Trading has moved on from auction house-esque trading floors to a predominantly digital format. If you’re somebody who is intrigued by the world of online trading, you might be on the hunt for more information to see if trading financial securities with the aim of making a profit is for you.
As online trading educators, it’s our business to help new traders learn the ropes, understand the markets they operate in and provide brilliant resources that give our members the confidence to trade successfully online.
As a big part of our approach is transparency in what we as traders do, here we have summarised the main advantages and disadvantages of online trading so you can weigh up the pros and cons before deciding if you want to dive right in.
Exploring The Advantages Of Online Trading
Online Traders Are In Sole Control Of Their Investment Decisions
In contrast to trading via a traditional stockbroker who will usually offer input and advice on trades to make, when trading online, you will be handling your own finances and are in total control of every investment decision you make. Depending on the level of independence you like, your personality and appetite for risk when it comes to big decisions, this could be a good or bad thing!
If you like flying solo and being in control of your own financial decisions then this can be seen as a bonus, but if you prefer a more cautious approach and running ideas passed by others before committing, online trading might not be for you.
Whichever route you choose, over time you will become experienced enough to be able to spot good investment opportunities and execute timely trades in order to do more of what works and less of what doesn’t, especially if you always keep track of your trades with a trading journal.
Online Traders Enjoy Lower Fees
In the 1980s, the cost of making a trade on the NYSE ranged anywhere from £50 to £1,000s according to the size and type of order desired. Today online brokers commonly offer trade execution for under £10. You should always shop around to compare broker prices before committing but in general online fees will always be lower than commission charged by traditional brokers.
Online Trading Is Immediate & Takes Place In Real Time
For those that like instant feedback and convenience, there is nothing faster than online trading! Once you have opened an online trading and demat account, you’re away with immediate trading ability & real time investment monitoring. This means you can log in and trade at times that are convenient to you and always have a handle on how your investments are performing.
There Are Brilliant Online Trading Educators Available
It’s natural to feel daunted as a newcomer to the world of online trading and while it’s true that online trading doesn’t provide a get rich quick solution (does this even exist?), there are lots of lovely people like the team here at Trade Room Plus, if we do say so ourselves, who can show and teach you everything you need to know in order to stand the best chance of success.
Online trading platforms boast tools, resources and information to help you optimise your trades. You can check out our You Tube channel if you learn well from videos or take a browse through our free training resources and blogs if you like to absorb information by reading.
Online Trading Can Raise Your Income Levels
If you like the idea of being in control of your own income, we can see why trading might peak your interest. When trading online, the level of financial gain you enjoy will depend on many things including your appetite for risk, level of understanding of how online trading works and your specific trading strategy.
Of course, no trade comes without risk but when everything aligns, there is a good chance that you can boost your income with returns that beat any savings account going in the current market. This makes online trading an appealing way to boost your income without putting in overtime at your regular place of work for many first time investors.
Online Trading Is Safe And Secure
Providing you use trusted online brokers (Here is our list of highly regulated brokers that we use and recommend at Trade Room Plus), and exercise the usual safety measures that you would with any online transaction, online trading is a safe and secure way to trade.
Always remember to trade in regulated markets, check regulatory bodies for your brokers, use practice accounts before trading live and utilise best practice for internet use such as not sharing your passwords or devices to trade, logging out after a trading session and ensuring your trading platform is secure, you will be off to a good start.
Online Trading Is Flexible
Whether you’re a small stock trader chasing profit within the market or an institutional player looking to manage a vast portfolio of holdings, there really is a trading style for everyone. Depending on the timeframe of the investments made and length of time the trade is open for, you can choose to trade in a way that fits around your life.
So whether you can dedicate all day to trading or just a few hours in the evening, there is trading style for everyone to learn to trade online and if you find that your personal circumstances change and you have more or less time to trade, you can simply adjust your trading strategy to reflect this. Find out more about each of the trading styles below in this article.
| TRADING STYLE | TIMEFRAME | TIME PERIOD OF TRADE |
| Scalping | Short-term | Seconds or minutes |
| Day trading | Short-term | 1 day max - do not hold positions overnight |
| Swing trading | Short/medium-term | Several days, sometimes weeks |
| Position trading | Long-term | Weeks, months, years |
Availability Of Leverage
Using leverage is a way for traders to use credit provided by the broker in order to take on a greater position in a stock without having to pay the full value. For example, forex brokerage firms commonly enable clients to use 100:1 leverage on their account balance which means the amount an investor has available to trade with is greater than their actual account balance which can be both a good and bad thing. Larger returns are made possible without investing more money but equally, the risk of loss and ending up with a negative balance is also increased, so always use leverage wisely.
