There are many alternatives to choose from when it comes to online brokerage accounts. You need to find out several things before deciding which broker to choose:
First, you need to find out if the broker is trustworthy and legitimate. Ask how you will get back your money should you want to withdraw. Investigate online security. Is the information encrypted with the latest security measures?
Second, you need to know which markets you’ll trade. Will you just trade stocks or maybe currencies and commodities? Does that online broker offer these markets? Financika, for example, offers a wide range of markets for trading including currencies (both major and minor), commodities (energy, base and precious metals, and agricultural commodities), CFDs and major stocks, as well as international indices (in North America, Europe, and Asia). That’s a quite a comprehensive offer and coming from an established broker.
Third, what are the transaction fees? These can differ substantially among the brokers. There is no reason to overpay unless you get much better research and service.
Fourth, find out what kind of research you will get. Since as an individual trader you will rely on your own knowledge and skills, it is necessary to get advanced charts, live news, research, and assistance. Financika (link to the Arabic version) offers advanced charts, daily market reviews, and live news.
Differences among markets
There are some major differences when trading different markets. Trading oil is much different from trading currencies or stocks. Below, some major points to know are highlighted.
Trading currencies (forex). When trading forex, you trade currency pairs. There are many pairs to trade including GBP/USD (British Pound vs. US Dollar), EUR/USD (Euro vs. US Dollar), USD/JPY (US Dollar vs. Japanese Yen), and so on. The first in a pair is the base currency (GBP in GBP/USD) and the latter in a pair is the quote currency. When you look at the pair, it shows how much of the quote currency is necessary to purchase the base currency. So, if you see a GBP/USD price of 1.5439, it means you need to pay $1.5439 to get 1 pound.
It is noteworthy to point out that when trading foreign exchange, you get leverage, which means that you only deposit a small amount of trade’s value. And leverage works both ways: you can make more than without it if you’re right, or you can lose more as well. Using leverage requires full understanding of the risks associated with a particular trade. It is also crucial to put stop orders, levels at which your trade will close to avoid massive losses. So now how much you’re willing to risk.
Trading commodities. When trading commodities, you either bet on a particular commodity’s rise or fall. For example, if you think oil will decline, you place a sell order, hoping that later you’ll close the trade at a lower price (buy back to cover), thus making a profit. Before you enter a trade, you need to know how much money is each point move worth, and it differs among commodities. Many traders specialize in one type of a commodity, some may trade only energy, while others opt out for metals or agricultural staples. It is important that you know that specific market before you enter it, and factors that affect its pricing. For instance, many commodities are priced in US dollars, effectively when a dollar rises, these fall in value. Of course, there are other fundamental factors, which are related to the supply and demand, that you need to be following.
Trading stocks. This is one of the most popular markets that traders pursue. Stock prices are affected by multiple factors related to the economy, industry, and particular company. Careful study of fundamentals is needed, although many traders rely mostly on technical analysis which includes trends, moving averages, and oscillators. You can bet on stocks rising or falling. When you bet that a stock will fall, you go “short.”
Trading Contracts for Difference (CFDs). You can trade CFDs on many markets, including stocks. With CFDs you can bet on both sides- either for a rise or a fall in a particular security’s value. Remember that CFDs are leveraged instruments, so your losses or gains are multiplied.
Trading indices. When you trade an index, you bet on its rise or fall. There are many indices but some of the most popular in the United States are Dow Jones, NASDAQ, and S&P 500. In Europe, the major indices are FTSE 100 (UK), CAC 40 (France), and DAX (Germany). In Asia, the most important ones are NIKKEI 225 (Japan), Hang Seng (Hong Kong), and Straits Times (Singapore).
Whatever you choose to trade, learn the market first. Also, learn the system your broker offers so you can easily enter and exit trades. Knowing what your risks are is important as well, this way when you place a trade, put a stop order, so risk is controlled.
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