What is trading?

Trading is one of the most profitable activities on the Internet. Every day, billions are earned and lost at the click of a mouse by people who trade online. As a trader, you trade in financial instruments such as stocks, currency pairs, and index funds. But why is trading so advantageous now, how do you do it, and what are the characteristics of trading? In this article you can read everything you need to know about trading!

How can you trade yourself?

Do you want to trade yourself? Then you need a free account with a broker. A broker is a party who, for example, makes it possible to buy and sell shares quickly. With most brokers, you can try online trading completely without risk by using a demo. Do you want to know where you can open a free demo? Click the button below and compare the different options:

trading demo

What is trading?

Trading is a specific way of investing. You actively trade in, for example, a share. Trading differs from 'traditional investing':

  • Investing: buying a share to achieve price gains in the long term.
  • Trading: buying and selling a stock quickly.

Trading is much more active than just investing. If you want to be successful with online trading, you will need to reserve more time for it.

trading

Why is trading so lucrative?

  • You do not need much money to start: $100 is enough to start!
  • You can use orders and automate your trading activities.
  • Successful trading does not have to take more than a few hours a week.
  • Because you can go short, you can also place orders on falling prices.
  • Thanks to the leverage, you can achieve results with a small amount.
  • No commissions are charged: therefore, trading can be advantageous!

How can you make money trading?

Making money from trading is certainly possible. As you may know, the share prices, for example, are moving up and down every day. This movement is also called volatility  and as a trader you can benefit from these movements. You can place orders on rising and falling prices. The latter we also call going short. When you go short you predict that the price will fall, and you get a positive result when this eventually happens.

Here are two broad strategies to choose from: intraday trading and day trading. When day trading,  you keep an eye on the price developments and open multiple positions in one day. These positions can be kept open for a longer period. For people with less time,  intraday trading is more attractive. When you do intraday trading, you open and close positions on the same day.

Learning to trade: become a good trader

Nowadays, anyone can trade online. Yet very few people manage to become successful. If you want to become a good trader, you will have to apply a strategy. On the Internet you can find strategies that can help you to achieve better results.

Of course, we would love to help you on your way! We have written a simple article in which you learn the basics of day trading. Press the button below to learn how to become a better trader:

trading course

In which securities can you trade?

When you start trading, you can trade in different securities. Below is a small list of the different securities in which you can trade:

The basics of trading are quite simple: you buy at an increase and you sell at a drop! However, the implementation is not necessarily simple. In online trading,  emotions play an important role. Many people are afraid of losing and therefore keep their loss open for too long. In the meantime, they are also afraid to lose their winnings, which means that they close the position at a small profit.

In the end, it is smart to do the opposite when you are trading. It is better to cut losses and to allow profits to continue. Therefore, always ensure a favourable ratio between your  risk  and return. For example, if you can lose up to $20 in a position, it is wise to close the position with a profit of $30 to $40. That way you must get it right in less than 50% of the cases to get a good result!

What is the best way to practice?

You must practice a lot! Trading is a skill  you do not learn from books. Of course, you can learn aspects of trading, such as technical and fundamental analysis, from a book. However, only theoretical knowledge is not enough. Therefore, it is important to practice often. Try out different investment methods and see if you manage to achieve a positive result.

Do you want to try online trading yourself? Then open an account with an online broker and try out the possibilities. We have listed the best parties for you:

compare brokers

How do you become a good trader?

After you have read this article, you will know exactly how to get started with online trading. But of course, just trading online is not enough: You also want to achieve good results. In this part of the article we look at what you need to consider when you want to make money from trading.

Follow the trend

In many industries, it works well to be opinionated. Artists make more money when they create something unique and as an entrepreneur you better come up with an original plan. Unfortunately, when you start trading, this works a little differently!

If you want to get a good result, it is wise to trade with the trend as much as possible.  Creativity is therefore often not beneficial. Investors sometimes say the trend is your friend. By buying when prices are mainly rising and selling when prices are mainly falling, you greatly increase the chances of success.

Take a break on occasion

Similarly, boredom is not the trader’s enemy. It is better not to have a position at all than to lose a lot of money. When it is unclear where the market is going, it is better not to act.