Explore The Disadvantages Of Online Trading
Risk Of Over Trading Or Investing Too Much
For novice traders or those that get carried away or easily frustrated, you can run the risk of over trading or investing too much. Over trading simply means engaging in more trades than can be supported by the market or the funds and resources available to you such as money and time. This is all to easy to do when you get a thrill or a fright from your current investment performance!
Find out how to create a rock solid trading strategy that you can regularly refer to in order to execute trades that work to meet your online trading goal and aren’t just knee jerk reactions to what is happening in the market around you.
Complacency Can Set In
When trading online, it can be easy to become complacent and take risks that you wouldn’t normally take because you can easily lose sight of the fact that you are still dealing with cold hard cash.
As the act of pushing a button to make trades is so disconnected from handing over actual money, it’s easy to fall into the trap of over investing, and taking risks or making poor investment choices.
Protect yourself from complacency by thoroughly understanding the stocks you are buying, and setting up safeguards in fast-paced markets such as placing a limit order on your account to control what and how much you can buy.
Technology Might Let You Down
When using technology, there is always a risk that it will fail. For example, a slow or lapsed internet connection could cause you to inadvertently trade again in error, or miss out on crucial trades resulting in lost funds. Make sure you understand how to verify trades have been made successfully and review statements before you begin using an online investing system. If you’re serious about investing check out our recommended tech set up in this article. Hint - you will need more than one computer screen!
You Need To Know Your Trading Psychology
We place a big emphasis on trading psychology at Trade Room Plus because the way you approach trades, and the way that you react to wins and losses is just as important, if not more important, as being able to determine the direction of a stock’s trend or evaluate investment vehicles.
Being able to control fear and greed is important for investors so that they can remain disciplined in their actions and not make knee jerk reactions based on the way they feel. Not everyone can do this but you can find out more about training psychology and what you need to be aware of here.
You Can Lose A Lot Of Money
Without a doubt, every trader will lose money but losing a lot of money is a big worry for new investors. It’s likely this fear to contribute to the statistic that around 80% of new short term traders give up within the first two years. To minimise the risk of loss, you should always remember that you should never invest more than you can afford to lose, and you should never bet more than 1-3% of your total investment value. Find out more about the risks of trading and how to mitigate and manage them here.
There Is A Big Learning Curve
There is a big learning curve for online trading which can put many people off but if you are prepared to invest enough time to learn how to successfully trade online, then there are plenty of rewards to be had.
Misinformation
There is no doubt that online trading is growing in popularity, and with popularity comes misinformation and manipulation. Keep your eyes out for scams claiming to help you ‘get rich quick’ from trading online - as this is impossible. Always use trusted sources for your trading education such as well known financial publications like the financial times, national news broadcasters, finance specialists, and experienced online traders and stock brokers. If you are in any doubt over the legitimacy of a broker or trading package online, don’t use them.
Where Can I Find Out More About Online Trading?
We hope this article has provided some transparency in regards to things to be aware of when trading online. As we have said, there is no magic method involved in trading, and trading success will only come from consistency, practice and knowledge how to execute the best, most timely trades.
As an online trading educator the team at Trade Room plus supports thousands of investors taking their first steps into the world of online trading every year. We teach the theory, the strategies, the planning and the trading discipline you need in order to succeed in online trading. Our membership and the training education available is suitable for those looking to trade part-time either in the evening or during the day and those wishing to trade full time.
If you’re ready to join thousands of online investors taking control of their financial profitability online, our online trading education hub, trade room simulators, free 14 day trial and excellent customer satisfaction scores make Trade Room Plus a brilliant place to start your trading journey.
Membership gives access to our Live Trade Room and our exclusive live and recorded training. This training will help you to master technical analysis, chart patterns and price action trading, when to short sell and when to go long. You’ll learn how to trade on standard trading platforms and MT4 (MetaTrader 4 or 5). Whatever your trading style, our day trading strategies will help you to take charge of your financial future.