Note:

TRADING IS A ZERO-SUM GAME. IT IS A MUST THAT THERE SHOULD ALWAYS BE A BUYER AND A SELLER.

What is Online Trading and how exactly does it work? What things do beginners have to keep in mind in order to increase their money in the long run and not lose it? – In this Learning Guide for Online Trading 2019, we will show you the step by step process on how the stock exchange  works. With more than 6 years of experience in the financial markets, more than 300 published Youtube videos of the channel “Trading for Beginners”, we will prepare you for your first investment.

Which market are available to trade?

There are countless of different assets that are for free trading on the world’s stock exchanges. In the following, we would like to give you an overview of the possibilities available for online trading. Different assets have different prerequisites, which is why you should find out more about the market before you trade them.

Many traders specialize in certain markets to improve their earnings. From our trading experience, it is always better to focus on one market segment because you can combine your power and knowledge. Of course, every trader has his choice open and every trader has his own preferences.

The best-known assets to trade:

  • Forex (currencies): FX trading (Wikipedia) is very popular with beginners. Currencies are exchanged against each other and represent an exchange rate. The trader can invest in one currency and sell the other at the same time and exchange the currencies back at the end of the trade. The difference in the exchange rate or the value of the currencies remains as profit. The advantage here is that they are the most liquid markets in the world and one can act with small capital and high leverage. Read more about this under “Forex”.
  • Shares (securities): With shares, you can participate in a wide variety of companies. Profits can be realized through price differences or dividends of the company. These markets particularly like to react to company and economic data. With various financial products, leverage can also be used or a short sale (speculation on falling prices) can be carried out. Read more about this under “Shares”.
  • ETFs: An ETF can be seen as a basket of several stocks or other assets. They are automated managed funds. They can be traded on public markets. Thus, it is possible for the trader to invest in a large market segment with only one investment. Read more about this under “ETF”.
  • Commodities: Almost all commodities are traded on the stock exchanges. Benefit from rising or falling commodity prices. Popular markets are: Oil, coffee, soybeans, etc.
  • Metals: Gold, for example, is a safe investment for many investors. With trading and the right financial product, you can invest in the gold price, for example, with just a few clicks. Silver, platinum, etc. are also very popular with traders.
  • Government bonds: Another very large market is government bonds. Conservative investors buy them to get a certain interest rate. The price of government bonds is also determined by the stock market and you can benefit from rising and falling prices.
  • Cryptocurrencies: Digital currencies are a new market for global investors. The market is characterized by extremely high volatility (fluctuation). High profits or losses can be made here. This new market is developing rapidly and new crypto currencies are coming onto the market every day. Read more about it under “Cryptocurrencies”.
Risk Warning:

TRADING IN FINANCIAL PRODUCTS IS RISKY. THE HIGHER THE RISK, THE HIGHER THE POTENTIAL PROFIT AND LOSS. YOU CAN’T EARN MONEY ON THE STOCK EXCHANGE WITHOUT RISK.

The advantages and disadvantages of trading:

In the following table, we have summarized the advantages and disadvantages. If you want to start trading, you have to decide for yourself. It is an easy and uncomplicated way to earn money, but you need a lot of practice and professional knowledge. It is very risky and at the same time the chances are very big to make money.

Advantages:Disadvantages:
It is possible to earn money with the computer.You need good and effective knowledge, otherwise you lose.
You have no physical effort.You compete against traders in the market who earn millions and have as well a very strong capital.
Unlimited profits are possible.You may lose your invested capital.

How does the price arise on the stock exchange?

Knowledge of the stock market is very important in the investment sector. You should definitely know how the price on the stock market is composed for any asset. This can be used, for example, to derive various trading strategies. In the following picture, we will explain the order book and the pricing building of the markets.

Orderbook EUR/USD Forex

The price is determined by so-called “limit orders” and “market orders” in the order book. The limit orders are placed on the selling prices (Ask) and on the buying prices (Bid). These orders describe that other traders want to buy or sell at a certain price. Only limit orders would not move the market. Limit orders are “placed” in the market and are waiting to be executed. This is done through a market order. A market order is placed manually by the trader through a buy or sell.

This allows you to directly serve the limit orders on the ask or bid. If there are no more limit orders on the ask or bid and further market orders are added, the price must change because supply and demand must match each other.

Note:

THERE MUST ALWAYS BE A BUYER AND A SELLER AT THE STOCK EXCHANGE. OTHERWISE, THE BUSINESS WON’T WORK. IF A PARTY IS MISSING, A NEW PRICE MUST BE FOUND.

Which financial products should you start trading with?