Even when there is a lot of uncertainty in the market, sometimes it is better to wait and see. For example, think of the Central Bank's announcement of interest rates. Taking a position at such a time is more like gambling than trading.

what is trading

Have a plan

The best traders understand that they need a plan to deliver good results. First, determine the amount of money you want to trade with. This is your ‘corporate capital’. Based on this, you can determine the size of the positions you can take.

If you want to act wisely, you set fixed percentages with which you trade. For example, risk no more than two to five percent of your total invested capital on a single trade. This will prevent you from losing the full amount in your trading account. When things go well, it is prudent to stop trading and evaluate your performance. Be critical of yourself and make sure you always trade profitably in the long run.

Do not get cocky

Everyone seems to want to have an opinion about everything. Racial matters, the climate or the future of the European Union. Everyone is an expert these days. As a trader, it is better not to have an opinion.

Do not act based on what you think is good or bad. The stock markets often anticipate good news or bad news. When good news is expected, people start buying shares. As soon as the news is presented, you see that many traders take their profits, which can cause the price to fall. So, it is not about your opinion, it is about the actions of large groups of traders.

Set simple rules

Finally, it is important to draw up simple rules. The most complex system is often not the best trading system. A good trader needs a lot of discipline. When you make the rules too complicated, it is a lot easier to (accidentally) deviate from them.

Therefore, set some rules that determine whether you open a trade or not. Then evaluate these rules constantly and adjust where necessary.

Trading as a profession

Many people encounter trading while they hold another job. They trade in addition to their profession. However, it is also possible to trade professionally within a company.

Traders often earn a high salary. The average salary is around $600 per month with outliers to $7500 per month. In addition, traders have good working conditions and you can get high bonuses.

These types of positions are often extremely popular. You must be good at math and leave a fair number of competitors behind you. An example of a well-known company active in trading is Flowtraders.

FAQs

In this section we cover some frequently asked questions about trading. With this information you can gain a better understanding of the meaning of trading. 

What is a trader?

A trader is someone who actively trades on the market. Anyone can become a trader. To do so, you only need to open an account with an online broker. You can already start trading with an amount of $100.

What is day trading?

Day trading also means within the day. Many securities are traded within a session. For example, shares are traded during the opening hours of the stock exchange. Day traders try to take advantage of these fluctuations by taking one or more positions during this session. A Day trader will close his positions before the end of the trading session.

Is there such a thing as rapid trading?

In general, rapid trading exists. Traders often open multiple positions in one day. However, you can also trade long-term. This is what we call day intraday trading. In intraday trading, positions can sometimes be held for a few days to weeks. However, this is a lot faster than traditional investing. In traditional investments,  shares are often held for many years.

Can you trade as a beginner?

Beginners can also start trading. Many brokers offer the option to try out the possibilities completely without risk with a demo. This allows you to make some serious mistakes before you make your first deposit. It is advisable to start with a small amount of money. With many brokers you can start trading with a $100.

What is online trading?

All trading nowadays is done online. In the past, you had to call the bank to buy or sell shares. Fortunately, this changed. All you have to do is log into your account and you can quickly buy and sell shares.

What is Forex trading?

In Forex trading you only trade in currencies. For example, you speculate on an increase in the value of the euro against the dollar. Currencies often move fairly stable. As an active trader this allows you to predict the patterns well. This makes Forex trading more accessible for beginners. Do you want to learn more about investing in Forex? In our article about Forex trading you learn everything you need to know:

investing in Forex

What is margin trading?

With some brokers you can do margin trading. When you trade on margin, the broker finances part of your investment. You can open a larger investment with a smaller amount of money. This allows you to get a higher return with your investment. At the same time, the risk is also a little higher. It is therefore important to be careful when you apply a margin. Would you like to know more about this way of investing? In our article about leveraged investing you can read everything you need to know:

leverage investing

What is automatic trading?

It is possible to trade completely automatic with special software. Through automated trading, you can invest money without too much effort. You can copy the results of other investors. Of course, you must be careful that you follow the right parties. When you follow a failing investor, you do not get positive trading results. In our article on trading signals you will find out how to trade automatically:

trading signals

Useful links: start trading directly!

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