Trading online has gained enormous popularity over the last few years. The scarcity of returns offered by traditional financial products has led many people to try their luck in trading, under the promise of succulent profits. However, the first thing to do is to understand what trading really is.
First of all, it should be noted that we are referring to stock trading, i.e. trading that takes place in the stock exchange environment.
What is online trading?
Trading consists of the purchase and sale of assets in a regulated financial market, with the objective of obtaining an economic benefit, generated by the capital gain of the operation. Trading is therefore a purely speculative type of stock market operation.
Basic trading operations consist of the purchase of an asset with the objective of subsequently selling it at a higher price, or selling an asset, with the purpose of buying it back at a lower price.
What are the assets that can be traded?
The stock exchange assets that can be traded are primarily shares, which are nothing more than ownership titles in listed companies or similar organizations. However, it is also possible to trade on futures referenced to stock indices, commodities, and even currencies.
In the case of currency trading, it will be necessary to trade in the market known as Forex and, due to the convertible nature of the currencies, this operation is always carried out on the basis of a currency parity such as the Euro/USD rate (EUR/USD) or the US Dollar/GBP rate (USD/GBP).
Thanks to the development of new digital technologies and the Internet, it is now possible to trade over the Internet, using specialized platforms that act as online brokers, i.e. trading intermediaries. In exchange for the payment of the corresponding commissions and the deposit of a minimum amount of cash, any natural or legal person can carry out trading operations, with the simple use of a computer and an Internet connection.
However, the fact that trading has been liberalised and popularised does not mean that it is an activity that is easy to implement and manage.
Dangers of trading
Like any other investment-related transaction, trading requires a relatively complex set of basic skills, without which transactions are more like buying a lottery ticket than buying an investment.
On the one hand, it is essential to know the basic operation of the platform to be used. It is also necessary to be aware of the risks and commitments generated by the operations to be carried out.
On the other hand, it is essential to have extensive knowledge of technical analysis; in other words, to know how to examine the evolution of the share price, so as to be able to predict in the best possible way what the trend of the value in which it is invested is, and thus to have a better chance of succeeding with speculation.
Finally, it is also advisable to have knowledge of fundamental analysis, which allows you to know the financial status of the companies in whose values you are investing. This is because the evolution of stock market values is usually correlated with the financial health of the company to which they correspond.