In addition to the various markets and assets, there are also various financial instruments that can be used. These differ in the possibilities and the risk. The operation is also different. In the following section, we will give you an overview of the different financial instruments offered by most brokers:

  • Forex (ECN): As a trader, you have direct access to the interbank market via a broker. Your order will be placed by various liquidity providers or other traders. High leverage is possible and the fees are very low. There is a lot of confusion because Forex (currencies) can also be traded via CFD (difference contract), options or futures (forward contract). Trade on rising and falling prices.
  • CFD (Contracts for Difference): This is off-exchange trading with the broker. The broker can hedge if necessary. The difference contract can be mapped to all markets. You do not trade the market directly but only the contract. The asset forms the basis of the contract. Here a lever can be used and trading is possible with small as well as large capital. Trade on rising and falling prices.
  • Future contracts (for experienced traders): Transparent trading on the public exchange. You can view the orders transparently via software. High leverage is also used here and the required capital is very high. Not necessarily suitable for a beginner. Forward contracts are used by the economy to secure a certain price in the past for anything. At the expiration of the futures contract, this thing must be delivered or bought. Trade on rising and falling rates.
  • Options (for experienced traders): They are another complex financial instrument. The trader secures the right to buy or sell an option at a certain price. The option does not have to be exercised. It is important to read several books about this financial instrument.

Summary:

Forex and CFD trading is best suited for most beginners and advanced traders because the financial instruments are not too complex. It is very easy to invest in rising or falling markets in just a few clicks. Leverage can be used and the fees are very low.

Which Trading Software & Broker is the best?

On the Internet, there are far too many offers from brokers and software manufacturers for the trading sector. From our experience, the offer is already too large, so that it is very difficult for a beginner to choose the best software and the best broker. In more than 6 years of experience with different brokers, we have tested many providers and published many reviews on this page.

The broker usually also provides the software (trading platform). Most of the time even several different trading platforms are offered. There are also apps for the smartphone to start mobile trading. This means that trading does not always have to take place statically in front of the PC, but you can check and change the portfolio at any time with Internet access.

In the following section, we would like to introduce you to our test winners. You will also learn which criteria you should pay attention to when selecting your broker.

Criteria for a good broker:

  • Regulation and licensing by a public financial supervisory authority
  • Free demo account (virtual money)
  • Low minimum deposit
  • Stable trading platform and fast execution
  • Favourable and transparent fee model
  • Fast support for customers

Use demo account (virtual money) as a beginner

A demo account is an account with virtual credit. It is “play money” which simulates real trading. Beginners can try out the broker and also test different strategies. In general, we recommend every beginner to practice with the demo account until you feel safe to invest real money. The demo account is one of the most important tools for a prospective profitable trader. Nowadays, you can create this trial account for free at any broker. For starting with real money the minimum deposits are very low from our experience.

Online Trading Broker selection and recommendations

In the table below, you can see our current top online brokers, all of which have been tested with real money. These providers are the best in their field worldwide and stand out due to strong features in contrast to their competitors. Further comparisons can also be found under “Forex Brokers” and “CFD Brokers”. Create a free demo account and start your trading trip:

Broker:Review:Spreads:Advantages:Open Account:
1. BDSwiss
5 out of 5 stars (5 / 5)
Read the review
Starting 0.3 pips+ Individual offers
+ Trading signals
+ Personal service

2. Tickmill
5 out of 5 stars (5 / 5)
Read the review
Starting 1.0 pips+ Options
+ Best platform
+ 24/7 support

3. Vantage FX
5 out of 5 stars (5 / 5)
Read the review
Starting 0.0 pips + 2$ commission per 1 lot+ Good conditions
+ ECN Broker
+ Personal service

Order execution: How does Online Trading work?

Today’s trading platforms are designed very clearly and you can buy or sell a certain value on the stock exchange with just a few clicks. In the following picture, we will explain step by step how an order execution works. The order can vary according to the preferences of the trader.

Order execution in the Online Trading Platform MetaTrader 5

  1. Select any market. An analysis should be carried out beforehand so that you have a suitable plan for your investment.
  2. The volume describes the size of the traded position. This can have different characteristics depending on the market. For this purpose, the broker provides information on the position sizes.
  3. Stop Loss: This is an automatic loss limit. Set the price at which you absolutely want to end the position in the loss. The stop loss can also be set at will after the trade has been opened.
  4. Take Profit: Similar to stop loss, Take profit is also an automatic limit. This time, however, it works the other way round in the case of a win. Take profit automatically.
  5. The order type describes the market execution. As mentioned before, there are market orders and limit orders. Adapt the type of order to your strategy.
  6. Buy or sell the market with a click.

Types of orders for trading

Traders can use different order types for online trading. Depending on the strategy, one of these types is selected. Invest in rising or falling prices. The following points will give you an overview:

Buy:

  • Market Buy: Direct purchase at market price
  • Buy Limit: Wait for the market to trade a certain price (below current price)
  • Buy Stop: Wait until the market trades a certain price (above current price)

Sell:

  • Market Sell: Direct sale at market price
  • Sell Limit: Wait until the market trades a certain price (above current price)
  • Sell Stop: Wait until the market trades a certain price (below current price)

What trading fees can I expect in Online Trading?

In trading, there are different fees and cost models for the client of a broker. In summary, it can be said that fees have become extremely low due to the digital age. Nevertheless, you should look for a cheap broker, because the fees can be very high on the year.

