Online trading has soared in popularity in recent years, with the proliferation of platforms making it easier than ever for novices and experienced professionals to get a piece of the action.
However, there are no guarantees when it comes to trading, so it pays to take care and pay plenty of attention to your situation to stay safe.
To make that easier, we’ve put together a few key tips.
Choose a reliable broker
Before you start trading stocks online, you must choose a broker you can trust. Ensure they’re regulated by the Financial Conduct Authority before opening an account and supplying them with your personal details. You can usually find out this information by scrolling to the footer of their website.
Once you’ve checked that, take a look at their reviews on Google and places like Trustpilot. If there aren’t many or there are several similarly worded reviews in a short space of time, it’s probably best to steer clear. It’s also worth seeing if there are any sign-up bonuses that you can make use of.
Make sure to compare brokerage fees and the services offered – the last thing you’ll want to do is pick a platform only to discover it doesn’t give you access to all the financial instruments you’re interested in.
Use limit orders
Volatility is inherent in trading – it’s part of the reason it exists, after all. This means your fortunes can change in an instant and you can go from looking at a tidy profit to a significant loss. It’s particularly pertinent when you’re trading on leverage, which is when you borrow funds from a broker to enhance the size of your position. It’s great for amplifying profits, but it also does the same for losses.
If you’re not going to be able to dedicate a lot of time to monitoring the markets, be sure to make use of stop-loss and take-profit orders. With these in place, you can set prices at which you’d like to exit the market and close your position. This ensures you get a level of profit you’re happy with and don’t experience losses that you can’t afford.
Diversify
Another way to protect your finances is to ensure you’ve got a sufficiently diverse portfolio. By avoiding having all your eggs in one basket, you limit the amount that a downturn in one market can affect you.
You can diversify in terms of the types of instruments you trade (stocks, indices, commodities, etc.) but also by hedging in the same market. For example, if you’re trading stocks in a transport company, you might want to also trade in an oil producer.
Take cybersecurity seriously
Whenever you’re sharing your financial details with a company, you need to take sufficient precautions.
If you use a VPN while trading then all your traffic will be encrypted, meaning it will not be readable if anyone intercepts it. It can also mask your IP address so snoopers will not know where you’re operating from.