Online Stock Trading

Are you new to the trade market? Or are you already trading in the stock market, but are looking for alternative investment options? Then maybe you need to consider futures trading, and with these uncertain times and the advent of the internet, getting online and trading futures just might be the best thing you′ve ever done.

For the benefit of those entirely new to trading futures, let’s start with the basics. Trading futures work like an investment plan for traders; it involves trading commodities on the concept that traders speculate on the price fluctuations of a particular commodity. Normally there is a contract, which is essentially an agreement between traders to buy or sell a particular commodity at a particular price at a particular time in future. The futures contract, as it is called, typically has a standard price, quantity, and date of delivery. Simply put, the buyer and seller of the contract are guaranteed a specific price for a specific quantity of the commodity at the point of trade. Trade does not take place on the stock exchange, since futures are considered different from stocks. The Chicago Board of trade, the New York Cotton Exchange, and the New York Merchantile are just some of the locations where futures are traded in future exchanges.

So why futures? Futures can be a very profitable financial instrument in your investment portfolio if you have a sound trading plan. In the early 1970s, Richard J. Dennis, a former commodities speculator, was able to turn a loaned $1,600 into $200 million over the course of ten years. Of course, not all of us can achieve that level of success, but why turn away a piece of that lucrative pie when the possibility of making good money from it is there? The potential in futures trading is there for the taking, and with the internet, trading futures has never been easier.

There are many websites - set up by brokerage firms - that allow you to get online trading futures. All that is required of you is to register an account, and then to download trading software that will allow you to start trading online. Certain sites will even provide you with services of how you′d like for your commodities futures trading to be executed, like automated system execution, self-directed online execution, and broker execution.

Specially developed for online futures trading, the automated system execution service is an automated commodities trading system that makes your trading decisions for you. You can also create your own automated system that can help you execute trades on your behalf.

On the other hand, if you′re confident enough to make your own decisions and execute your own trades, then go for the self-directed online execution service. You will be provided a trading platform by the brokerage services that would allow you to make informed decisions with regards to your trades, and give you full access to execute the trades yourself.

But if you′re a beginner, your best bet would have to be the broker execution service. Because of your relative inexperience as a beginner, it would be better that you leave the trade decisions to your broker, who will make the trades for you on your behalf. Perhaps after you′ve gained enough experience and confidence in the market, you can then consider the other two choices mentioned above.

Getting online trading futures is really as simple as it seems, but like most cases, caveat emptor applies in your search for the online trading platform that might be best suited for your level of knowledge.

Let’s begin with a common cliche: Don’t put all your eggs in one basket.

A balanced portfolio is one that includes shares from a number of different companies and from different industrial sectors of the market. The more diverse the better. If one share, or one sector, performs badly, then you have balanced this with the gains you are hopefully making in your other companies and sectors.

Try to establish a spread of investments. As a general rule, you should aim to hold shares in at least six different companies in your portfolio at any one time. Remember, your first selection is likely to be your most favored company, and after you have chosen six, you are likely finding it harder to select a specific company to invest in from a range of alternatives.

Reinvest your dividends. If your investments pay Dividends, compounding the size of your investment by reinvesting the dividends will significantly increase the value of your portfolio.

You can limit risk by buying shares in ‘blue chip’ larger companies. Large, well established companies with a good reputation should maintain their value over the longer term, and if you are looking for long-term growth, this is the best place to start.

Try to limit your broker charges. These should be no more than 1.5% to 2% of the total value of your order. If they are significantly higher than this, then your investment has to grow by a significant amount to cover these costs and put you into profit! Remember, this is now a very competitive business area. Charges are under pressure and online Internet trading facilities have increased the pressure and further reduced your likely dealing costs.

For Long-Term Growth

If you are aiming for long-term growth, then providing your investment decision is based on solid company fundamentals, do not worry about short-term price fluctuations. Think in terms of what the company shares will be worth say 5 years from now.

If your reasons for originally selecting the company appear sound, and nothing has happened to adversely affect its value and performance over your 5 year time span, than it can be safe to assume that todays adverse fluctuation will soon swing back in your favor. (see further down for tips on aiming at short-term gains)

For Short-Term Gains

If you are after a shorter term gain, then you should become familiar with Technical Analysis, which measures the price fluctuations revealing indicators of when to enter and exit your trades. In this case, do not leave trades on for an extended period of time. Cut your losses, and find something more promising. If you are after short-term profits be on the look out to make moves from rocking chairs to Ferrari’s. It’s not worth hoping for a bounce back, if there are other opportunities clearly making strong gains right now.

Mikael Lorenzo writes for Digital Look where you can find research data and tools for investment research and more articles about how to invest