which helps you to adapt your trading to your preferences as much as possible. However, it is worth mentioning that this trading method is not suitable for every beginner - only experience and understanding of the situation will help you set up your trading according to this approach.

 

3.3. Position Trading Strategies

Position trading is trend-following on a long-term basis, on charts covering large time scales. Usually, traders make use of both fundamental and technical analysis planning to hold the position for a long time. Position trading is suitable for all types of markets: stocks, commodities, and forex.

It is an independent style that differs much from others. Market participants can use this approach to hold short-term and long-term positions. Here are its advantages:

  • Does not take into account small price changes, which means it does not require constant monitoring of the situation;
  • There is no need to be near a computer all the time. The most important thing in positioning strategy is a deep and thorough analysis, on the basis of which a further decision is made;
  • An open position simply needs to be monitored if there is a situation that could change position or price.

 

3.4. Investing Strategies

Investing Strategies

An investing strategy allows traders to hold positions for a long time. Market participants in this case do not pay attention to tiny price fluctuations, because they believe that all their expectations will pay off later when the price increases significantly. Investing strategies are divided into short-term (up to one year), medium-term (from one to three years), and long-term (over three years). It should be noted that the use of fundamental analysis plays a major role in this case since traders should know what is the current situation is and what is happening in the company.

 

4. How to choose the best online share trading site

Choosing the most reliable and the best shares trading website can be confidently called one of the most important conditions for future comfortable and successful work in the stock market for any trader. At the same time, finding the best company with appropriate trading conditions among hundreds of offers can be quite difficult even for professional traders, let alone for beginners. Understanding explicit and implicit commissions, knowing the availability of necessary trading instruments, to analyze the trading accounts offered are just some of the tasks that have to be solved when choosing the company for shares trading. Let us have a look at some factors to pay attention to.

Trading conditions

Basically, every trader knows for himself which trading conditions suit him and which do not, so there is no point in recommending anything in this regard. Nevertheless, let us briefly analyze the main points of trading conditions, offered by CFD brokers. Minimum deposit. If you can not afford to invest a tidy sum in trading, then you must pay attention to this type of restriction. Most often limits on the deposit size are set on ECN/STP accounts. On cent accounts, there are no limits and you can start trading from $1 - $10. Trading accounts. Be sure to check the availability of the type of trading account you need, because not all companies offer, for example, trading shares on all types of accounts. Also, if you need to, make sure that you can trade without swaps. At some brokers, to connect this service, it is necessary to apply to the support service. In addition, not every company allows opening a trading account with a currency other than USD or EUR. If it is important for you, do not forget to specify this question.

Trading instruments. Since we are talking about shares trading, then ask whether the list of instruments includes the companies you need. The most famous companies are available at every broker, but not all of them offer some "ordinary" companies' stocks (e.g. Oracle).

A limit on the volume of the order(s). For instance, the minimum order volume might be 0.1 lot instead of 0.01. Also, restrictions are often imposed on: the maximum order volume; the maximum total volume of orders opened at one stock; the maximum total volume of all open orders; the maximum number of open/pending orders at one stock; the maximum number of all open/pending orders. If these limits are critical to your trading strategy, then be sure to check with your broker for details. Spread/trading commission. Many companies have floating spreads, ranging in size from 0 pips, so judge the company by the average (typical) spread size, if this information is available. As for the trading commission, it can be specified in different ways: the commission for opening an order. You will have to pay the same amount for its closing; commission for a full round - for opening and closing an order; commission per $1 million of trading turnover; commission in % per contract. It complicates the comparison of brokers by this parameter to some extent. Generally speaking, you can't do without a calculator. Also, note that some companies may have accounts with the trading commission and spread at the same time. Leverage. Its size can be floating and depends on the balance of your trading account. A bigger deposit means smaller leverage. Remember, leverage only affects the amount of deposit to open an order, and not anything else. That is why high leverage is useful only for those traders, who trade very aggressively, on the edge of margin call, when the practically whole deposit is invested into opening positions. Stop Out Level. Its value, as well as high leverage, is important only for aggressive trading. If you are going to trade like that, then it is important to keep the stop-out level as low as possible.

Deposit/withdrawal methods. Popular methods of funds transfer such as bank transfer, electronic payment systems like Neteller or Skrill are available at the majority of standard online share trading brokers. But if you need, for example, mobile payments, then you will have to look for companies that support transfers of this type. The same applies to the possibility of internal funds transfers between the accounts of a broker's clients.

Whatever way you deposit your trading account, be sure to consider the fact that you will have to withdraw funds by the same payment system. The reason for that is the fight against fraud and money laundering. If you want to withdraw your profit in different ways, you will have to fund your account by these methods first. Pay attention to the number of transfer fees. They vary from broker to broker. Most companies do not charge any additional commission for deposit/withdrawal; you will pay only the payment system's commission. Some brokers make adjustments for their customers and compensate them for the transfer fee. In other words, if you transfer $1000, you will get exactly $1000 in your account. Also, note the restrictions on the amount of the transfer. Not all brokers or any other way can deposit $1. Or $1000 in one payment.

