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Many individuals are keen to obtain an additional source of income. However, the fact of the matter is that working longer hours at the office is hardly an appealing prospect. This is why those who have begun to think outside of the proverbial box are attracted to the possibilities associated with online investing.

While day trading as a hobby has become increasingly popular throughout South Africa, businesses are also considering a foray into the world of institutional investing. The issue here is that, in either case, it can be difficult to know where to begin. This is even more relevant for those who intend to allocate a significant portion of their funds at any given time. It therefore pays to examine some basic tips and tricks in order to develop a sound strategy.

Appreciating the Principle of Supply and Demand

Although this is a decidedly general point, its importance is impossible to overstate. There are many different asset classes which appeal to investors and some of the most popular include:

• Blue-chip stocks
• Exchange-traded funds (ETFs)
• Commodities
• Cryptocurrencies
• Forex pairs
• Bonds and treasuries

While each of these categories offers unique benefits and discrete drawbacks, they are all governed (to a greater or lesser extent) by the role of supply and demand. Simply stated, values tend to rise when demand is high and supply is low. Conversely, prices often fall in the event of an oversupply and dwindling demand. This is a fundamental principle that should always be taken into account.

Learning the (Digital) Ropes

Online trading has become commonplace since the first platforms emerged during the late 1990s. Still, the user interfaces were quite complicated in the past. The majority of software packages also tended to be limited to those who were already familiar with investing.

Software providers now understand that investors should be allowed to test the proverbial waters before committing to a specific product or service. This is why the option of opening a demo trading account has become commonplace. Users can now examine the mechanics of a certain interface without being forced to commit real-world funds.

Long-Term or Short-Term?

Another common question that should be addressed involves whether it is better to become involved in long-term positions or leveraging the possible benefits of short-term trades is the best strategy. In truth, each of these approaches offers possible benefits.

Long-term positions are often more stable and predictable; suitable for risk-averse individuals and those who are hoping to accrue longitudinal profits. However, these holdings can lack liquidity, and it may be years before a substantial return-on-investment (ROI) is realised.

Short-term holdings (such as Forex pairs or cryptocurrency trades) are more liquid, and therefore, could reap substantial returns. The trade-off here is that losses can just as easily accrue. This is the reason why these positions are better suited for those who accept the potential risks.

Most experienced traders will attempt to create a balanced portfolio that offers the best of both worlds, combining the stability and reliability of traditional assets with the growth potential and innovation of newer, more volatile investments. This strategy is designed to mitigate risk while maximizing returns, ensuring that they are well-prepared for various market conditions. Achieving this balance takes time, a deep understanding of different asset classes, and a commitment to continuous learning.

The Tools of the Trade

Another crucial point to highlight involves choosing an intuitive and multi-faceted trading terminal. In this sense, not all platforms have been created equally. The ideal portal should offer a plethora of functional options such as:

• The ability to accommodate large trading volumes.
• A proven track record.
• Streamlined B2B trade executions.
• Access to experienced brokers.
• Low fees and commissions.
• Access to many different asset classes.

Furthermore, the terminal and the company should be able to address the strategic goals of individual traders as opposed to offering nothing more than generic solutions.

Appreciating the Value of Mistakes

Another common error committed by novices involves failing to realise how mistakes can work to their advantage. These should be viewed as learning experiences as opposed to setbacks. Even the most experienced investors make errors from time to time. Putting pride aside and using these scenarios to further hone one’s skills is therefore a talent that should be developed from the very beginning.

Success within the world of online investing will require time and effort. However, the end results are well worth the journey itself. Those who are willing to put in the work will inevitably be rewarded; even if the road itself presents unexpected twists and turns on occasion.