Online trading became popular after the 2000s with the expansion of the Internet and the multiplication of the number of online brokers. It is an activity which has become democratized today, everyone can trade on the financial market.
If you want to become a trader, it is important to educate yourself; and that is the mission of Tradingenligne.fr. As professional traders with more than 10 years of experience, we give you our advice on the best trading strategies and the best online brokers.
The Best Online trading platforms in Canada
For this purpose, we have opened real trading accounts with the best online brokers in order to test their offers taking into account various criteria: the ease of use of the trading platform, the assets available, customer support, methods deposits and withdrawals, etc.
You will find all the necessary information on our comparison of brokers in order to make the best choices.
We will also educate you on all aspects of financial markets and trading in general, moving from traditional products such as equity markets, indices or Forex, to new products such as cryptocurrencies.
What is online trading?
Online trading is simply the act of buying and selling publicly traded assets in order to make a profit. This is done through online brokers who play the role of intermediary between individuals and the financial markets.
These brokers allow you to open a trading account and have access to a we trader which is an interface that guarantees you easy and quick access to financial markets around the world.
Gone are the days of going to the stock exchanges to trade at auction.
Today you can transact in the markets from home with your smartphone.
You can trade on different markets: stocks, Forex, indices, commodities or even cryptocurrencies.
Can you be successful as a freelance trader?
The short answer is yes. Don’t assume that you need a specific degree to become an online trader.
Certainly, there are professional traders who work in the trading room, but others are traders for their own account and are therefore completely independent.
However, please note that online trading is an activity that requires personal and financial investment. The trade of trader can be learned and your training can last several years.
It is a question of first discovering all the financial markets, then it is necessary to look at the financial products most suited to your income and your aversion to risk.
After finding the most suitable market, more research is needed in order to develop a trading strategy.
Forex is one of the most popular financial markets. This is where currency pairs are traded. Forex is the largest financial market in the world with an average daily trading volume of $ 5.5 trillion.
Currency pairs are bought and sold in pairs. For example, if you want to buy the US dollar, you have to sell another currency, especially the euro. In this case, we will focus on the EUR / USD currency pair.
Selling the EUR / USD pair is like buying the dollar against the euro. Conversely, buying the EUR / USD is like buying the euro by selling the dollar.
Forex is the most accessible market because it is open 24 hours a day, 5 days a week.
In addition, significant leverage effects are made available to you by Forex brokers, which allows you to multiply your gains, but also your losses.
The cryptocurrency market is relatively new. The first cryptocurrency, Bitcoin, was created in 2009. Unlike traditional fiat currency (euro, dollar, yen, etc.), cryptocurrencies are traded only in digital form.
These virtual currencies are based on a technology called Blockchain. They do not need the intervention of banks, because they are exchanged directly between
individuals. Cryptocurrencies are therefore not issued by banks, but created through a complex process called mining.
Today there are more than 1600 cryptocurrencies. They can be traded through the various cryptocurrency exchange platforms that exist.
Brokers also offer cryptocurrency trading using CFDs (we will learn more about CFDs below). You can therefore take advantage of the fluctuation in the prices of these currencies without owning them digitally.
To take advantage of Bitcoin fluctuations, you can simply buy or sell the Bitcoin CFD. The evolution of the latter closely reflects that of the price of Bitcoin. Therefore, with your Forex trading account you can also trade cryptocurrencies.
The cryptocurrency market is relatively new. Volatility is very high there, so caution is required when entering this market.
Raw materials are natural or agricultural products that we use in everyday life. The most traded commodities are listed on exchanges like the New York Mercantile Exchange (NYMEX).
The prices of raw materials are governed by the law of supply and demand. Macroeconomic factors and political decisions can also impact the commodity market.
As a private trader, the commodities market is within your reach. Derivatives allow you to speculate on the prices of commodity assets while taking advantage of the leverage offered by your broker.
The equity market
When a company needs financing, it can resort to indirect financing through a bank. But it can also call on private capital by issuing bonds or selling stocks.
The share is a title deed which represents a part of the capital of the company. Shareholders who own shares of the company reap dividends (or profits) if the company is profitable.
