Online trading has to do with the buying and selling of financial products. It takes place via the internet. This is completely different from the traditional financial trading that involves the traditional broker. In traditional financial trading, the trader will have to meet with the broker. He can also communicate with the broker via telephone before he can place a trade. This is not the case with trading online. In the latter case, you will not need to meet the broker face to face. Online trading also does not require telephone communication. All the trading activities take place via an online trading platform. There are different types of online trading; some of them are:
- Stocks or shares
- International currencies
- Several other financial instruments
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Online trading takes place on the broker’s platforms. The trader also has the freedom to choose any broker that he likes. The online broker is a business organization offering its service online. Its brokerage services can be accessed from any part of the world. You do not even need to be in the same city or country as the online broker before you can access sits services. If you want to venture into online trading Germany, then you will need to look for online brokerage firms that accept traders from Germany. In conclusion, we can say that online trading involves buying and selling financial products via an online trading platform.
Difference between traditional and online trading
Traditional trading involves calling the broker by phone or discussing it with him before you can enter a trade. The broker is the one that trades on behalf of the trader. There was no other way to communicate with the broker in those days. If you wanted to trade stocks, you would need to first call the broker on phone and place an order request. There was no other way. The broker will then tell you what the price of that asset you want to buy is. After that, the broker will confirm the order to buy. As a result of this, the process can trade a very long time. It is even the broker that will confirm how long you can keep the order open. He will equally inform you on the account to get the money from.
Faster way of online trading
Things have changed a great deal these days. You can now do all these things by yourself by only registering on an online broker. The advent of the internet makes the entire process very easy. You will not have to call the broker again before you can place a trade. You will also not have to wait for the broker to confirm your order. The order you place on any asset can be initiated immediately. Most online trading platforms are very easy to understand. As a result, you will not spend a long time before you can understand how to use them. Your order can be executed immediately.
Online trading is available in different forms and they all have their benefits and challenges. Before you venture into online trading, you must know the various types. This way, you will not end up making avoidable mistakes as you go deeply into it. As a trader, you will have so many options. However, not all the options can yield the kind of result you desire.
The kind of person you are or your kind of personality can also determine the type of trading you venture into. You can go for short term trading if you think that is what is best for you. You can also go for a long term trading if you so desire. Both types have their benefits and they also have their disadvantages. The kind of strategy you will use for a long term trading is not the same you will use for a short term trading.
Categories of online trading
Generally, we can divide trading into three categories. You need to understand these categories before you use any of them. The three categories are:
- Short term trading: This has to do with trading that lasts for a very short period. The maximum length of a short-term trade is a few weeks.
- Long term trading: This type of trading involves a very long period. The trader can find himself leaving trades open for several months. A single trade can even last for up to some years.
- Medium-term trading: This is the midpoint between the two types of strategies described above used for online trading. In this situation, a trade can last for a few weeks or even a few months.
As mentioned earlier, the three types of trading above have their benefits and challenges. So many factors can determine the particular one you choose. One of those factors is the fund you have available. One other method that can determine the one to choose is the research method you use for trading. How much risk are you willing to accept? This is one question you should ask before choosing any of the three methods. Studies show that the risk increases with time duration. This means that those who use short term trading do not face many risks. Those who use long term trading get more risk exposure than others.
One factor that affects online trading Germany these days is technology. Thanks to technology, it is now possible for traders to choose trading strategies of different types. Aside from the one we mentioned above, some other trading methods are:
- Swing trading
- Position trading
- Day trading
- Online CFD trading
We are going to look into each of these methods of trading below:
This is one of the most popular online trading methods. This type of trading method is a short term method. The trader buys or sells securities within the same day. This means that the trade never extends to the next day. Only professional traders use this trading strategy for trading online. This is because it requires a lot of time to learn the strategy. Be that as it may, some average traders can now use this strategy. This is made possible by the emergence of so many online CFD trading platforms.
There are different types of day trading strategies out there today. The one you choose among them depends on your level of experience. Check below for some of the most common day trading strategies:
- Price action trading
- Rebate treading
- Market making
- Momentum day trading
- Pattern trading
- News trading/Playing
Benefits of day trading
Day trading has so many benefits; we can say the same thing about all the other trading strategies we mentioned above. It is one of the fastest ways to make money from online trading Germany. It enables you to make money from trading within a short period. Bear in mind that you will only be able to make money from day trading if your strategy is correct. You need to do your research very well so that you can know what security you should buy. A good strategy will also help you to know how to manage your trading decisions.
If you are a beginner in online trading, you can also consider this trading method to make money. You will only need to invest a small amount of money in a day. The risk is low and the duration is very short. The fact that the trade will never extend to the next day means that you will not have to pay a swap fee. The swap fee is the money you have to pay when your trade extends to the next day. As you gain more experience, you can increase your risk and invest more money in your trading.
This is yet another unique strategy you can use when trading online. This strategy is a long term trading strategy. In this case, the trader buys and holds a position doe a long period. The long period can be as long as weeks or even months. The trader will need to carry out extensive research about the market before trading. You need good knowledge about how to read the trend of the asset you want to trade. You also need to know how to predict the future behaviors of the asset.
A trader using this strategy will buy or sell at the beginning of a trend. He will then close the trade at the end of the trend. The trend can be up or down. In an uptrend, the trader seeks to buy the asset. In a downtrend, the trader seeks to sell the asset.
Benefits of position trading
Position trading has so many benefits worthy of note. Position trading gives you a good opportunity to make money. If you know how to read the trend, you will find yourself making a lot of money from online trading using this strategy. So long as you do your homework, making money from position trading will be very easy. It is a long term trading and this means that you will not need to be checking your trade frequently. You can even set and forget if you use stop loss and take profit carefully.
