Trading online has been on the rise in the recent years due to the ever-increasing technology and the expansion of the stock markets. It has brought about trading innovation, and an increase in the trading instruments available to a trader. Many changes are taking place, and some markets have even attempted to eat into each other, as competition gets tougher by the day. You may not need to buy gold physically, but you can enter the gold market via another route: Exchange Traded Fund (ETF). The same scenario is possible in stocks, currencies, commodities and other investments. Several alternative ways to trade online are available to traders as follows:
The foreign exchange market facilitates the exchange of one currency for another, and you trade the currencies in pairs. However, some pairs are more liquid than others, so you need to study the market trends well before you embark in this business. Many currency combinations are available in the market, making it a potentially rewarding alternative way to trade online.
You could also consider the Options Market as another option to buy online. The market allows you to undertake positions in the derivative of an asset. Although options will grant you the right to sell an underlying asset, you are under no obligation to do the same. You have the leeway to buy or sell the underlying asset at a set price on or before the specified date. The option price may change about the value provided by the underlying stock. A careful analysis of the market trends and some patience can reap maximum returns for you.
Contract for Difference (CFD)
If the Options Market does not tickle your fancy, but you still want to own securities without actually possessing them, head straight for the Contract for Difference. It involves futures contracts where you use cash to settle the differences in settlement rather than the physical stocks or securities. You would like CFDs because they offer a higher leverage compared to traditional trading. Standard leverage can be as low as 2% and as high as 20%. You won’t have to worry about minimum amounts of capital or a cap on the number of trades you can conduct in a day, as CFDs don’t impose such restrictions. They allow you to participate in stock splits and receive cash dividends, increasing your return on investment.
An Exchange-Traded Fund (ETF) trades like a common stock on the stock exchange but experiences price variations throughout the day. They have a higher daily liquidity than mutual fund shares but attract lower fees, hence, making them the most attractive alternative way of trading online for investors.
The stock market avails you an opportunity to own a slice of any company by accessing its capital. You can choose between over-the-counter or listed securities. Over-the-counter securities are easier to manage because you deal directly with the seller or through a broker, such as CMC Markets. You may also find these securities on the pink sheets if they do not meet the listing requirements, or have low floats as is the case for thinly-traded stocks that go below the $5 mark.
The ever-increasing numbers of alternative ways to trade online mean that you can watch your portfolio grow from the comfort of your living room. You can try your hand at the forex market, ETF and Options Markets and you may just be in luck to make a substantial return on investment. Nevertheless, you must remember not to risk what you cannot afford to lose. These markets can be very volatile, and you need to tread and trade carefully.