It can be intimidating to enter the world of online trading if you have never done so before.
It’s all about how you transact, committing to your schedule, not being led by your prejudices, and maximizing your trading ability with all of the resources at your disposal.
Trading as a beginner calls for a thorough knowledge of the fundamental factors that affect consumer behaviour, as well as the forces of supply and demand. In the wake of new technological advancements, external help can be sought. For instance, you can check out the best trading app in South Africa to get you going, but you’ll still need a basic understanding of online trading to pull it off.
A price change occurs when supply and demand are out of sync; if there are more interested customers in the market than there are sellers, the price is bound to rise, and vice versa.
The reasoning behind this is straightforward and extends to the fundamentals of currency trading and other general investments.
Traders can choose from a variety of trading accounts offered by online brokers, including:
Forex Trading - This is described as the process of exchanging one currency for another. In a particular currency pair, exchange rates fluctuate as one currency increases or declines in relation to another. Since online trading became feasible, the rise of forex trading skyrocketed.
CFD Trading - Traders will bet on the future of their underlying assets by transacting in derivative financial instruments such as contracts for difference (CFDs). Currency pairs, stocks, commodities, mutual indexes, and other financial instruments are examples of such reserves.
Demo accounts - These accounts, which are funded by virtual currency, can be used to practice investing, validate a policy, or evaluate a broker's services and website.
Basic Steps for Online Trading
Step #1. Select the instrument you wish to trade
It is critical to choose the trading instrument that is ideally tailored to your trading purpose, risk appetite, and financial literacy from the vast range of trading instruments available in South Africa.
Each instrument has its own set of returns, risk factor, and uncertainty, making it suitable for a variety of traders. Every financial market's price can fluctuate for a variety of reasons that are difficult to forecast.
Instruments that are good for short-term speculation are usually not the most suitable for beginners, while instruments that are good for long-term investment are preferred as they offer little risk.
Step #2. Choose a reputable online broker
Choose an online broker who can provide you with all the relevant tools, resources and help you need. Beginner traders should focus on customer service, educational opportunities, and account and trade minimums in general. Consider the stock exchange tools offered by the online broker.
A website that is streamlined, easy to use, and includes ‘how-to’ tips and a trader group of peers to help answer questions is ideal for new traders.
Step #3. Conduct extensive research about stocks
Your account is now ready for use, and you can begin investing. So, what's next? The most difficult thing is settling on the right stocks.
Most traders begin their research by reviewing public records such as quarterly reports, financial filings, and SEC reports, as well as outside research reports by expert analysts. All of this, as well as latest business news and risk scores, can be availed by your broker.
Start small, with one or two stocks and a fixed sum of money that you are comfortable losing.
You can reinvest profits in the stock — or in other firms — but don't throw more money into the pool until you've figured out what you're doing and have done your homework on other businesses.
Step #4. Adopt a strategy and stick to it
Investing can be an emotional experience for beginners. Losing money is never an easy thing to digest, and it is easy to panic. It's also easy to get caught up in the euphoria of a seemingly winning stock.
Changing your trading strategy after each loss would only push you farther down the learning curve, as you will never really master either of the trading strategies.
That's why you should think about how much you want to buy and at what price, as well as how much you're able to see a stock fall before selling.
The right kind of trade order can help you stay on track and avoid emotional reactions. Stop-loss orders, for example, trigger a sale if a stock falls below a certain price, reducing risk and losses.
Individual traders may find South Africa to be a comparatively favorable country to invest in because of its stable financial system and massive stock exchange, but enterprises may face huge challenges.
Additionally, the country's well-organized "Twin Peaks" regulatory structure could help to boost investor trust in the country’s banking system over time.
When looking for a broker to use in South Africa, traders should look for one that offers a wide variety of asset classes, a good trading network, tight supervision, and sufficient financial protection for a margin deposit.