  • Account maintenance fees: Very few brokers still charge an account maintenance fee. In my experience, an account maintenance fee can occur after a longer period of inactivity.
  • Spread: This is the difference between the bid price and the ask price. This may vary depending on the market situation or may be imposed by the broker. You will always see it transparent in the trading platform.
  • Commission: A fixed trading fee for opening and closing a position.
  • Swap (interest): Often a trader trades in leveraged derivatives. The leverage must be financed, only a small margin is necessary. Therefore, interest can accrue overnight

How to earn money with trading: Fast profits or not?

Many beginners want to make fast money with trading. Is that even possible or not? – Trading on the stock exchange always involves a risk. Without risk, you will not earn money. In most cases, the higher the risk, the greater the profit. Unlimited profits are possible. So you can get rich by trading on the stock exchange.

Leverage explained:

Most financial products are backed by leverage. In many cases, even leverage is necessary to earn money effectively. You can trade more money on the stock market than you actually own. It is, so to speak, a loan that the broker grants you. All you have to do is deposit a margin with the broker. This is called margin trading.

The leverage multiplies your position. With a security line of, for example, 1000$, you can trade exactly 100,000$ on the stock exchange with a leverage of 1:100. The position size, therefore, fluctuates with the value of 100,000$. The profit/loss is then debited from your account.

Summary:

As a trader today, you can participate in the financial markets with any size of capital. Opening positions is possible from just a few cents of risk. High leverage can also result in a high profit or loss.

  • Trading is possible from a very small amount of capital
  • Unlimited winnings are possible
  • The lever can be used to advantage
  • Trading fees have become extremely low as a result of electronic trading

Debts through trading? – The Risk

When trading on the stock exchange, you can lose more money than you have paid into the broker account. This is called a margin call and such an incident can be caused by very extreme market situations. For example, if there is no liquidity, you cannot close your position at the desired price.

All recommended providers on this page do not demand an obligation to make additional contributions anymore, but stop you before forcibly. New securities and account protection have abolished the obligation to make additional contributions.

Note:

THE LEVERAGE INCREASES THE POSSIBLE POSITION SIZE AND CAN THEREBY INCREASE YOUR RISK.

The different types of online trading explained:

In the linguistic usage one uses several different terms for the types of trade. Most traders are universal and adapt to the market, so the boundaries of the types of trade often blur. Roughly speaking, trading types can be divided into short-term and long-term investing. Every trader should find out for himself what he likes best.

  • Scalping: Scalping the market. Very short-term trading with a trade duration of usually a few minutes to seconds. Fast profits and losses are the order of the day. A high leverage is used. The trader needs a lot of attention and skill. Read more under “Scalping”.
  • Daytrading: This refers to daily trading. The trader only opens positions from the start of the opening to the end. Trades are not held overnight and are closed in the evening. Here, too, the trader moves in the short-term range. Read more under “Daytrading”.
  • Swing Trading: Longer holding of positions is called swing trading. Here, trades are held for several days to weeks. The Swing Trader always moves in large time units and has more time to react. Read more under “Swing Trading”.

We recommend it to a beginner to try out every direction of trading so that he can make his own experiences. Some coaches swear by their own tactics. In most cases this tactic is not 100% transferable. Make your own experiences on the market.

Correct analyses and strategies lead to success in Online Trading

Successful traders possess profitable trading strategies for daily trading. In general, a distinction is made between fundamental analysis and technical analysis. Both analyses have their advantages. In my experience, an interaction between these two analyses produces the best result.

Fundamental Analysis:

Economic news or indicators are included in the analysis. Economic data has an impact on short-term or long-term market movements. A trader should always be aware of the latest news from his traded market. For example, business news or data can generate very strong price jumps.

  • Economic calendar
  • News or news
  • Earnings calendar for shares
  • Political decisions
  • Economic indicators

Technical analysis:

The majority of traders rely on Technical Analysis and using the Candlestick Analysis. This includes an understanding of the candlestick chart and various indicators. Some strategies are based only on indicators. Drawing tools and indicators are used in technical analysis. The past of the chart is analyzed and the trader forecasts the future development of the chart. There are many different trading strategies in this area.

Conclusion: Learning to trade online is possible

On this page, we have shown you what online trading is and how it works. In just a few steps you have learned the basics for successful trading on the financial markets. Now it’s up to you whether you want to continue learning and start trading.

Information is very important for every trader. That’s why, we created this website. In addition, many brokers also offer training and very good support, so that you can easily call your broker if you have any questions about trading.

Earning money on the financial markets is nowadays possible for anyone who has an internet connection and is willing to take risks.

Summary of the learned knowledge:

  • Trading is the buying and selling of a security on the stock exchange.
  • There are very many different markets
  • There are various financial instruments for these markets
  • The price is determined by supply and demand
  • The choice of a good broker is absolutely necessary
  • Opening a position is not a problem
  • Trading fees are very low
  • Wealth through trading is possible

For more information about Online Trading you can read our 10 best Trading Tips & Tricks. 

With the right and professional knowledge you can earn constant money in the financial markets.

Trusted Broker ReviewsExperienced and professional traders since 2013