Online trading is becoming more and more popular, and has been for about twenty years. A time reserved for professionals, trading is now accessible to all . Our guide gives you all the keys to succeed in trading like a pro: best platforms, advice and opinions can be found on this page.
What is online trading?
It is quite simply the purchase or sale of financial instruments, with the aim of generating a profit thanks to their variations. For this, you will need to choose an online broker , which will provide you with a trading platform.
Here is an example :
One of the main advantages of CFDs and online trading is actually that you can profit from market declines as easily as rises.
When you think the market is going to go up, you buy, and you go “long” according to the vocabulary of professional traders. If we think the market is going to fall, we sell, and we go “short”.
It should be noted that different techniques exist for trading. The most popular are swing trading and day trading .
Tutorial: how to trade?
In this section, we will explain in detail how to trade online on a trading platform, such as the broker eToro .
➡️ Step 1: choose a trading platform and open an account
The choice of a broker is not to be taken lightly. There are many criteria to take into account. It is even often decisive for beginners.
Here are the most important criteria to consider when choosing a trading platform :
- 📱 Ease of use of the platform.
- ☑️ Trading features and tools.
- 🔒 Broker regulation and security.
- 💲 Non-abusive transaction fees.
- 💱 Ease of deposits and withdrawals.
- 🎓 Access to tutorials and guides.
➡️ Step 2: open your trading account
Opening an account is a very simple process , especially at eToro , which in our opinion offers the best trading platform. You will need to fill in your personal information and answer a questionnaire about your investment habits and experience. This last point is a legal obligation in accordance with the KYC ( Know Your Customer ) procedure that regulated brokers are required to respect.
Then, you will then have to validate your account by providing proof of address and an official identity document (national identity card or passport). You can then credit your account through the many payment methods offered by eToro (Paypal, bank transfer, Neteller, credit or debit card, etc.).
You can start investing in one of the many financial products offered on the platform.
➡️ Step 3: choose a trading market
It will be necessary to determine the market on which to intervene . This will guide the choice of broker, because not all products are available with some of them.
There are many financial markets on which it is possible to practice trading :
- Shares of a company
- Raw materials
- Currencies (Forex Trading)
- EFT (Exchange Traded Funds)
The advantage is that the techniques to be used are almost the same regardless of the market. It is therefore easy to switch from one market to another.
However, note that if you are more interested in investing in the medium to long term or less than 10 years, investing in the stock market will be the market best suited to your profile.
CFDs ( Contracts For Difference ) offer both professionals and beginners the opportunity to profit from price movements without owning the underlying asset.
To put it simply, it is an instrument that allows you to bet on the fall or rise of a financial asset , without owning it. It is a contract between the broker (eToro for example) and the trader (namely you).
By trading CFDs, you do not own the financial asset. Here, you are only exposing yourself to price variation .
Trading CFDs offers several major advantages:
- 💰 Buying an asset can be expensive. Through CFT trading, it is possible to place a smaller amount of money.
- 📉 By owning an asset, your only wish is for it to increase in value. Thanks to the CFD, you can bet on the decline of the asset.
- ☑️ There are CFDs in all financial markets (stocks, forex, cryptocurrency, commodities, etc.)
- 📊 The ability to take advantage of high leverage.
- 📜 This activity is completely legal in France.
Forex is the largest financial market in the world. This is most commonly the forex market, where currencies are traded. The daily trading volume of major world currencies is approximately $6.6 trillion.
This consists of buying and selling currency pairs such as EUR/USD, GBP/USD, USD/JPY or USD/CHF.
This pairs market is generally a 24/7 market .
Stock market trading
The stock market , which hosts shares, is undoubtedly the best known market. By buying a stock, you are buying a small part of the relevant company.
Although stocks often respond similarly to major economic shocks , each stock has its own specificities, and each stock is influenced by its own financial news .
Practicing online trading or day trading on shares therefore means first of all studying the activities and performance of companies. This is why it is interesting to focus on certain actions that you will get to know well. The Paris Bourse opens in the morning at 9 a.m. and closes in the evening at 5 p.m.
The crypto market is a very recent market. Cryptos such as Bitcoin and Ethereum are “digital” currencies, which are based on cryptography and blockchain technology.
The volatility of cryptos is often significant, since they are the subject of intense speculation. Although it is possible to practice technical analysis on crypto currencies, the fundamental factors to take into account are different from other markets.