The shares of the largest companies are listed on the stock exchange. They are therefore negotiable through the platforms of online brokers. However, thanks to derivatives, it is not necessary to own a stock to benefit from the rise in its price.
CFDs allow you to trade on the price of a share up or down without investing in the company in question.
Indices are indicators that represent a basket of stock market assets. It can be a group of shares listed like the CAC 40. Indices make it possible to invest in a group of assets.
By buying the CAC 40, for example, you are betting on the performance of the 40 stocks that make it up, which allows you to diversify.
When an index appreciates, it is because all the companies that make it up are in good financial health. Likewise, when an index depreciates, it is a sign that all the companies that make it up are in difficulty.
This logic is nevertheless relative, because in a bull market, we can have indices which drop slightly over several days before continuing to rise.
The most popular indices are equity indices: the SP500, the DAX and the CAC 40.
Note, however, that indices can be created from any type of asset.
ETFs (Exchange Traded Funds) or trackers work like mutual funds, but they replicate indices. These may be equity indices or industrial sectors. You can also find commodity ETFs.
Due to their advantages, ETFs are increasingly popular and take up more space in the capital managed by funds. Indeed, ETFs allow you to diversify your portfolio by investing in a basket of assets. Plus, they have
lower fees compared to some mutual funds.
Some brokers offer trading ETFs in the form of CFDs, making it easier to trade ETFs.
The derived products
Today there are many derivative products that make it easier for us to access financial markets. Whether you are a professional or an individual, you will find the instrument best suited to your approach.
We have already talked about CFDs. What are they ?
CFD stands for “Contract For Difference” or Contract for the difference in French. It is the most accessible financial instrument. This derivative product indeed simplifies online trading.
It is a contract between the individual trader and his broker on the evolution of an asset. If the trader is a seller, the broker is a buyer, and vice versa.
CFDs reproduce the price of assets. You can find equity CFDs, currency pair CFDs, or even indices. In Forex, for example, the EUR / USD CFD will behave the same as the actual EUR / USD price.
The options are much more complex than CFDs. An option is a financial instrument that gives you the right to buy or sell an underlying asset at a predetermined price and for a certain period of time. Investors sometimes use options to mitigate the risk associated with a position already taken in the market.
The options are similar to insurance contracts, when you buy a car you buy auto insurance to insure it. With an option, however, you can insure an asset (share, index, currency, etc.).
There are two types of options: a call option called a call and a put option called a put.
c) Binary options
Despite its name, the binary option is more akin to a CFD than an option. The difference between CFDs and binary options is that the latter do not have a stop loss and take profit, but they are defined by a short term expiration and a return set
by the broker.
A simple binary option can be defined as follows:
EUR / USD, expiration: 5 minutes, gain: 80%, loss: 100%.
In this case, when you open a $ 10 binary call option, it expires after 5 minutes. If the EUR / USD has appreciated during the 5 minutes, you gain 8 €, on the other hand, if the EUR / USD has depreciated, you lose your 10 € initially invested.
Binary options may seem simple at first, however, they are risky products, especially since their risk / reward ratios are disadvantageous.
Futures or futures markets
Futures allow market participants to buy or sell physical or virtual goods on a predetermined date and at a certain price, hence the term “futures contract”.
Futures are a regulated market. They allow buyers and sellers to trade futures contracts. Futures are therefore a parallel market to the spot market.
However, futures traders speculate on the rise or fall of the underlying assets without really resorting to futures contracts. Futures trading offers a more professional environment with notably very low commissions compared to CFD trading.
Choosing the right broker
As a private trader, you must necessarily go through online brokers to access the financial markets. There are hundreds of brokers online and most of them are unregulated.
It is important to choose your broker carefully. It’s good to make a profit while trading, but it’s not worth it if you can’t cash out your winnings. We have seen in the past brokers who disappeared overnight with their clients’ funds.
On Tradingenligne.com we only present reliable brokers who are at least regulated by a market authority. However, some are more advantageous than others, particularly in terms of commissions or other services made available to customers.
Some brokers offer free online training, webinars, as well as a variety of essential tools to trade properly. These include the position size calculator, the economic calendar, a financial news feed, etc.
