How Online Trading Works in South Africa. What is online trading and how does it work in South Africa? Learn about online trading South Africa and the benefits of trading online. Also compare the best online trading platforms and brokers for trading forex in South Africa.
What is Online Trading?
While the stock market remains a complex concept for many, the stock markets are nevertheless proving to be more accessible than ever to retail investors. The rise of the Internet has in fact really democratized the practice and online trading is very popular with savers. So concretely, what is trading? Explanation.
All About Online Trading: Definition
Let’s first see what trading means. English language word, trading in French means trading in financial assets, but it is the English word that is commonly used.
Trading therefore consists of selling and buying securities on the stock markets. Trading online is like placing orders directly on the Internet, through a stock broker. The online trade is simply an order to buy or sell placed on the Internet.
Today, the frequent question “what is a trader” is actually not so trivial since the Internet has greatly changed the situation. Originally, traders were employees of financial institutions that operated in physical stock exchanges. Today, these are dematerialized and any individual investor can declare himself a trader on his account.
Understanding Online Trading: How Does It Work?
Let us now see more concretely what trading consists of. To trade online, you must first equip yourself as follows:
- A computer, tablet or smartphone,
- Internet connection,
- A stock broker,
- A trading platform.
The basic equipment of the individual trader is therefore not very sophisticated, the computer or smartphone and the connection to the Internet being very common today.
For the rest – trading platform and stock broker – nothing too complicated either. It turns out to be very simple to open a trading account with a stock broker and to connect to it via a reliable platform such as MetaTrader for example. But online trading presents significant risks, it is imperative to choose the right stock broker, by checking that it is properly regulated by a South African regulatory authority such as the FSCA (Financial Sector Conduct Authority).
Online Trading: in which Markets to Invest?
More specifically, trading covers a variety of possible investments. We can thus trade on different stock markets: Forex, or currency market, stocks, indices (the Dow Jones or the DAX 30 for example), commodities, or even crypto-currencies, to name a few examples.
Financial markets are accessible through different types of contracts, such as Futures (futures contracts) or CFDs (contracts for difference). These investment contracts have this in common that they allow you to trade assets without actually owning them and to speculate on their price fluctuations, upwards or downwards.
Example: What is Forex Trading?
Among the most popular stock markets is the Forex, which is very popular with retail traders. So what is Forex?
Acronym for Foreign Exchange, Forex simply refers to the foreign exchange market, also called the currency market. The Forex trader bets up or down on currency fluctuations. In Forex, currencies are traded in pairs, for example the euro dollar (EUR / USD) or the euro Swiss franc (EUR / CHF).
What is Trader? – The Different Trading Styles
Just as one must choose which financial markets to invest in, the trader must also determine which style of trading he wishes to practice.
The trading style is closely correlated with the desired investment horizon, that is, the duration of the investments: basically, short-term or long-term trading.
A long term trading strategy is based on swing trading. This consists of keeping your positions open for several months or even years. A short-term trading strategy is based on day trading, or intraday trading. Here, the positions only remain open for a few minutes, or even a few seconds during a single trading session. The fastest intraday trading technique is scalping. To go even faster, we can use trading robots (Expert Advisors or EA). We are talking about automatic trading. A trading robot literally trades for you according to an algorithm that you have configured and can therefore trade very quickly. The robot can of course also be used for swing trading.
What is Trading? – Conclusion
At the end of this article, you now know all about trading. It’s up to you to decide which markets you want to enter and what style of trading to adopt.