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Strategies for online stock trading – Trading tips for 2019

Basically, online trading is using an electronic device – a computer, tablet or smart phone – to buy and sell financial products using an online trading platform. Brokers based on the internet, and there are many of them, provide the platforms and you can use them to try to make money on the financial markets. As you learn more about the process you will be able to develop strategies for online trading that suit your own knowledge and skill levels.

  • Active trading
  • Passive investing
  • Useful stock trading strategies
  • Swing trading and scalping
Stocks Highlights

Strategies for online trading

There are several ways you can develop your knowledge and understanding of trading strategies, and once you have set up your first trading account you can start to learn how online trading works. Before setting up your account you should carry out a broker comparison so that you are able to select a broker that suits your own trading style. By checking out what the various platforms offer, you can see what level of complexity they have. Some brokers offer their own bespoke trading platforms but will often also offer the popular MetaTrader4 (MT4) platform, whilst others may only offer MT4 or sometimes MetaTrader5.

Whichever broker you choose you will need to familiarise yourself with what the platform offers, the types of charting and tools available to you and the depth of educational tools such as videos, seminars, webinars and explanatory documents. Trading can be a very risky business, so it is important that your research is thorough and that you fully understand what the risks are. There are many online trading guides you can access to help you, but perhaps the best tool for beginners is to open a demo account with a broker. These provide you most of the functionality of a live account, but you are using virtual money rather than your own. This type of account will help teach you the ins and outs of trading and is the first step to developing your own stock trading strategies.

Top 3 Stock Broker Comparison

1
of 10 Stock Broker eToro
National fees £0.00
Custody fee £0.00
Intl. fees £0.00
Dep. Protection £50.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Interactive Investor
National fees £7.99
Custody fee £9.99 monthly
Intl. fees £7.99
Dep. Protection 50.000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

Active trading – short term investing

You can utilize several stock trading strategies once you get involved in active trading. Active trading is when you buy and sell securities that are based on short-term movements in a market to try to profit from price movements on a stock chart. If you intend to be an active trader, you will want to focus on volatile stocks such as derivatives and foreign currency trades (Forex). These are highly liquid markets which can be difficult to read and will behave unpredictably at times. It is important that you develop your knowledge of technical analysis by using predictive methods that are based on the price charts of an equity. Brokers offer powerful tools to help you with your speculative decisions on whether a product is likely to rise or fall in price.

Active traders will usually have a high volume of trades so that they can make profits, because short-term price swings are likely to be relatively small. Provided you are keeping a close eye on what the markets are doing, you have more possibilities for turning a profit by using high volumes. Techniques include frequently using limit orders which let you set specific price levels that determine when securities are sold. A take-profit order allows you to set an upper price limit; in this scenario, you could find that if prices unexpectedly rise high you may not make as much profit as you may have anticipated. As you gain more experience you will find which method best suits you.

forex 1

Buy and hold – passive investing

The converse to active trading is buy and hold, a passive investment strategy that might suit the more cautious investor, though you can use both stock market strategies to hedge your bets. With buy and hold, you buy stocks and hold them over a long-time period, no matter how the market fluctuates. You can actively select stocks, but you will not be interested in short-term price movements. Though if you are doing active trading as well, then you will be keeping a close eye on what the markets are doing in the short-term.

There are, as one might expect, differences of opinion about which type of strategy is superior. There is certainly considerable risk with the active trading strategy, especially if you are a newcomer to investing. But experienced traders can often make good profits from speculating on short-term price fluctuations. If you go for a buy and hold strategy, you may be able to get tax benefits, depending on your financial circumstances. If you hold investments over the long term you could be in a position to defer capital gains taxes. You should check the situation with a financial advisor before making a decision.

  • Buying and holding – a much more passive investment strategy
  • Look to long-term rather than short-term
  • Possible to get tax benefits

Day trading and position trading – sound strategies

These are both stock market strategies used by active traders and the most well-known is day trading. Day trading is what you do when you buy and sell securities within the same day, as the name implies. You take a position in whichever market or markets you want to trade on and close that position the same day, so you do not hold it overnight. Day trading tends to be the province of professional traders who are alert to all the possibilities of short-term gains or losses. But with the arrival of online brokers, there are many novice traders who can practise to see if this type of active trading suits them.

Position trading is considered by some in the business to be similar to a buy and hold strategy rather than active trading, but when it is carried out by an experienced trader it can arguably be called a method of active trading. If you want to test out position trading you will be using longer-term charts, which could be from daily to monthly. You would then combine this information with other methods so you can work out where the current market direction is going. You want to look for the long-term market trend in the securities you are interested in, take a position depending on how you think the trend is going to go, and exit that position when the trend breaks and starts to do something different. If markets are volatile, then trend trading can be difficult.

etf 2

Swing trading – after a trend breaks

Swing trading normally happens after a trend breaks, since when a trend ends you can expect some price volatility as a new trend tries to get established. It is not always the case, but if price volatility does set in, then swing traders will buy or sell the relative asset. Swing trades are generally held for over a day, but for less time than trend trades. These types of traders will frequently create a set of rules that are based on fundamental or technical analysis.

