Financial trading describes the buying and selling of assets in financial markets. You can trade anything from blue-chip stocks, commodities, indices, foreign exchange, and more. To find out how to start financial trading online, make sure to read this handy explainer.
This article at a glance:
- Financial trading refers to the buying and selling of assets in financial markets.
- You can trade different assets in the markets, including stocks, forex, commodities, Exchange-Traded Funds (ETFs) and more.
- Demo accounts allow traders to execute risk-free transactions in a live trading environment.
What is financial trading?
In a nutshell, financial trading is the buying and selling of assets in financial markets, in the hopes of a positive outcome. Financial trading takes place in all sorts of markets, such as oil, silver, tech stocks, indices such as the S&P 500, and more.
As a retail investor, you can open up a brokerage account and begin trading different financial products in the markets, including contracts for difference (CFDs). Let's break down exactly what financial trading online looks like, and how you can build a reliable financial portfolio of your own.
Types of financial trading
When you think of financial trading, stocks are probably the first thing to pop into your mind. However, this is just one of many types of assets that you can trade. The most popular types of financial trading online today include:
- Stocks: shares in companies that change in value according to the company's performance, financial prospects, and public opinion.
- Exchange-Traded Funds (ETFs): baskets of securities that are mapped against another asset, such as a commodity, index, or industry.
- Indices: baskets of securities such as stocks and bonds that measure the performance of a specific market.
- Forex: foreign currencies that are traded in pairs, such as the EUR/GBP or USD/JPY.
- Commodities: ‘hard’ and ‘soft’ commodities, including precious metals, energy resources, agricultural products, and more.
How can I start financial trading?
To get started with financial trading online, you'll need to:
The first step to financial trading is making sure you know what you’re getting into. This is especially so because sound financial trading is based on analysis.
Market analysis helps to understand price trends, and make educated trading decisions. Traders use technical analysis to evaluate price movements based on past price performance, or fundamental analysis to study external factors influencing the price of an asset.
Create your brokerage account
As a retail trader, you will need an intermediary who can provide you with access to financial markets, practice options such as demo accounts, competitive spreads, and tools such as leverage and risk management.
With INFINOX, for instance, you can open an account and access instant brokerage services for exactly these purposes. When choosing your brokerage account, make sure to pay close attention to the following features:
- Regulation: choose a broker that is regulated by a trusted authority.
- Safety of funds: check if your broker provides for secure handling of your funds, and has safety measures such as deposit insurance in place.
- Spreads: spreads are the quoted difference between the buy (offer) and sell (bid) prices of assets offered by a broker. Low spreads mean more competitive pricing.
- Fees and commissions: brokers often charge certain fees for account opening or trading.
Using a demo account, you can practice trading in real-time conditions but without taking on any risk. Demo accounts allow traders to execute risk-free transactions in a live trading environment, using professional-grade trading platforms such as Meta Trader 5.
This is an ideal way for beginners to learn the ropes, and access a wide range of features and resources, before they can start live trading.
Beginner-friendly trading strategies
If you're new to financial trading, benefit from these beginner-friendly trading strategies:
- Copy-trading: you can use your INFINOX account to automatically "copy" the trading activity of the most successful traders on the site.
- Stop-loss orders: place a stop-loss order on trade to exit a position and cash out if losses reach a predetermined level.
- Take-profit orders: choose the exact price level at which to close your open positions automatically for a profit.
- Trading the news: follow news activity around companies and markets to buy and sell depending on how developments impact prices.
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.