Successful strategies for online stock trading

Including stocks in your trading portfolio can potentially provide a multitude of profitable opportunities, as this is a market that sees a high level of liquidity and volatility. Trading online can also see opportunities arise, that you can easily and quickly react to.

But, as with any investment, it comes with its risks, and so having a clear strategy in place can improve your chances. Here are some of our top techniques and strategies to lead your trading journey to success.

1. Research, research, research

The most important strategy for online stock trading begins before you part with any of your capital, and that is conducting extensive research. Not only does this involve an understanding of the stock market in general, but the companies of the assets that you wish to invest in. You should also know and understand the factors that will affect the stock market, making sure to keep up to date with relevant events and any breaking news.

The benefit of online stock trading is that there are plenty of resources available for you to digest and learn all you need to know. In fact, depending on the trading platform that you use, they may provide you with educational materials to expand your knowledge.

Majority of stock trading takes place online, making the exchange much quicker and easier. Therefore, researching the online trading platform is also an important aspect, in order to find the best one for you and your investments.

The London Stock Exchange is one of the biggest online trading platforms for stocks, but some traders opt for financial derivatives, such as with a contract for difference (CFD) trading platform, as this doesn’t involve ownership of the underlying asset.

It is vital to make sure to choose a platform that is regulated and reliable and offers the extent of advice and support that you require.

2. Begin with a demo account

Any trading strategy works best when it has been tried and tested, and this is where a demo account can be beneficial. When stock trading online, opting to use a demo account, to begin with, can not only improve your confidence in the market but also allow you to establish a strategy without using any of your capital.

Once you are ready to move on to investments with real cash, it is also best to start with a low amount of capital and buy shares in different companies. This essentially spreads the risk, as any losses incurred will not equal a substantial amount, and any factors that affect the market can be disproportionate between the various stocks.

3. Day trading

This strategy is used by individuals who open and close their position on the stock market during the same day, with the aim to profit from daily price movements. Understandably, these are known as day traders.

It requires an in-depth knowledge of the invested assets, as well as an acute eye on the fundamental factors that can affect the market. Day traders are constantly on the pulse when it comes to the rise or fall in interest rates, the earnings reports of companies, or any PR disasters that come to light — all of which can affect the price of a stock in an instant.

4. Contracts for difference

As previously mentioned, online stock trading may involve a financial derivative, like CFDs. You may be asking what is CFD trading, but it is a popular strategy amongst experienced traders. It involves the speculation of the value of shares, without owning the underlying asset. Instead, the trader buys a certain number of contracts, sometimes known as units, with the profit or loss calculated from the difference in price from opening and closing the contract.

Unlike traditional stock trading, you can benefit from speculating on both a rising or falling market. You can also utilize leverage, which allows for greater exposure to the market, without the full percentage of the capital needed to make the trade. However, you must have a full understanding of how leverage works, as it can magnify both your profits and losses.

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There are several other strategies that you can employ when stock trading online, such as swing trading, social trading, and position trading, as well as those mentioned above. All come with their pros and cons, but it is always best to choose a strategy that suits your trading style.