Online trading open doors that were once shut by brick and mortar stock exchange bureaus. Everyone from the young to the old, rich or middle class can now control a couple of assets and spew all sorts of investor jargons. However, not everyone comes out of the trade a winner and there are good reasons why.
As simple as the online trading setup appears at a glance, the real eye opener is when you get into the details. Ask any online investor and they will tell you that there are only two quick things to understand: a put and a call. These are represented by the numbers 1 and 0 and form the basis of what online trading is all about.
What a Call and Put Mean to a Stock Trader
In conventional stock trading, a call option simply means opting to buy over 100 shares of any stock at fixed prices. The opposite of this, which is the Put option is to sell the same 100 shares at fixed price as well. Both trade options have a definite future timeframe.
Things are quite different when we switch to binary options trading. What you first need to know is that you aren’t owning any shares; you basically trade in price movements of different assets. That said, a Call option, in this case, means you predict the price to go up in a given time frame while the Put option means you predict prices to go down.
The beauty of it all is that you don’t own any assets thus you are not at a loss when the price for the said assets falls in the market. This is why it’s so easy to trade online even from the simplicity of your mobile phone. Online trading companies like CMC markets already have a comprehensive mobile app on IOS and Android.
So Why Do People Lose Money?
As much as you will see the losers lamenting about how bad an app is or how cunning an online trading company is, the finger is pointed at them in most cases. Greed is the number one reason why so many people lose their money on their first chance of trading.
Firstly, mobile apps simplify everything for you. All it takes is to watch how the price indicators move on a digital chart and you predict whether the price goes up or down within a given time frame. A lot of novice online traders assume this is enough knowledge for them and don’t bother doing an outside research on what’s happening in the market.
Then there is the thrill of the first win that gets you clouded in judgment. So you made a profit of $13.46 on your first $10 and you feel you are ready to take on a full day of trading. In your next session, you put in all your money, make a call that prices will go up, but before you know, it goes down and you lose a huge portion of what you invested.
Lastly, we have those traders who only favour one side, that is a call or put, and don’t think about being open to the market scenarios. This is a recipe for disaster as prices shift within seconds, and an asset that was doing well a minute ago could go down price-wise in the next. So it’s always good to keep your options open to avoid a loss.
How to Trade Online Successfully
Slow down and take the time to understand how the market works. Understand how prices behave in the market and what are the factors causing this behaviour. Determine what kind of asset you are going to trade in; it could be indices, equities, commodities or forex, don’t just stick to one channel.
As a novice online trader, grow your portfolio in bits—trading by the minute and at most an hour. This minimises the chances of prices shifting rapidly on you and your money is lost. Once you have your experience and are sure of how markets will behave throughout the day, then place your money on a full day trade.
Above all, do your research and understand the factors affecting prices in the stock market. If it means foregoing your favourite sports channel for stock trading news, so be it. Growing your knowledge expands your experience and confidence to trade in bigger portfolios.