Boosted by the internet development since the early 2000’s, the financial industry had expanded tremendously, enabling ordinary people to get involved and profit from price fluctuations of different assets. Brokerage firms multiplied and trading costs were reduced to a few pips, making trading cheaper, faster and available even if you want to work from your bedroom. People were drawn in the industry like magnets, but let’s see if online trading is such a good alternative for you to invest your money.
Advantages of online trading
- Accessibility – online trading enables you to buy and sell thousands of instruments by a few clicks, by using a broker platform like mt4 or a web based platform. Trading had never been so easy due to software developments occurred in the last 10 years.
- Speed – a broker that works with a good liquidity provider can place your trades in under a second, at the exact market price, without requote. In the early days, you would have need to call your broker, wait until a representative will answer, tell him who you are, what you want to trade, what amount and until you would have done that, the market price would have been different, forcing you to enter at a worse price.
- Diversification – the ability to diversify your portfolio in a wide variety of markets in order to spread the risk and avoid being hit by a huge loss.
Besides these advantages, online trading carries with it some disadvantages as well, which should be taken into account before starting to invest online.
Disadvantages of online trading
- Scam brokers – along with the development of the financial industry, various scam brokers have arisen. It is very important that you choose regulated and trustful brokers that have a track record in satisfying their clients.
- Increased risks due to leveraged products – The improper use of leverage is one of the main reasons retail traders do not manage to succeed when trading online. It is very important that you use leverage in a professional way, so you won’t blow all your money after just one mistake.
- Tons of bad information available on how to trade. You don’t need a degree to trade and you can find everything that you need on the web. However, there are a lot of “get rich quick” strategies there that won’t help you at all.
To summarize, online trading can be a good alternative for investing, but it also carries some risks that you may lose all of your initial investment. It is very important that you dedicate yourself to learn new skills and build your craft so you will be able to succeed.