The computer era has brought with it numerous benefits that are revolutionizing the way we do business, socialize and even how we trade the financial markets. In the past, financial markets were an exclusive place for finance gurus and their wealthy investors who had the large amount of money needed to join the markets. With the advent of technology and specifically the internet, the financial markets have now been opened to everyone through online trading platforms. We have a myriad of these online trading alternatives and having a clear understanding of the existing options to choose from will help you to navigate through the markets.
You can virtually trade on anything online provided you find the right broker that is offering the assets you are interested in and the quality of services that you want. Alternatives available in the market include trading in binary options such through advanced online platforms such as those provided by Stern Options, forex trading, vanilla options trading, CFD trading and spread betting among many other options.
Popular among the various online trading alternatives is forex trading. This is one of the oldest forms of trading in the financial markets due to its role in facilitating global trade for companies involved in international export and import business. Forex trading is also popular with travelers who must acquire local currencies in the countries they travel to in order to buy goods and services during their stay in the foreign country. Governments also are big players in the forex market to facilitate their international trade to acquire pubic goods and services needed by their citizens.
Due to its global nature, forex trading provides you with a market that is always open for 24 hours each day. You can trade with other traders in virtually every part of the world from your online trading account. The risk involved is that you will have invested your money in the trade and if you miss out on any trade, you could end up losing all your capital investment in it. On the positive side, you stand to gain a lot after understanding the market dynamics and knowing when to enter and exit each trade.
Vanilla Options Trading
Your next alternative is the vanilla options traded in the derivative markets. The vanilla options give you the option to either buy or sell a given underlying asset at a pre-determined price and after a period of time agreed upon when executing the transaction. You are however now obligated to buy or sell the underlying asset if the market price is better compared to the option exercise price. Online trading companies provide you with online accounts to venture into this market that had previously been a preserve for hedge fund managers and other veteran traders.
Binary Options Trading
Binary options trading is another alternative for online trading. This involves predicting the price movement of a given underlying asset and if your prediction is right you end up gaining returns; otherwise you lose money in that particular trade. The advantage of trading binary options is that once you have opened an account with your broker and deposited cash into it, you can trade from anywhere at any time while taking advantage of price movements in the market for your chosen underlying asset.
Also within the same category of speculative trading is CFD or contract for difference trading. This involves a contract between you and the CFD providers in online trading platforms. The CFD provider who is the seller agrees to pay you the difference between the current price of the underlying asset and the price at the end of the contract time. If the difference is negative, you then pay the CFD provider instead. You can take a position that the price will either go up or fall; and by the end of the contract time you will gain returns if your prediction is right.
Closely related to CFD and binary options trading is spread betting. Under this alternative, the spread betting company provides the bid and ask price of an underlying asset and you predict where the price at the end of the betting time will be more than or less than the stipulated spread. For instance, a spread betting company can give a bid price of $20 and an offer price of $30 for a given underlying asset. You then choose whether the price of the underlying asset will be more than the offer price or less than the bid price. If your prediction is right, by the end of the betting time you gain returns; but lose out if you are wrong.
With an array of options available in the online trading ecosystem, it is prudent to first understand each of them, their benefits and their shortcomings before getting into actual trading. Analyzing your risk appetite and the alternative you are most comfortable with also helps in building your confidence whenever you are trading; and hence increase your chances of winning in most of your online trading transactions.