If you want to engage in the financial markets, there are several things to consider. First, you’ll need to face the idea that headwinds, as well as advantages, lie in front of view.
Technological developments had enabled a simple individual to invest from the comfort of his own place. But yet, if we analyze the statistics, retail traders fail to have consistent results.
The lack of education and understand lie behind this, which is why today we will talk about the pros and cons of online trading, so you will be fully aware of them.
Pros of Online Trading
Despite some frustrations coming from people who did not manage to succeed in the financial world, online trading carries some real advantages. The first one is accessibility. In other words, you can get in on the market action with just a PC. After that, all you need is limited capital, and an internet connection.
Second of all, liquidity is quite an important thing to note. With so many people willing to buy and sell in the market, liquidity had increased exponentially over the past two decades. All of this is significantly contributing to lower transactions costs.
Brokers like forex.com, FXVC broker, Oanda, and others, now offer competitive spreads and commissions, enabling retail investors to get involved in the market.
The third positive aspects related to online trading is leverage. Back in the early days, you had to be able to trade standard lots (meaning 100,000 units) with solid cash. Now, the broker is able to lend you money! This way, you will be able to open bigger positions in the market. Still, we should mention that leverage acts as a “double-edged sword” since it can increase both profit potential and losses.
Cons of Online Trading
Despite all of the above-mentioned advantages, there is a limited number of people out there managing to make a living out of online trading. Technology has evolved, new trading instruments have appeared. Yet in terms of trading education, we can talk about a lack of information.
You can find a tone of information about trading setups, strategies, technical analysis, etc., but few educators focus on the mental aspects of traders and how the emotional side of us can dampen our trading performance.
The second disadvantage of online trading is related to technology. Although we have better computers and internet speed, latency continues to be an issue. No trade is instant, so don’t expect it from any trading platform. Still, this can lead to slight delays, especially when the markets become volatile.