This is yet another important trading strategy you should consider closely. Those who use this strategy base their trading decision on swings that take place during a trend. A trend does not continue indefinitely. It creates a swing along the way. These areas of swings are where the swing trader bank on to make money. All the swing trader needs to do is to predict highs and lows as the trend continues. The trader needs to also carry out adequate research before using this strategy for online trading. Day trading involves trading within a day.
Swing trading, on the other hand, can require holding a position for more than a day. This helps the trader to maximize his gains after the trend gains momentum. The trader needs to be accurate in making trading decisions. The trader also needs to make the right judgment before he can make money using this strategy.
Benefits of swing trading
This trading strategy has some benefits you need to know. Once you can detect the trend, the rest is very easy. The trader needs to be ready to take advantage of an increase in momentum in trading. This trading strategy is if you get your strategies right. The strategy is the best to use when the asset records high volatility.
This is a very fast way to make money from online trading Germany. The trader looks for opportunities to take advantage of gaps. The gaps occur as a result of order flows and spread. The trader looks to sell at the asking price of an asset to make a profit. He also looks to buy at the bid price. This strategy is a short term strategy. Those who prefer trading online without exposure to many risks can go for this strategy. The risk is very low and it is good for traders with limited capital. The profit you can make per trade is also very small. Additionally, the trader will have to open and close trades several times within each trading session. Traders that use this strategy are called scalpers.
*Check with your provider to see if they allow scalping
Benefits of scalping
The profit margin is low, but the risk is also very low. The profit may seem to be very low, but they can add up over time. The strategy is very fast and the trader will not even need to wait for a trend to show up. Additionally, the trader will not need to do extensive research before using this strategy. A scalper will not have to worry himself about stock market big events. He is never into a trade for a long time. You will not need more than just a few minutes or a few hours to expose your position to risks as a scalper.
Online CFD trading
CFD stands for Contract for Difference. CFD makes it possible for you to trade an asset without owning the asset.
Benefits of trading CFD
This is made possible by the various online services designed for that purpose. CFD is a good way to trade online, but it also has its disadvantages. The internet makes CFD trading accessible to so many people. You can carry out CFD trading via several CFD trading websites.What is more, you can trade CFD from virtually any location.
Online trading for better control
Online trading gives the trader better control over his trading. This is unlike what you get from traditional trading. For one, the broker will execute your trades instantly. You will also not need to wait until you communicate with the broker before you can enter a trade. You can do all the processes on the trading platform of the broker in an instant. You can complete the entire trading process by just clicking on buttons and tabs on the broker’s trading platform.
Additionally, you will be able to manage more than one position at once when you venture into online trading. You will also have access to loads of data that can help you to make better trading decisions. Trading is a lot easier when you do it online because you can access loads of data that can help you to make good trading decisions. Online trading now makes it possible for people of different categories to trade online. You also do not need a huge capital before you can start trading online.
With as little as $50 or even less, you can now trade online. This is unlike what the case was in times past. Online traders can access leverage and this makes trading even more interesting. Leverage helps to increase how much money you can access for trading. The ratio of leverage you choose depends on how much capital will be available to you. If you have say $100 in your trading account, leverage of 50:1 will help to increase your trading capacity by a multiple of 50. This means that you’re your small $100 will be able to play the same role that $5,000 can play in online trading.
Tools you need
You do not need many tools to trade online. For one, you can trade right there in the comfort of your home. You only need a computer that has an internet connection. Aside from these tools, however, you also need to learn about online trading. You need to get a trading strategy and master it. You will also need to download the trading platform on your device. The beauty of it is that you can trade online from your mobile device. Many of the trading platforms are compatible with mobile platforms. You can download the trading platforms on both your Android and iPhone also. Aside from the tools above, you need to get analysis tools ready.
Furthermore, you need to understand the various indicators available and how to use them. You need to take time to learn about patterns and oscillators also. The knowledge can help you to always make a better trading decision. Additionally, it is important to equip yourself with knowledge of price action. It will surely help a lot. The trading tools follow different patterns to generate trading signals. The patterns are divided into the following:
- Trading volume
- Price history
Some of the popular technical analysis tools are:
- On-balance volume
- Accumulation/distribution line
- Average directional index
- Aroon indicator
- Relative strength index
- Stochastic Oscillator
How to choose the right tool
Each of the tools has its area of strength and areas of weakness. You need to learn about the tools before you start using any of them for live trading. The tools can help you to determine the particular direction of the market. This will help you to determine if to buy or sell. You will find hundreds of these indicators on many online trading platforms. You should make sure that you study them before you choose any of them for your trading. You should never be tempted to use too many of them at a time. One or two will just be ok. This will remove confusion from your trading.
Always bear in mind that there is no 100% tool or indicator in online trading. All that matters is to use a strategy that can give you more profit than losses. Before you start using any of the indicators for live trading, make sure you first test it using a demo account.
The demo account can help you to make the right decisions about the right tool to use. A demo account will give you the same challenge that a real account will give you. The only difference is that you will not be under emotional issues as it is the case with live trading. You can learn how to use the trading platform by using a demo account.
A good broker is a necessity when comes to online trading
Aside from the tools, the broker you choose is also very important. As an online trader in Germany, you should look for a broker that accepts online traders from Germany. Find out if the broker is regulated by the concerned authorities in Germany before you register there. Do not forget to also read reviews before choosing a broker. The reviews will help you to make the right choice among brokers for online trading Germany.
Answers these questions before choosing a broker
- How many years in the industry?
- What are the customers saying?
- What account types are available?
- What is the minimum deposit for each type of account?
- Does the broker provide a demo account?
Make sure you find answers to these questions before you register with the broker.