Online trading is fast gaining momentum due to the convenience and flexibility that it offers to traders. Increased penetration of the Internet and the invention of Smartphone have made online trading easier for most people. Currently, you can trade from anywhere, anytime as long as you have access to your computer/Smartphone and a stable internet connection.
Opening an online trading account on one of the many online trading platforms such as CMC markets is simple and straightforward. However, there are several ways you can trade online and make profits. Below is a description of the most used trading styles that you can easily learn and adapt.
Scalping is one of the fastest ways of trading. In scalping, traders take advantage of the gaps created by the bidding process and asking spreads and order flows. Traders make a profit by selling the commodities at an asking price which is higher than the buying price of the security or spread. There are minimal risks involved in this type of trading since it is a short-term strategy.
It is usually safe to practice scalping with smaller amounts of capital while increasing the number of trading times to maximize profit. Although the profit margins involved in scalping are lower than those in many other forms of trading, the profits here can easily add up hence doubling or even tripling your fortunes. Scalpers require less analysis of the market trends since trades are intraday.
Spread betting is more of a speculation scenario. It is very similar to CFD trading. It usually involves placing a bet on the speculated price movement of a security. Mostly, the spread betting company will quote two prices; the bid and the offer price which is commonly referred to as the spread. Investors are then required to bet whether the price of the underlying stock will be lower than the bid or higher than the spread.
In spread betting, the investor does not own the physical stock but simply speculate on the price movement of the stock.
For example, assuming that the spread betting company quotes a bid of £150 and an offer of £200for X stock and you are pretty sure that the price will be lower than the £150 bid price. Since you are confident about this speculation, you can decide to bet £3 for every GBP that X falls below £150. If the final price of the stock comes to £100, you receive £150, but if the price goes to let’s say £230, you will end up losing £90.
Swing trading usually holds a position in a stock for a relatively longer period compared to day trading. Swing traders usually try to predict short-term fluctuations in the price of a given stock. In swing trading, it is possible to hold a position for more than a day to allow the stock price sometime to gain the required momentum for maximum profits.
Swing traders usually hold a stock position for few hours to several numbers of days. In swing trading, you stand a chance of gaining more returns than day trading. Sometimes swing traders are forced to assume the overnight risk, unlike day traders who liquidate their positions at the closure of the trading day. Several risks are involved in sticking to your positions overnight, and you can easily end up with significant losses to count the following day.
Day trading is a simple strategy. Traders are simply involved in buying and selling of stocks throughout the day. Traders are always hoping that the stock prices will fluctuate in value during the day allowing them to earn some quick profits.
Day traders hold stocks for few seconds to few hours and will always make sure that they square off all the stocks before the close of the day. After the close of the day, a day trader does not own any positions meaning that day traders are always immune to the overnight risks. Some of the strategies involved in day trading include rebate trading, news trading, scalping, and arbitrage.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.