What is Online Trading

Welcome back to Financial Empires, today we will see what online trading is and how to start investing money through this new method that is much discussed on the net and that many of you are completely unaware of.

Definition of online trading

Online trading is nothing more than the activity of buying and selling CFDs through the use of trading platforms made available to all users on the internet by brokers.

The subjects that operate in trading

Now let’s go in order and try to understand the meaning of these terms starting with the first ones. CFDs, meaning Contract for Difference as the same word says are derivative contracts that users of platforms buy and sell.

CFDs are derivatives because they are based on the real-time price of the assets on which you operate, shares, currencies, features, indices etc., this means that when we go to buy for example 500 Amazon shares in reality we are not really buying the shares but a contract which is based on their price.

The broker, on the other hand, is the intermediary who makes available to users the online trading platforms that replicate the market situation with absolute reliability and which allows users to buy a contract or sell it based on the performance of the asset of interest.

The Trader, on the other hand, is the one who physically makes the purchase or sale, is the person to whom the broker’s services are intended or the investor who operates within these platforms in order to make money on the markets.

How online trading works

Now that we have at least partially understood the role of the subjects involved in this new way of investing, let’s see for a moment how the mechanism works.

Online trading is possible thanks to continuous market fluctuations that do nothing but make prices fluctuate from the bottom up and vice versa, this guarantees traders the ability to buy when the price is low and sell when the price is high.

The most important feature of online trading that differs a lot from the more natural practice of investing in the stock market is that in this case we can also make a profit when the price is falling.

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Financial Empires, The Editorial Staff

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