Fundamental analysis is how traders evaluate a security to try to assess its intrinsic value. They do this by looking into related financial, economic and other quantitative and qualitative factors that may affect the value of the security. This would include the conditions of the economy and industry, macroeconomic factors, and the company’s management and its financial conditions (microeconomic factors). The basis for doing this type of analysis is so that a trader can get an indication of whether the security is overvalued or undervalued and then trade appropriately with this information.

  • Swing trading relies on taking advantage of price volatilities
  • Generally, trades are held for over a day
  • A big emphasis is placed on analysis

The set of rules swing traders implement, known as algorithms, are designed so that traders can identify when it is the right time to buy or sell a security.

cfd 3

Scalping – a fast moving pro strategy

The term scalping sounds a bit drastic, but it is used by active traders and is one of the fastest strategies they employ. The idea behind this strategy is to get as many profits as you can on minor price changes. Traders who employ this strategy reckon that you can catch small moves in stock prices more easily than large ones, and those who implement this are known as scalpers. The idea is to try to make many small profits that will compound into large gains as long as there is a strict exit strategy that is designed to prevent large losses.

If you want to try scalping, then you need to be an experienced trader because the strategy requires precise timing and execution of trades. Your plan would be to use larger-sized positions to get smaller price gains, but in a short period of holding time for one day or a period during that day when trading is open. Your main objective is to buy or sell a certain number of shares at the ask (bid) price and then sell as fast as possible, either at a slightly higher or lower price to make a profit. Speed is of the essence with this type of strategy as holding times could be seconds, minutes or sometimes hours. Scalping requires you to be highly proactive as a trader, so you need to watch interval charts with a smaller time frame and a range of other indicators.

1
of 29 Forex Broker Pepperstone
Currency pairs 70 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit £ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 29 Forex Broker GMO Trading
Currency pairs 60 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 29 Forex Broker XM
Currency pairs 55 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 5
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 29 Forex Broker ITRADER.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 29 Forex Broker ETFinance
Currency pairs Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 ETF Broker IG
ETFs w/ discount 1200
Custody fee 0 GBP
Min. deposit £ 0
Trading from 5 GBP
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker eToro
National fees £0.00
Custody fee £0.00
Intl. fees £0.00
Dep. Protection £50.000
Go to eToro
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Interactive Investor
National fees £7.99
Custody fee £9.99 monthly
Intl. fees £7.99
Dep. Protection 50.000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
of 10 Stock Broker Calamatta Cuschieri
National fees £ 7.50
Custody fee £ 0.00
Intl. fees £ 7.50
Dep. Protection 100.000€
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker Hargreaves Lansdown
National fees 11,95 £
Custody fee 0,00 £
Intl. fees 11,95 £
Dep. Protection 50.000 £
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 29 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit £ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 29 CFD Broker GMO Trading
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 29 CFD Broker XM
FTSE spread 1.0 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $ 5
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 29 CFD Broker ITRADER
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 29 CFD Broker ETFinance
FTSE spread 1 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit $/€/£ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 18 Crypto Broker eToro
Crypto currencies 10
Max. Lever 1:2
Min. deposit $ 200
BTC spread 1,50%
Go to eToro
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 18 Crypto Broker GMO Trading
Crypto currencies 33
Max. Lever 1:2
Min. deposit $ 100
BTC spread varied
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 18 Crypto Broker IQ Option
Crypto currencies 15
Max. Lever 1:2
Min. deposit $ 10
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 18 Crypto Broker ITRADER
Crypto currencies 33
Max. Lever 1:2
Min. deposit £ 250
BTC spread Floating
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 18 Crypto Broker ETFinance
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 250
BTC spread 1%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 7 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit £ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Social Trading Broker ZuluTrade
Underlying assets 200
Dep. Protection
Min. deposit £ 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 10
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker FX Pro
FTSE spread 1.5 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50.000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker

74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

4
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.

Biotechs – a calculated risk

Trading in biotechs should be done by experienced traders who are able to take what can be a very long position and have their capital tied up for potentially a long time. The basis of this strategy is to take a large position – hence the need for significant capital – in a biotech stock that is awaiting approval by the US Food and Drug Administration (FDA) for a drug or drugs in the company's pipeline. Given the enormous costs of developing and patenting a new drug, pharmaceutical companies need high levels of investment from institutional investors as well as individuals who can afford to take that type of position.

Before a drug can be approved by the FDA, it must first pass through a rigorous clinical trial and testing process. If the drug passes all the testing phases and gains approval, the stock will move upwards significantly, and you can make money on the back when the drug becomes available on the market. But if there are problems along the way, then there could be heavy losses and you may be holding something that could cost you a considerable amount of money.

  • Biotechs is likely a long-time investment
  • High levels of investment are needed at the beginning
  • Drugs need to be FDA approved

Quick gains should not be expected, and one should be prepared for a potentially volatile market.

Conclusion:

Conclusion

Trading strategies are used to try to determine the best way to profit from playing the financial markets. All trading carries risk and it will depend on your own risk appetite as to which strategies you want to use. If you are a beginner, you should always practice with a demo account using virtual funds as you build up your knowledge and experience before you go live and use your own money. By testing out strategic options as you practice you will get to know what you are comfortable with and what best suits your style of trading. One size does not fit all in the world of online trading, so take the time to thoroughly explore your options. When you do make the decision to go live, make sure that you are able to cover any losses if your trades do not turn out the way you had planned.

Stocks Highlights