Note that the crypto market is open 24 hours a day, 7 days a week. It is therefore possible to trade cryptos even on weekends!
➡️ Step 4: Open a trading position
To do this, go to the eToro platform or the one of your choice , then click on “Markets” in the left menu.
In our example, we will then go to the “Currencies” tab that you will find at the top of your screen.
Good to know – The spread : you will notice at this stage that there are always two different prices for each forex pair: a buying price and a selling price, the buying price always being higher than the sale price.
In the list of available currency or forex pairs, find the one you want to buy or sell, then click on “Buy” or Sell. Here we will for example buy EURUSD .
Then, in the window that opens, enter the amount you wish to invest, a leverage effect and click on “Open position” to finish. You also have the possibility to set a Stop loss and a Take profit.
The benefits of trading
Trading the financial markets online is an activity that offers many advantages . We have listed the main ones below.
Although earnings are not guaranteed, this activity can help you generate money . Many people also manage to make a living from trading, or quite simply to earn a comfortable additional income from it.
Trade both ways
As we have seen above, it is possible to take advantage of downward movements as easily as upward movements at brokers who offer CFDs, depending on the financial products.
What’s more, it makes the crises that panic investors so much and cause rapid asset dips an opportunity for traders to make big financial gains.
Trading the markets through CFDs is most of the time cheaper than “classic” trading, regardless of the asset concerned.
For example, brokers charge transaction fees and commissions, but also often custody fees, fees which, when accumulated, seriously undermine the performance of operations.
Assets and Financial Market
Where “classic” brokers are often specialized in a particular market. Brokers that offer CFDs are generally much less restricted . Trading platforms such as eToro allow you to access a wide range of financial products: forex, stocks, indices, commodities, crypto-currencies and even ETFs.
Differences Trading vs Investing
If you are reading this guide, trading is relatively new to you. However, you have no doubt already talked about investing . At this point, you are probably wondering what the difference might be between these two activities, based on the purchase and sale of financial products.
We therefore propose in the summary below to summarize the main differences between trading and investing.
|One of the basic principles of trading is to take advantage of small market variations to make significant gains by multiplying them. |
Traders therefore make big gains with small
|In the context of long-term investment, |
on average 10 years , we do
not use leverage , in order to avoid having to undergo margin calls during temporary bearish reversals in the market.
|It is a short-term activity , where |
positions can last from a few seconds to a few days.
|It is based on the long term . |
We are talking here about 10 years, even decades.
|Low minimum deposit |
of a few hundred euros.
|Is generally practiced without any |
leverage and requires a substantial
start-up capital .
|Forex and Crypto currencies||Stocks, Indices and ETFs|
|Fundamentals of analysis for technical and market sentiment reading.||In-depth financial and macro-economic analysis|
|Gain Potential and Risks|
|Trading offers the potential for quick and almost unlimited gains, but it is also a much riskier activity than investing.||The investment will not make you rich in the short term, but may allow you to prepare for a safe retirement. |
It is indeed rare for a stock market index to show a decline over the next 10 years, regardless of when you buy.
How to become a trader? 10 Trading Tips to Follow
From basic trading training to the start of your online trading career, we explain everything here! Follow these 10 steps to make sure you do things in order:
- 📊 Learn to read charts : Investment and trading decisions are mostly made based on a chart.
- 🔎 Familiarize yourself with using basic technical indicators : the main indicators used by beginners in trading are MACD and RSI.
- 🛑 Learn the basics of risk management : manage the use of stops and limits. A stop loss is the maximum level of loss you allow yourself on a trade, while the limit is your target gain.
- ☑️ Choose the market that suits you best : there are different financial markets and financial products, each with their specificities.
- 👉 Select your online broker : there are many criteria to take into account, and it is better not to be mistaken to avoid scams.
- 💲 Practice on a demo account : all online brokers offer you to test their platform with a demo account under real trading conditions, but with virtual money, risk-free.
- 💡 Set up a trading strategy : a trading plan brings together the arguments you consider necessary to take a position. Your trading plan should also specify the time units (real time and long term) you are working on, the level of risk you accept, etc.
- 🎓 Analyze and improve your trading method : eliminate what does not work, and insist on what has given good results. You also need to keep training. This may be possible thanks to the “Academy training” spaces offered on trading platforms, for example.
