Market trading online, sometimes referred to as e-trading, is the buying and selling of shares in publicly traded companies. The shares are selected after an analysis of the company has been carried out. This technical analysis takes into account the industry, news, expected trends, and the internal dynamics of the company. The company’s annual reports, corporate history, and financial statements are studied. Proper research is the principal key in online trading. It determines if an investment in the company would provide value.
Market trading online – Types
Online traders may be in the market on a short-term (as share flippers) or long-term basis (shareholders). Investments may be in mutual funds, bonds, and fixed-income funds. Traders speculate on the market forces, and determine when to buy or sell to make profit. Profit is made when shares are bought at a lower price in anticipation of a future rise in value. They are then sold off when their value rises. This is how the trader makes profit on the short-term. Some traders may hold shares for as little as minutes, as they seek to make the highest returns in the shortest time.
Market trading online – Regulation
Most markets have a regulatory agency that monitors the activities of the exchange. They primarily ensure a level playing field by all the operators. There are different regulatory agencies in several countries, and different markets. They earn money by charging fees and commissions on transactions and licenses. There are online trading courses and apps that introduce the intricacies of the market.
Market trading online –Brokers
Although anyone can invest in the stock market, there are specialized, licensed agents who buy and sell shares. These are called brokers. A broker may either be physically present on the floor, or may be monitoring trends online and making transactions via a telephone. There are brokerage firms that offer management services to investors. The investor gives out a sum of money to the firm, and the firm picks out an appropriate mix of shares and stock options and shares the investment across a set of companies. In other cases, the individual has an account managed by an online firm. This is a growing trend that is expected to rise in the future. In all cases, instructions are issued to the broker directing him on the prices to buy and sell the stocks.
Stock trading – Managing Risks
The stock market has its fair share of risks. When shares are held on the short-term, the risks are significantly higher. However, they can be effectively managed. One way is to diversify an investment portfolio. This means purchasing stocks in several industries, such that adverse effects in one do not affect the other. Begin trading with spare money at first, until a proper understanding of the market has been gained or expert advice has been received. Then, larger investments can be made. Generally, blue chip companies are regarded as safer bets. The flipside is that they are for patient traders who are in it for the long haul. Overall, the popular maxim of distrusting things too superlative to be true applies here.