The dos and don’ts of online trading

ONLINE trading platforms have become popular, given the ability to access the internet easily, and smartphone advancements which have sped up since 2010.

- ADVOCATE LAVAN GOPAUL

Retail traders access global markets with just a few clicks, something that was the preserve of the ultra-wealthy. However, while technology has lowered barriers to entry, it has also amplified tisks, especially for inexperienced traders.

I’ve witnessed individuals make life-changing gains and devastating losses from online trading. This guide outlines the critical dos and don'ts to help navigate the markets wisely.

Dos

Understand the asset to be invested in. Never invest in stocks, cryptocurrencies or forex based on hype alone. Analyse fundamentals (P/E ratios, earnings reports) for stocks, or macroeconomic factors for forex.

Use reliable sources such as the JSE, other exchange official notices, or central bank announcements.

Do not be motivated by social media influencers. Learn chart patterns (for example, head-and-shoulders, moving averages), which are referred to as technical analysis. It is vital always to consider fundamental analysis as well, which includes the financials of the company to be investing in or the general macro economy when considering FX or commodities.

Start small and diversify, and always apply a risk management strategy. For example, allocate only 1% to 5% of your portfolio to high-risk trades. If you have R100 000, limit speculative trades to R1 000 to RS 000. Diversification is key to good trading and investing, spread investments across sectors (tech, health care, commodities) and asset classes (stocks, bonds, ETFs).