Online traders usually seek to make profit by leveraging significantly large amounts of capital to benefit from miniature price changes in liquid stocks and indexes. Typical online traders take two factors into account when investing in a certain stock or index: liquidity and volatility. Liquidity is the ability buy and sell at a decent price and volatility is an average measure of the expected range of price at a given time period.
Even though it may look easy, online trading could be a dangerous game if the trader is new and doesn’t have an established strategy to work with. Below we’re going to examine few ways traders can use to get more results of their online trading.
Choosing a Good Broker
There are few factors that you should take into consideration when choosing an online broker like their level of support, their experience in binary and forex trading, the number of tools they offer, and the nature of the access they provide you with.
Naturally, before trading with any broker, it’s a must that you make sure their support will be available 24/7. Technical difficulties represent a deciding factor in online trading.
Instant connectivity is also an integral part of online trading. Before choosing a broker, you need to make sure that they’re able to provide you with proper connectivity channels no matter if you use a mobile trading app or work exclusively via desktop application.
Online trading primarily requires access to a large database on information thousands of markets. While it’s not hard for traders to find information about items in popular markets, it’s definitely a plus if your broker can give you access to well-built database that you can use anywhere.
Identifying Price Target
Choosing a target depends entirely on the way you approach online trading. Below we’re going to list and explain few strategies any online trader can use to identify a price target.
The commonly used strategies are: scalping, fading, daily pivots, and momentum.
Scalping is parting ways with the stock or index once profitability is attained, resulting in a narrow but guaranteed profit margin.
Fading, in theory, means shorting stocks after rapid increases in prices. This strategy should be followed when the stock you’re trading in is overbought, existing buyers are reluctant to sell, and early buyers are beginning to sell. This strategy is more risky than the first yet more rewarding.
Daily pivots is the simplest strategy. Here the buyer simply waits for the price to show a sign of reversal by the end of the trading day to make a move. It is essentially attempting to buy at a low price at the beginning of the day and selling at high price at the end of the day.
Momentum is almost as simple as daily pivots but it requires a little more patience. It’s simply riding news trends and waiting for a sign of reversal to start selling. By far this is the most common strategy due to its almost guaranteed reward.
Once you’re able to determine which stocks or indexes you’re going to invest in, the second step is to identify at which point in time it’s best to buy. There are few tools that can help you identify this buying point like candlestick graphs, ECN quotes, and real-time news service. Below we’re going to examine how candlestick graphs can be read and interpreted.
Traders typically look at candlestick charts to identify patterns. When looking at a candlestick graph, a trader looks for three signs: spikes, highs, lows, and level II situation scope.
Spikes show whether backers support the stock or index at its current price or not. Highs of days and lows of days are meant to give the trader an idea about the prior level of support at the same price.
The level II situation scope gives exact numbers of open borders and order sizes. Following these three signs should give the trader an idea about the direction the index is taking, whether it will turnaround or continue as it is, subsequently allowing the trader to be in a favorable condition. Online trading companies, like CMC Markets, give you unlimited access to a plethora of similar tools that can help you monitor every possible sign.
Online trading is all about learning. The main and most important advice to get more results out of your online trading is to be patient and with time, satisfying results will pour in.