- 📱 Open a real trading account : do not stay too long on demo accounts because one of the difficulties of trading lies in managing emotions in the face of the risk of loss. It is therefore important to get started without too much delay.
- 📝 Keep a trading diary : We recommend keeping a trading diary. This is a document listing all your positions, their risks, and their results.
How to trade like a professional?
At this stage of the guide, you should have placed your first trade. But this is only the beginning. A trader’s learning never stops, and you will need to make sure to continually update your knowledge . So, follow the 4 tips below.
If there are technical indicators known to all traders such as the MACD or the RSI , there are also hundreds of others, and several new ones are introduced each year.
However, the principle remains the same for all indicators: find buy and sell signals .
Indicators help you identify turning points in the market, or confirm that trends will continue. All trading platforms, including that of the online broker eToro , offer these indicators.
Financial market analysis
Company news, as well as geopolitical and economic news, have a considerable influence on the markets.
However, to take the temperature of market sentiment, it is necessary to be constantly informed of the news , and to see how the markets react to it. Indeed, some sources of information are better than others.
There are good free blogs and websites , just as there are also paid real-time news services specifically aimed at traders. You can also consult the economic analyzes of the research departments of the major banks.
Trading can be a solitary activity, which over time is often overwhelming. To overcome this, professional traders are often in contact with each other, either through private networks or forums, or on social trading platforms such as TradingView or on the eToro social network .
Automatic Trading and EA
Expert Advisors (EAs) are programs that run on the MetaTrader 4 (MT4) platform, used to monitor financial markets in real time and trade using algorithms. They automatically spot opportunities based on the parameters you set, then either notify you or open a deal automatically. After your trade is opened, an EA can add closing conditions, including stops, trailing stops, and limits.
In short, it is therefore possible to automate your trading strategy . You then only have to monitor the results, and modify the parameters if the market conditions change.
Note that it is EAs that are used for automatic trading when it comes to MT4, but other trading platforms offer their own interface to automate your strategies without the need for any computer coding knowledge.
|CFDs (Contracts for Difference)||The Contract for Difference is a contract concluded between a Buyer and a Seller. The contract defines that the buyer will have to collect (or disburse) the difference in price at the time of the sale and its purchase.|
|Pips (Percentage in Points)||It is a unit of variation measuring the smallest movements of a currency.|
|Margin||Margin is the amount needed to open a trade. The margin is calculated by dividing the exposure amount by the leverage.|
|Spread||The spread is the difference between the buying and selling price of a financial asset at a given time. The buying price is always higher than the selling price.|
|Stop Loss||The stop-loss is the loss threshold from which you want to abandon a trade. Stop-losses can be recorded as soon as the initial order is placed, for automatic execution if the stop-loss price is affected.|
|Take Profit||Take-profit is your profit target. This is the threshold on which you decide to close the operation and collect your winnings. Take-profits can be recorded as soon as the initial order is placed, for automatic execution if the defined price is hit.|
|Batches||For CFDs on shares, the contract size is standardized in lots. 1 share CFD is generally equivalent to 1 share. In Forex, we usually talk about units, and there are lots of 1,000, 10,000 and 100,000 units.|
|Trading platform||A site or application that allows you to access financial asset quotes and place your trading orders.|
|Broker online||These are specialized financial intermediaries with whom you can deposit funds to trade, and who provide you with the trading platform.|
FAQ: the most frequently asked questions
☑️ What is online trading?
Online trading involves buying or selling financial assets with the aim of generating money. Want to know more ? Check out our article.
☑️ Online trading: which platform to choose?
Many platforms offer you to trade online. However, not all are equal. In our article, discover the 5 best platforms for online trading in 2022.
☑️ How to trade online?
Although it may seem complicated at first glance, trading online is relatively simple thanks to the tools put in place by brokers. We detail here the 4 essential steps to start trading safely.
☑️ Why trade online?
Online trading is a smart way to invest your money and earn profits.
Of course, you have to invest within your means. If you want to learn more, check out our guide to online trading.
☑️ Can we trade online for free?
Whether you are a beginner or an expert, it is totally possible to trade for free because of the demo version. You will be able to speculate with fictitious money on the stock markets or even cryptocurrencies, without taking any risk. On the other hand, it is not possible to generate profits from the demonstration mode. Find out here on which platform to trade.