Online trading: what it is and how it works: a brief guide - Online trading: what it is and how it works: a brief guide

In this article, we will discuss what online trading is, what its advantages are, how to start online trading and a lot of other useful information. 

Internet trading: who is an online trader? 

Who is an online trader? The profile of a typical trader can be defined in 3 different but complementary categories: 

  1. Analyst: analyzes the situation of a particular instrument, using fundamental analysis and technical analysis (although traders often use only one type of analysis). 
  2. Trader: buys and sells instruments such as currency pairs, CFDs, stocks, etc., to make a profit, making (or losing) money on the difference between the buy and sell price of trading positions. 
  3. Risk Manager: Because a trader must manage the risk associated with trading the markets in order to continue earning profits and continuing his or her business. 

A trader is first and foremost a professional in the financial markets. A trader learns and understands how the market works and how to interpret and read market fluctuations and how to profit from them. Let’s take a look at where to start online trading and give you the answers to the questions that will help you get started. 

How does an online trading platform work? 

An online trading platform is software that allows traders to make trades and control their accounts with a broker.

Often online trading platforms have other useful features that may include price charting tools, real-time quotes coming to the platform, news and research. Some platforms are specifically designed for traders working in specific markets, such as stocks, currencies, options or futures. 

Ease of trading and access to financial markets are a must-have feature of the platform. The trading platform is also used by traders for a variety of other tasks. 

Trading online: advantages. 

Online trading platforms also offer a wide range of order types that can be set up independently in your account with the broker of your choice. 

The wide variety of order types is an advantage because it allows traders to prepare an accurate trading plan: 

  1. Opening Buy Limit Order: 
  • Buy Limit order (opening a position at a price below the current market price) 
  • Market Buy Limit Order (opening a position at the current market price) 
  • Buy Stop order (opening a position higher than the current market price) 

2.  A Sell Limit order (opening a position at the current market price): 

  • Sell Limit Order (opening a position at a price higher than the current market price) 
  • Market Sell Limit order (sale at the current market price) 
  • Sell Stop order (opening of a position below the market price) 

3. Closing Orders: 

  • Stop Loss (closing of a position at a predetermined price level with a loss) 
  • Take Profit order (closing of a position at a pre-defined level with profit) 
  • Trailing stop (an order to close a position at a level that is more profitable for you, as the movement of the position changes in the market). 

The last important advantage is that there are no restrictions on the use of certain types of strategies. Traders can choose any trading strategy they want. Here are some trading styles: 

  • Scalping (short-term trading);
  • Intraday trading; 
  • Intra-week trading;
  • Swing trading; 
  • Long term trading;
  • Renko Bars and other chart types; 
  • Use of Expert Advisors. 

Some of these trading styles seemed unimaginable decades ago, when it was still necessary to contact a broker. 

Online Trading: Tools you can trade online 

Online trading has revolutionized the world of trading and has given more people access to more financial instruments than ever before. Let’s take an example of a typical broker and look at their products: 

  • Forex (trading currency pairs such as EUR/USD, USD/GBP and USD/JPY) 
  • CFD Commodities (trade CFD’s on commodities such as Gold, Crude Oil and Energy) 
  • CFD Indices (CFD trading on DAX40, NASDAQ, etc) 
  • Stock CFDs (trade CFDs on top stocks, such as Apple, Tesla and BMW. Stocks are commonly used for online trading and long term investments) 
  • ETFs (exchange traded funds) 
  • CFDs on bonds 
  • Cryptocurrency CFDs 

As you can see, there are seven different categories. Each segment consists of a whole list of instruments that traders can analyze and trade.

As you can see, there are seven different categories. Each segment consists of a whole list of instruments that traders can analyze and trade. For example, the forex (or FX) market consists of dozens of currency pairs, which are divided into:  

Forex majors (major currency pairs). 

  • Currency pair EUR/USD 
  • GBP/USD currency pair 
  • Currency pair USD/JPY 

Forex Minors (non-major or minor currency pairs) 

  • EUR/JPY currency pair 
  • GBP/AUD currency pair 
  • GBP/JPY currency pair 

Finally, there are also “exotic currency pairs”, such as EUR/NOK, NZD/SGD and USD/HUF. Of course these are just a few examples, but in fact there are many more available for trading! Other popular instruments are CFDs on Gold, CFDs on Oil (WTI), CFDs on the DAX 30, CFDs on stocks such as Facebook, Google and BMW, as well as commodities trading. 

Internet Trading for Beginners: How to Start Online Trading with Profitcoin?

There are many articles on the Internet devoted to online trading. Almost everyone has their own opinion on important steps and tips for the novice trader. It’s hard to combine all this wisdom, experience and knowledge into a few tips, but we’ve tried to highlight the ones mentioned most often. 

Step 1: Choosing a Reliable Broker 

What is the best broker for a novice online trader? There are several brokers to choose from, including, of course, Profitcoin

They offer many unique tools for trading, some of the best spreads in the industry, low commissions, and protection of customer funds from negative balances. 

Step 2: Create a Trading System

A trading method helps you understand when it’s worth trading and when it’s best to refrain. It also helps you systematize your thoughts and your approach so that you can get more predictable and consistent results. 

Keeping track of your trading ideas, whether your analysis has worked, and what results the overall trade parameters you set are producing is vital information.

Step 3: Risk Management 

The next step is to understand the benefits of risk management. Once you are done testing your systems on a Profitcoin free demo account, you can take the next step and start trading on a real account. 

Traders are sometimes unaware of the risks when they start trading. For example, some traders do not use a stop loss, which is crucial because it allows traders to limit the risk on each trade. 

Another problem is that some traders take too much risk and may use too much leverage. Traders who keep their risk low are better prepared for potential drawdowns when the markets change not in favor of their system. Smaller loss amounts will help traders recover faster and trade profitably again when their strategy is back in full force. 

Step 4: Finding the right trading style 

Traders usually don’t know exactly which methods work best for them. They, often change trading styles and methods of online trading. This is a good thing in the beginning because traders need time to find a style and approach that works for them. 

It is important to understand that a strategy that works well for “Trader A” will not necessarily work for “Trader B.” For example, “Trader A” will get the best results with scalping, but “Trader B” may have too little time for that style of trading. 

 When trading the markets, it is important to know the following: 

  • Your financial goals in the short and long term; 
  • What level of risk you are willing to take;
  • How much time you can devote to trading;
  • How many strategies can you analyze and apply; 
  • What and how you are motivated to trade; 
  • What trading styles, tools and indicators you like to use.

Step 5: Getting Started in Online Trading 

If you feel you are ready to try your hand at online trading, but don’t want to risk your money yet, a demo account is the perfect place to get some trading experience. With Profitcoin you can trade with virtual funds, test all kinds of trading strategies, analysis, indicators and methods. with no risk to your funds. 


As an online trader, you can work from almost anywhere with an Internet connection. At the same time, online trading also involves new risks that we haven’t considered before: 

Traders should not place orders from computers that other people have access to. 

It is important to log out after trading is completed to avoid misuse of the trading account by third parties. 

Traders should never select the “Remember” option when logging into their trading account on someone else’s device. 

Now that you know the basics of online trading, you can try it yourself.