Forex Trading for beginners
Published: 16 September 2020 by Andrew
What is Online Trading? Why so many people would like to trade online today? Is it really possible to make a lot of money by trading online?
These are questions that OnlineTradingCourse.net often receives, after all we are one of the international reference sites for those who operate in the financial markets with online trading.
We therefore decided to give educational tools for beginners, like this course, which explains, step by step, what online trading is and how you can make money.
In this guide we will talk about the best online broker platform for trading online, such as eToro. Let’s immediately take the example of eToro because it is one of the easiest platforms to use and even allows you to automatically copy the best traders in the world.
What is Online Trading?
Let’s start our guide immediately by explaining what online trading is. Unfortunately there are really a lot of completely wrong opinions about trading. There are those who think that “trading” means a way to make easy money and there are those who think it is a real scam.
To face the facts, easy money does not exist (not only with trading), this is what scammers usually promise. Who wants to start trading online, especially beginners, must first understand what we are talking about.
Warning: we are absolutely not saying that it is something complicated. Indeed, it is much simpler than you might think.
Online Trading is a high yield speculative activity that generates profits quickly when securities listed on financial markets rise or fall in price.
The definition we have given may seem complex but again, things are simpler than they seem.
It’s easier, to better understand the definition, with an example: let’s assume we trade Amazon shares.
The easiest way to operate with Amazon shares is to buy the stock on the market (possibly paying a commission), keep it for a certain period and resell it when the price has risen.
The profit, in this case, is represented by the difference between the sale price and the purchase price. Financial stocks, usually, don’t change their value much, so anyone who wants to make a high return has to wait years.
What if the price drops? You bear a loss equal to the price difference…
What we have shown is the most banal form for trading online, but it is certainly not the most profitable or the simplest (and we didn’t consider that this operations involve the payment of high commissions that lower its profitability even more).
Online Trading with CFD
What is the best way to trade? We don’t want to waste anyone’s time with useless theory, so we refer directly to the case of the small investor who want to start trading online with small investment, starting from 10 euros up to a maximum of a few thousand euros.
In this case, the best way to start trading online is through Contracts for Difference (usually abbreviated as CFD). What is it about? Nothing complicated, it is a very simple financial contract to use and understand.
A CFD is a contract whose value depends exclusively on another financial security, called “underlying asset”. For example, the CFD that has Amazon shares, as an underlying, is exactly as good as Amazon shares.
Why then is it cheaper to use CFDs to trade? CFDs have various advantages.
First of all, thanks to CFD it is possible to earn both when the Amazon share goes up and when it goes down. In practice, you can buy the CFD on Amazon shares or sell it in the short. When you buy the CFD you earn in case the value of the security goes up.
When you sell short, you earn when the value of the shares drops.
As you can see, this feature of CFDs is really important since it allows you to earn in any market condition.
The profit obtained with CFDs is proportional to the difference in price between the moment the transaction starts and the moment the transaction ends. It doesn’t matter if the Amazon share price has gone up or down.
This is truly a significant advantage, but there is more: with CFDs it is possible to apply the leverage that is used to multiply the profits of each individual operation.
CFDs are an extremely convenient tool, in fact the best broker platforms for online trading do not charge commissions and have no costs. Their only profit is represented by a small spread, that is, a tiny difference between the price at which it is possible to buy and that at which it is possible to sell.
Another important feature of CFDs is that even very small investments can be used to start trading. There are broker platforms that allow you to start with a starting capital of just 10 euros. Virtually nothing. Most CFDs trading platforms allow you to start, however, with an investment between 100 and 250 euros.
A last, very important advantageous element of CFD is represented by the speed with which transactions can be performed. This depends on the fact that no commissions are charged and that small price fluctuations can generate much higher profits thanks to the leverage effect.
Online broker platform for trading
The most important tool that let you operate is the online trading platforms: it is the access point to the financial markets available to the Trader to perform the operations. In this guide we refer mainly to CFD trading platforms, since we have already explained that this is the best system for beginners.
A trading platform is a broker who manages the client’s trading account. This account is recharged with the deposit that the trader makes with credit card, bank transfer, Paypal etc..
The money in the account are always owned by the Trader who can do whatever he wants with it, even withdraw it at any time without any kind of obstacle. Trading platforms usually offer simple and intuitive interfaces to operate in the market.
If we go back to the example of Amazon shares, after having made a deposit in the account, you can decide to buy the CFD on Amazon shares to earn in the case of a price increase or to sell short to earn in the case of a price decrease.
The broker platform will take care of carrying out the operation and, upon closing, will pay the capital invested plus the profits achieved on the trading operation. The capital available, on the trading account, is always owned by the trader who can withdraw it whenever he wants without any type of restriction.
How to choose which online platform is best
The choice of the online trading platform is really important: unfortunately, not all platforms are the same!
First of all, it is advisable to operate exclusively with authorized and regulated platforms.
These platforms operate with a license issued by a control body of a European country and required to comply with the very strict rules of the European agency ESMA which has the aim of protecting the capital of investors.