In France, brokers are supervised by the Autorité des Marchés Financiers (AMF). The latter ensures the protection of savers. The AMF authorizes and controls players and investment products on financial markets.
The organization updates its blacklist of brokers to avoid every month. But if you follow our recommendations on Online Trading.com, you will avoid getting into trouble with
Take into account the spread and commissions
Brokers charge commissions on your online trading operations. If you open a large number of positions in a short period of time, the accumulation of commissions can significantly reduce your gains or increase your losses.
Therefore, you have to choose your trading strategy.
Some, on the other hand, do not take a commission, but are paid from the spread. The latter is the difference between the purchase price and the sale price of an asset.
You have to understand that when you want to sell an asset, you do so at its purchase price.
Conversely, when you want to buy it, you do it at its selling price, it makes sense.
The difference between the purchase price and the sale price is in the broker’s favor. You kind of pay the spread every time you close a position that has been opened.
Online trading regulatory bodies
As we have already said, brokers must be registered with market authorities. Their role is to ensure that these financial institutions comply with the guidelines and requirements for financial services.
Apart from the AMF, there are several financial market authorities around the world. The most notable in the online trading industry are:
The latter regulates many international branches of brokers. Indeed, many brokers have several branches, each of which is regulated by a different body. This allows them to comply with local laws and regulations.
Is Online Trading Risky?
Trading is a risky business. You expose yourself to markets that are volatile and prices fluctuate constantly. Several factors can cause a sudden movement in asset prices.
Among the factors that can turn the markets upside down are high impact economic news.
In Forex, for example, the posting of non-farm jobs in the United States, which takes place on the first Friday of each month, can cause sudden changes of several dozen pips on currency pairs in seconds.
The same behavior can also be observed after an interest rate change by a central bank. In addition, central bank presidents can also impact the market during their public speaking engagements.
Therefore, it is essential to follow the economic calendar so as not to be surprised by these interventions.
On the stock market, even technical analysis combined with deep fundamental analysis does not guarantee the success of your next market position.
You should not therefore invest the money whose loss would upset your finances.
However, you can mitigate the risks associated with trading by setting up a money management or risk management strategy.
How to manage risk in trading?
We help you set up your money management. These are strategies that allow you to limit risk and protect your trading capital.
Most beginners only focus on the technical part, with the strategy of entering and exiting a position. However, it is just as important to know what percentage of your capital you are going to risk per position.
There are different types of money management. Some methods are more aggressive than others, depending on your risk aversion, you will find the money management
that suits you best.
Risk management is based on stop loss and take profit investments. These two elements are essential if you want to be successful at trading. The stop loss allows you to liquidate your positions when the market continues to move in the opposite direction to that of your prediction. It is a tool that offers protection against uncontrolled losses.
Take profit, on the other hand, closes your position when your profit target is reached. The ideal would be to place, relative to your entry point, a take profit which is further than the stop loss. By doing this, you have a favorable risk / reward ratio.
What style of trading to use?
Traders generally have four approaches to trading: technical analysis, fundamental analysis, automated trading, and quantitative analysis.
Technical analysis focuses on studying the history of asset prices. The technical analysis trader only uses charts to which he can optionally add technical indicators to simplify his analysis.
Technical analysis also studies graphic figures that are repeated on the market (triangles, rectangles, bevels, etc.). Technical traders often take a short-term approach. They are therefore day traders, scalpers or swing traders.
Fundamental analysis looks more at macroeconomic aspects that can impact the market. In particular phenomena outside the market such as the economic health of a sector of activity, a country, or even a geographical area.
Fundamental analysis is the preferred tool for long-term investors who trade position.
Short-term traders can also use automated trading, especially Expert Advisors. These are commonly referred to as trading robots.
These are plugins that integrate with the trading platform and manage your positions for you.
Quantitative analysis is the pinnacle of automated trading. It is the application of mathematics to financial markets. Quantitative analysis involves analyzing a large amount of market data in order to find a profitable trading strategy.
This trading method emphasizes price history and volumes. The quant trader can also use technical indicators in his analysis. The goal of quantitative analysis is to set up an algorithmic trading strategy.