All in all, to determine the perfect broker, the most important thing is to try out the broker in practice. If you, having used the advice from this article, have chosen a company, then open a real trading account with it for a small amount. First a cent account, later a standard one. Only this way you will know for sure, whether there are no slippages and requotes, whether all the trades are executed as they should be and whether there are problems with the withdrawal of the profit. Do not be afraid to spend a few months testing your broker. This short period is not comparable to the years you are going to devote to trading. After all, you have plans to trade your whole life, don't you?

 

Online share trading for beginners: Placing a trade

Now, after the site for trading shares is chosen and you are all set to get started, it is the perfect time for you to open your very first trade on the online trading terminal. No worries, it just sounds complicated. In fact, it is extremely easy, especially given that most trading terminals are extremely intuitive. Anyway, let us have a look at the example of placing an order online. In such a way we will make sure we are on the same page and you are 100% prepared to start your journey into the world of standard online share trading.

The first thing we need to do is to run the MetaTrader 4 trading terminal and log in to the AdroFx account. Now we go to the top left corner and click on the Market Watch (or just use the Ctrl+M on the keyboard). Here we get the list of all the instruments we can trade with this broker, now we scroll lower to the shares (they are located right after the currencies).

Here comes the interesting part - we need to decide what shares we are going to trade and some more important aspects. Let's start one by one.

Firstly, we need to determine which company is the best option to make use of right now, and technical and fundamental analysis are here to help. Let's say we know that Tesla is about to open a new factory in China and that will boost the price of the shares. So, we will place a long position on TSLA. The logic behind it is simple and everything makes sense.

The next thing to consider is the amount of money we want to invest in this particular trade. Remember that CFDs allow you to use leverage, so we need to check the contact details on the broker`s website. Let's say the invested amount was 1000 and the leverage was 20. It means that the trade will be executed as if the money was 20 times more. In this particular case, it would be 20,000.

Also, we should not forget that we can set the automatic close of the trade with the help of Stop-Loss and Take-Profit, which will close the position once the price reaches the predetermined level. Of course, it is not mandatory, but still highly recommended. It will help you not to lose too much money if the market goes in another direction and, at the same time, it will secure your profit at the set price until it reverses.

Since the standard online share trading is all about deciding whether the price will rise or fall at the time the trade expires, we will need to press either the BUY or SELL button. If we click the green button, we expect the price to go up. When we choose the red button, we expect prices to fall. As in our example about Tesla, we expect the price of shares to soar, so we choose the trading volume and click Buy By Market.

The trade is open, but we can still make some changes. We can adjust the Take-Profit and Stop-Loss levels. Moreover, we can simply close the position manually instead of waiting until it reaches a predefined level. It is better to use this method when the situation is clearly developing against the trader and large losses are expected if it remains open.

 

Online share trading tips: Pending orders

One of the beginners` mistakes is that they had no idea that, along with market orders, there are pending orders. Pending orders are so-called because they are not executed immediately, but some time later, when the price reaches a predetermined level.

Let us consider the setting of pending orders on the example of the popular trading platform Meta Trader. To begin with, right-click on a chart of the financial instrument on which you would like to place an order. Then select Trading and New Order from the dropdown menu.

Next, in the window that appears, set all required parameters, such as:

  • The volume of the opened position;
  • Level of Stop-Loss;
  • Level of Take-Profit.

After that, in the line Type, select Pending Order. Below parameters of the pending order in which it is necessary to establish will open:

  • Type of the pending order;
  • At price. Once the price reaches the point set here, the order will open automatically;
  • Expiry. It is that time after which the pending order will cease to be actual and will self-liquidate.

 

Why start online share trading with AdroFx?

 Why start online share trading with AdroFx?

Summarizing everything, we have discussed and learned above, we can assume that AdroFx is the best option for anyone willing to start trading shares online, most importantly, for beginners. With the impressive lineup of trading instruments (including Boeing, Chevron, American Express, and much more), it becomes easier not to miss trading opportunities and get the most out of standard online share trading. Moreover, we must mention our market analysis section with daily fundamental analysis and blog with various informational and educational articles. Now you get the best shares trading experience you have ever had.

If you still (for some reason) have some doubts or questions, open a demo account and test us out!

 

About AdroFx

 

Being founded by experts with a couple of decades of the overall experience, AdroFx is one of the best platforms on the market for shares trading. Either a newbie or experienced trader, both will find here what they are looking for since the company provides various trading accounts for different trading styles. Apart from shares, you can enjoy trading currencies, indices, precious metals, and cryptocurrencies. Sign up right now and start benefiting from the online shares trading with us!