About to Trade Online for the First Time? Read This First

About to Trade Online for the First Time? Read This First

One of the most significant developments in finance over the past few years has been the explosive growth of online retail trading. With this, anyone can now buy and sell complex financial instruments and assets over the internet, even using their smartphones to buy stocks in just a few seconds.

While this has led to an explosion of investment activity from the public, it does not mean that everyone with a smartphone should just start trading.

It is essential to know exactly what it means to buy and sell financial instruments online so that you can reduce risks and make more informed decisions with your finances. Here are the essential things to keep in mind before you start trading and investing online. 

stocks

You need a broker

Many people do not realize that, in order to trade real financial assets, you require a middle person of some sort. This is where your broker comes in. A broker is an entity that can provide you with access to capital markets and execute trades on your behalf. These usually come in the form of platforms that may take a small percentage of each transaction as commission or charge a regular fee for their services. Always use a regulated and trustworthy brokerage. 

Protect your funds

When you use a broker, you are placing your funds in an account with them, which you can then use for trading. It is therefore essential that you can protect your funds in case something goes wrong. The best way to do this is by choosing a broker that offers regulated fund protection, which will return your assets to you if a broker goes bankrupt. For example, if you are forex trading, you can use a regulated platform like Infinox, which offers FSC and SCB-regulated fund protection in the event that something goes wrong. This is the safest way to trade. 

Research widely

There are a million different factors that will influence the prices of assets on a minute-to-minute basis. While you are not expected to stay on top of every market development, you should do your research as widely as possible before making any trading decision. Many brokers offer in-depth financial market analysis to help you understand current trends. You can also consult expert publications such as Bloomberg or The Wall Street Journal to stay informed about the major market trends that affect your portfolio. 

Know your obligations

Finally, it is important to note that traders have certain tax and legal obligations to fill. On a basic level, this means making sure that you pay capital gains tax on any and all profits derived from trading, no matter what kind of asset you are trading. In addition, you should know that investing in US stocks from outside the US requires you to submit a W-8BEN form to the IRS. By doing this, you can prevent a huge flat tax from being imposed on your trading profits. 

Financial markets are complicated, but you don’t need a degree in economics to be a successful trader. Follow these steps to stay safe and make more empowered and informed trading decisions.