A platform that is not authorized and regulated cannot be considered reliable. Obviously we refer only to safe and legal platforms because security must always be the first thought of the trader.
But just security is not enough. For example, it is never convenient to pay commissions (or fixed costs) to trade online. For this reason we always recommend the best platforms that allow you to operate without commissions and with extremely advantageous spreads.
Finally, a good online trading platform must always be user friendly, especially if the trader is a beginner. Even better, if there are additional support tools such as trading “signals” or automatic trading systems (one of the most famous tools is the eToro “Copytrader” which allows you to automatically copy what the professional traders do).
Online Trading reviews
Success in online trading also depends, considerably, on the trading platform you use. For this reason it is very important to pay close attention to the initial choice of the platform, on order to avoid risks and scams.
We have already explained which are the characteristics that we should look for, in a trading platform. Now we show the reviews of some of the best broker platforms for trading online ever. Today there are many reliable and safe trading platforms, but we have decided to publish the reviews of those that are simpler and more intuitive, therefore also suitable for beginners.
Min. Deposit: 50€
Min. Deposit: 100€
Min. Deposit: 50€
Min. Deposit: 100€
Min. Deposit: 250€
Min. Deposit: 100€
eToro is one of the most used online trading platforms in Europe. All eToro reviews underline the fact that it is an easy-to-use platform even for those who have never traded online.
The strength of eToro is the possibility, for the traders, to copy in a completely automatic way, what the best traders do. The patented “Copytrading” system allows you to select the traders who have achieved better performances over time: with a click you can automatically replicate all the operations that selected traders will do in the future.
This particular system has a double advantage: it generates profits immediately even for less experienced traders and allows you to learn trading by observing what professionals do.
If you want to know more about eToro, you can read our full review of this online broker.
Investous is considered to be the other great option for those who start trading online and don’t want to make mistakes. Investous is a safe and reliable platform, extremely simple and intuitive. All members have the access to phone support, where a real trading expert provides precise indications (that’s why making mistakes is almost impossible).
Those who want can also download an excellent guide to online trading for free. Indeed it is one of the best guides ever:
First of all it is free (other guides unfortunately cost a lot of money)
Simple to study even for a beginner (other guides are full of complicated terms)
It is all oriented to practice and it explains well how you can make money with online trading (the other guides are often jam-packed with unnecessary theory).
You can download the Investous guide for free by clicking here.
The advantages of Investous are not yet finished: the trading platform is completely free, there are no commissions. With Investous you can also register a Demo account, so you can try the platform with all the tools, without investment nor risks.
You can sign up for free on Investous by clicking here
To learn more about Investous, you can read our full review.
Iq Option is a great online trading platform and it is preferred by a great numbers of beginner traders. In addition to providing a very simple and user friendly interface, Iq Option is known because it allows you to operate with an initial investment of just 10 euros.
The other high quality online broker platforms allow you to start with an investment that tenges between 100 and 250 euros. In practice, thanks to Iq Option everyone, absolutely everyone, can access the great trading opportunities, because the necessary investment to start is absolutely ridiculous.
Even those without knowledge nor experience can start easily, considering that Iq Option offers exceptional educational tools like a teaching area where you can find hundreds of original video courses that allows beginners to learn how to operate with online trading, from the basics up to the most advanced concepts.
Iq Option provides an excellent free, unlimited and unconstrained demo.You can sign up for free on Iq Option by clicking here.
To learn more, you can read our Iq Option review here.
Online Trading: the Demo mode
What should a beginner do, if he wants to learn how to trade online without mistakes? The first step, of course, to learn trading is using a good, simple and complete guide. One of the best is the one offered by the Investous broker, which clearly explains how you make money with online trading.
Before starting to operate with real money, it is always advisable to exercise using a Demo account appropriately.
So, how does the online trading demo mode work? Basically, it is a simulation. The best trading platforms offer the possibility of trading with virtual money for free. In this way it is possible to experiment without investment and absolutely risk-free.
In this way you can experiment and try the best strategies without risk. Once you have gained experience, in any time, you can switch to trading with a real account and obviously real money but with more experience.
Online trading demos are essential for first-time traders and can help beginners a lot. It is important to keep in mind, however, that a demo is not able to teach everything about trading.
One of the main components of online trading is psychology. When working with real money, in fact, emotions could become dangerous, such as fear or greed.
The great traders, actually, are not those who know the best strategies, but those who are able to dominate the emotions. Strategies could be easily learned or even copied.
When you operate with a demo platform (with virtual money) there are no emotions: in the end, with fake money invested, it is almost a game. This is why who wants to be a great trader should switch to real money as soon as possible.
At the beginning, you don’t need a big investment, there are platforms that allow you to start with just 10 euros. The fact of operating with real money, however, still teaches how to dominate emotions (because in the investment fund, we always want to make money and we don’t want to lose even a penny!).
To learn more about, you can read Online Trading Demo.
