The core differences between investing online and conventional investing in stocks are:
- Level of investment and profit options.
- Risk Factor.
- Learning how to trade
In conventional stock trading, it is necessary to buy a quantity of stock and hope to sell them at a later date, deriving a substantial profit from an increase in market price.
Online trading with for stocks is particularly popular because it is not necessary to buy or own any actual stocks. You simply purchase a Contract at a fraction of the price of the stock and collect revenue on the difference when you decide to end the contract. Depending on the type of contract you entered, you can profit on a price increase, or decrease.
The only way to make a profit in conventional stock trading is if the market price of the stock rises within a reasonable timeframe. The investor needs to invest a substantial sum in order for a profit to be meaningful. Investing a large amount of money means risking a large amount of money. If the price decreases, the investor faces a loss.
The amount invested in is significantly smaller. You do not need to purchase the stock at market price value. The price of the contract is significantly lower, meaning the amount of money you are risking is much less. If you foresee the correct direction the price is going to move – whether it will increase or decrease – you will make profit.
For traditional investors, the level of profit depends on how much the stock price increases, if at all. The investor receives the amount invested plus the increase. In other words, the initial investment is high and in case the stock price rises, that amount is returned and the investor gains only the increased amount. That is usually a modest percentage of the invested sum. Should the market price fall, the investor loses on his initial investment.
When trading in, the initially invested amount is minor, yet the amount gained is the same. In addition, you have the possibility to enter into a contract, profiting on a decrease in market price. To make use of this option you will simply open a sell position for the contract, rather than a buy position.
Usually, volatility in stock prices is a bad thing for investors. Instability causes insecurity for the investments and often ends in a loss. Patience does not always pay off.
Not so in trading. Volatility actually works to the advantage of the investor, because you can make a profit either on an increase or a decrease of the value, by choosing the right type of contract.
Difficulty to Learn
MottoFX account holders have 24/7 access to an online trading academy. It is free-to-use. There are no qualifications necessary except the desire to succeed, and it functions as a resource that you can refer to at any time. Our online training materials include fully comprehensive video demonstration tutorials, study courses for the beginner and for the veteran investor, trading platform tutorials, and eBooks.
Whereas, if you want to practice conventional investing on share-stock you will need to either purchase a small library of expensive technical books and/or go to a college for a year or possibly more before you will feel confident enough to risk your capital.
Overall, the conventional approach to making money from stock markets is not at all easy, requiring a lot of patience, risk, and low profitability. What’s more, you will get virtually no assistance as you learn the steps.
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