The Evolution of Online Trading

online trading

Online trading used to be complicated and expensive. It was more like exclusive access to the markets after the lengthy stock broker phase. In the beginning, not many people trusted online brokers. And if they did trust an online broker, the vast majority of traders didn’t really know what they were doing. Today’s online environment is much different. It’s simple and affordable. Let’s take a quick look at the evolution of online trading.

Marketing Messages to Clients

Online brokers have changed their marketing tactics and have done an excellent job at driving more traffic. For instance, welcome bonuses have been a big draw for traders and investors. Depending on the online broker and how much you deposit, you can receive a welcome bonus of between $50 and $3,500. Don’t get too excited about that $3,500. That’s usually if you have a couple million dollars to invest. Sometimes, a welcome bonus won’t come in the form of money but something else, such as access to a financial advisor, a financial planner, low margin rates, asset allocation and rebalancing, and more.

Other forms of marketing include access to proprietary materials and risk-limiting tools, such as stop loss orders. This allows savvy traders to minimize losses while still letting gains run and then setting a stop on the gains to lock in profits. Then you will sometimes find something unique, such as risk free trading with AvaProtect. This is an automated hedging feature that provides a new level of risk management. You can get your money back on losing trades and have up to $1 million in protection over a selected time frame. In order to qualify, you must pay a modest hedging cost. Features like these are often exclusive to that site and/or app.

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If you choose to go solo without protection assistance, you should know that most professionals will put a 2% Stop Loss on their entire portfolio. If you’re a retail investor, 2% won’t seem like much, but you should at least put a 6% monthly stop loss on your account. This will limit the losses for a bad month, stop the bleeding, and allow you to stay in the game. Before continuing, there is something you should know about stop loss orders. If there is a gap-down in a stock price, you could miss your exit point. This, in turn, has the potential to lead to a bigger loss. Now let’s move to the forex market for a moment. The information in the next section is critical if you plan on dealing in currencies.

Intro to Regulation

You can choose between two types of forex brokers: unregulated and regulated. This should be an easy decision. Always choose regulated. Unregulated brokers do not typically have rules to follow and usually operate in offshore tax havens. Some of them do this to cut costs because it can cost millions to become and remain a regulated broker. However, this is a matter of doing it right vs. looking for shortcuts. Regardless of the reason for an unregulated broker operating offshore, it can often lead to fraud, and you are the potential victim. This is a major risk to your capital because there is no way to recoup your losses.

A regulated broker means they are registered with a regulated body in their country. The broker must submit information to prove everything they do is legit. There are strict rules to follow, which is good news for you. It means you won’t be the victim of fraud and/or mistreatment. Also, if the broker were to go out of business, your money is safe. That isn’t the case with an unregulated broker. They could close up shop overnight and you have no recourse. In order to make sure a broker is regulated, check their website or app for the wording that they are registered with a regulatory body. After that, check reviews for the online broker to confirm that they are truly regulated.

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All Platforms

Evolution of online trading, all platforms pertain to stocks, forex, bonds, commodities, cryptocurrencies, ETFs, options, futures, bonds, and more. You can trade almost anything in today’s world. While the evolution of online trading everything has also gone from slow to fast compared to 20 years ago, which should be expected. Additionally, you now have access to easy order placement, advanced charting, profit analysis, research tools, and lower-cost trades. Pay careful attention to that last feature. This isn’t always a good thing. When you have access to lower-cost traders, this leads to overtrading, which is dangerous and often leads to losses due to emotion. Using a low-cost online broker is good, but only if you devise a plan to keep yourself out of trouble.