Online trading in 2021: Your SA guide to getting started

With the right knowledge and discipline, anyone can start making money by trading the financial markets

05 February 2021 - 07:09
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To become good at any discipline you must first understand the tools of the trade.
To become good at any discipline you must first understand the tools of the trade.
Image: Supplied/CM Trading

Want to start trading online but not sure where to begin? CM Trading’s insightful guide will help you understand all you need to know about online trading in SA and how to trade one of the most popular financial derivatives — contracts for difference (CFD). 

With the right knowledge and discipline, anyone can start making money by trading the financial markets. Here’s how:

1. Choose a reputable broker  

Online trading used to be the domain of a few elite institutions and firms but in 2021, there’s never been a better time for the average South African to get involved, whatever your skill level. To help you on your trading journey, your priority should be to partner with a reputable and trustworthy broker.

A broker will enable you to access financial markets and facilitate your trades. Make sure your broker is reputable and offers the best trading conditions such as low pricing, quick execution of trades, and security of your funds.

When signing up with a broker, you should only consider those who are regulated and licensed by supervisory bodies in SA such as the Financial Sector Conduct Authority (FSCA). CM Trading ticks these boxes.

2. Learn and understand the tools of the trade    

To become good at any discipline you must first understand the tools of the trade. With trading, you need to nail the basics of charts, graphs and trading platforms such as MetaTrader 4 (MT4), which is a long-standing and user-friendly platform.

Since you will be using MT4 for all your online trading, familiarise yourself with the ins and outs of the trading platform. 

Even if you’re a novice to trading, we have webinars, trading courses and educational packages to help you on your way.

3. Trade with the trend   

To be successful in online trading, you’ll need to understand how trends work and how to follow them, regardless of your skill level.

Since CFD trading allows for traders to speculate on the price direction of an underlying asset such as currencies, gold or oil without actually owning it beforehand, you can buy or sell at any time.

If prices are going up, you want to be on the buying side, and the earlier you open your “buy” position, the better. Buy low, sell high — simple right? However, you also have the opportunity to sell an asset and benefit from its downwards movements.  

Identifying an entry point in the market just before the uptrend or downtrend begins can be profitable, but it’s a fool’s errand trying to open a sell position when prices are still riding high in the hopes that the market will move in your favour, and many traders have blown up their accounts by doing this excessively.

So, while you can choose when to buy or sell, it’s rarely beneficial to go against the consensus and start trading against the market direction.

CM Trading provides real-time signal alerts and market updates.

Watch the video below:

4. Be patient and develop a strategy 

When you begin trading, it’s normal to make a few mistakes along the way. Ups and downs are a natural part of the market cycle — prices tend to fluctuate often and rapidly.

The trick is to understand and manage risk. Beginner traders tend to overdo it in terms of position size and trading frequency because there are so many opportunities throughout a daily trading session. However, the most successful traders aim to minimise their losing trades instead of maximising profit.

While both these mentalities can lead to the same outcome, the latter is what gives rise to emotional trading, which is proven to be detrimental to a trading strategy.

Adapt your trading style to the market instead of trying to do it the other way around and you will eventually find that it’s easier to stay profitable in the long term.

5. There’s never been a better time to get into trading   

You don’t have to have a business degree or existing knowledge of the global markets to start trading. If you’ve ever thought, “Hmm, I think I can predict what’s going to happen to that company/country”, then you’ve already taken your first steps to becoming a trader.

If you’re a novice, start by trading small positions to limit your risk and increasing your trade size as you build up experience. With CM Trading, you can also get access to private coaching sessions and take advantage of high-quality educational packages to develop your strategy.

There are unique advantages to CFD trading.
There are unique advantages to CFD trading.
Image: Supplied/CM Trading

Trading CFDs 

CFDs are contracts that allow you to trade a variety of underlying markets. You can sign up with a financial broker that specialises in CFDs and start trading the instruments available in your broker’s offering.  

Popular instruments to trade include:

  • stocks such as Amazon, Apple and Zoom;
  • commodities such as gold, oil and wheat;
  • indices such as Nasdaq, S&P 500 and JSE; and 
  • cryptocurrencies such as bitcoin, ethereum and litecoin.

There are several advantages to CFD trading:  

  • diverse range of assets — most financial markets can be traded through CFDs;
  • profit potential — since you can profit from both rising and falling markets, CFD trading is one of the most efficient and profitable methods of online trading;
  • low barrier to entry — you can start trading with minimal upfront capital and trading costs are significantly lower than any other investment vehicle; and
  • leverage — online CFD trading can be incredibly popular due to leverage; in short, it allows a trader to open trades that are worth several times more than your initial investment. This allows you to enjoy much higher returns — if you can bear the added risk.

Start trading with an award-winning broker today 

With more than 1-million registered clients since 2012, CM Trading has grown to become the largest and best-performing broker in SA.

CM Trading clients enjoy superior trading conditions including high liquidity from top-tier banks and financial institutions, as well as high leverage to maximise potential returns.

The broker offers a safe avenue to the financial markets and is regulated and licensed to offer its services by the FSCA.

Register here to get started today.

For more information visit the CM Trading website, call +27 (0) 10-500-8026 or e-mail info@cmtrading.com.

Follow CM Trading on Twitter and Facebook.

This article was paid for by CM Trading.