We mentioned earlier, that trading strategies can be automatically copied. In general, automatic trading is a dream for many of those who start: who wouldn’t want to automatically apply winning trading strategies?
The problem is, most automated trading techniques don’t really work. Either the technology is still immature or, even more common, it is a question of real scams.
The mechanism is usually that simple: when anyone promises easy money with a miraculous system for automatic trading, always follows a scam.
Of course, there are exceptions, one of the best systems for automatic trading is: eToro Copytrading. In this case, there is no algorithm that decides the operations, but the operations of the best traders are automatically copied.
How does Copytrading work? For the trader, it is very simple: inside the platform, there is an internal search engine that allows you to identify the traders who have earned the most over time and these traders can be copied with a simple click.You can sign up for free on eToro by clicking here.
Warning: trading is never a way to make easy money, even when it comes to automatic trading. Usually those who promise easy money are always scammers.
And what about eToro? Some might think that it is a way of making money without doing anything. But it’s false: it takes time to select the best traders to copy and you must check, practically every day, if they are actually producing profits or not. It is also necessary to check daily the performance of any new traders registered on the platform that can be automatically copied.
If you want to learn more about Automated Trading you can read our article.
Online Trading Amazon
In recent years, Amazon shares had an unprecedented growth, greatly enriching the investors who have focused on the company.
Many beginners, therefore, use Amazon shares to trade, with the hope of getting rich easily.
Now, the choice is excellent, but not because Amazon shares always go up, but because it has a high capitalization. Traders that don’t have so much experience would always stay away from small capitalization companies and to focus on big companies, like Amazon.
Are Amazon shares destined to grow forever? Absolutely not. Indeed, no stocks can grow forever, not even Amazon shares. Those who decide to trade online must therefore be ready to make money in any market condition, both when the value of the shares increases (by buying) and when it decreases (by selling short).
Just for information, the Amazon founder Jeff Bezos himself admitted, in a private meeting, (abusively registered and then made public) that Amazon is destined to decline within the next 30 years.
We gave the example of Amazon online trading precisely because it is highly sought after by beginner traders and it is good to reiterate, once again, that no stocks and no financial assets can grow indefinitely.
There is always a roof, even when it is high…
Online Trading Scams
We have already mentioned, in the previous paragraphs, that you must keep your eyes open to defend yourself from trading scams. Unfortunately this eventuality exists and has also hit an impressive number of people over the past few years. There have been so many scams that someone has started to think of online trading as a kind of legalized scam.
Fortunately, trading is not a scam (as demonstrated by the many traders who can easily get great results) and it is also very easy to identify and avoid real trading scams.
In general, we can distinguish trading scams in two main areas:
- Unauthorized trading platforms
- Systems to make easy money
Unauthorized Trading Platforms
It is not said that all unauthorized trading platforms are scam (maybe some honest ones exist, who knows) but unfortunately history has shown that most of the unauthorized trading platforms are not reliable.
Problems of all kinds can occur: starting from the inability to withdraw you profits, up to the sudden disappearance of the platform (there are some that have closed overnight and all the traders’ money evaporated).
There is little to do: only authorized and regulated platforms truly guarantee the security of trading. That’s why they are the only trading platforms we recommend.
Easy Money Systems
In recent years we have seen advertisements for all types of automatic trading systems that can make anyone rich without the need for any kind of commitment or study.
Now, we know that with online trading you can make (even a lot of) money, but you have to commit and study and it takes time. From the advertisements that bombed us, however, is seems that it’s easy to make money. There is the story of the housewife who earns 7.000 euros a month without doing anything and that of the worker who buys an Estate in the Canary Island.
All false stories of course, stories that had to create in the victim, of these scams, the dream of a perfect life at your fingertips. It’s a pity, however, that those who fell into the trap and put their money into this, ended up in the worst possible nightmare.
In practice, as was to be expected, all those who invested in these profit systems have lost everything, right down to the last penny: nobody has ever managed to recover the investment.
So, how do you defend yourself against these trading scams? It is very simple: if someone promises you easy money or automatic income, he is a scammer. Stay away.
Online trading is a very high yield speculative investment. Everyone can trade because the required capital is very low (ranges between 10 and 250€) and it is possible to learn very easily thanks to educational tools like Investous e-book.
In addition, the best broker platforms for online trading are really simple to use, even for a beginner.
Those who start trading for the first time, must be careful to operate only with authorized and regulated platforms, the only ones that offer the highest level of security and reliability. Unfortunately, there are also trading scams around: they can be easily recognized because scammers offer easy money while serious platforms always warn of trading risks.
It is a particularly profitable form of speculative investment. In practice, it consists of generating profits from the movements of stocks on financial markets.
There are scams, but it is easily to avoid them by operating only with the best online broker platforms. It is essential, for those who invest small sums, to avoid paying commissions.
We recommend starting with 250 euros, but there are cases where even 10 euros are enough.
Potentially, very much. But be careful: the results come only if you put effort and dedication. This is not a game.