Online trading involves investing or speculating in the stock market, foreign exchange market, or other financial markets over the Internet.
Online trading has increased over the past decade with the popularity of financial instruments such as stocks, forex trading, and cryptocurrencies among retail investors. Kenya has a developed ecosystem of online trading apps like FXPesa, Faida that are overseen by the local market regulator CMA.
Traders or investors who trade the financial markets on a daily basis need certain tools and services in order to participate in the market and monitor the deals and market events that affect them.
Nowadays, trading is almost entirely electronic. There are certain common tools you will need to do this, such as: B. a computer, tablet or smartphone and an Internet connection. You should also have a phone connection so you can get in touch with your broker quickly.
However, there are more specific tools for day trading that you will need as well. The exact combination of tools that you should use will depend on your own needs and strategy.
Here are basic tools you would need in order to trade, research, and execute your trades online:
- Device – computer or tablet or smartphone
If you are an active trader who is constantly trading in the market or monitoring its trades, it is important that you have constant access to a device to trade on. Most traders prefer to use a desktop computer or laptop as a trading device.
This is because a desktop or laptop has a much larger screen and is easier to perform a complex action on them. You can also use a wider range of tools and applications that may not be available on other types of devices.
Instead of relying entirely on a single device, you can use a combination of devices. It is best to use a smartphone if you want to trade on the go. You can also use your smartphone to complement your desktop as a backup device or as an additional screen and source of information.
- Internet access
In addition to having a device with which you can access the internet, a reliable internet connection is equally important. The internet connection should be extremely fast and reliable. If your internet connection is slow or prone to downtime, it can cost a lot of money if you can’t get in or out of trades exactly when you want.
Use a fiber optic connection for greater reliability. Also talk to your internet provider about the different offers and make sure they offer a reliable connection. Keep their number on the speed dial so that you can contact them quickly if you have problems with the Internet.
Also, consider having a backup internet connection that you can use in the event that the primary connection fails.
You cannot trade directly on the stock exchange or other financial markets. In order to trade, you need a broker to execute the trades for you. There are several Kenyan and international brokers that you can trade through. These brokers charge a spread or commission as a fee for their services.
There are several factors that you should consider before choosing a broker. The main factor is that they need to be well regulated.
In Kenya, a stock broker must be regulated by the NSE, while in Kenya a CFD or online forex broker must be licensed by the CMA. Examples of regulated brokers include FXPesa, Pepperstone, SBG Securities, and Faida, to name a few.
- Trading platform
The trading platform is the software that you need to use to execute your trades. There are different types of trading platforms, however, some very popular trading platforms are the ones that most traders use.
A good trading platform must ensure user safety and fast execution with 24-hour access and real-time pricing and order placement.
It must also work on a wide variety of devices and operating systems. You should make sure that the trading platform offered by your broker works on all the devices and operating systems that you need.
If you are a stock trader with NSE, you are likely using the OST (Online Share Trader) platform for Web & Mobile offered by Chelsoft Active Trader. The platform offers real-time market prices as well as order placement.
While most CFD and Forex brokers in Kenya offer MetaTrader 4 and 5 to their traders. These platforms are available as desktop programs, web applications and mobile apps.
However, some brokers also offer proprietary trading platforms that are exclusive to them. Be sure to review the features of such platforms to see if they are right for you.
For example, FXPesa offers a proprietary web and mobile trading platform called FXPesa Trader & FXPesa Mobile and the option to use MetaTrader 4. While Pepperstone offers another CFD broker, CTrader, Metatrader 4 & 5.
- Charting software
If you are a day trader, it is important that you conduct a technical analysis of the instruments that you intend to trade. The main tool that you need to use for such an analysis is a chart tool. A charting tool must provide a real-time chart of the price movement of each instrument that you want to trade.
Most brokers offer charting software or a charting tool along with their services. This chart software will help you analyze the technical data of the instrument you want to trade.
In addition, certain advanced charting tools such as NinjaTrader and Trading View are available in the market. You can purchase this software separately online to aid in your analysis.
With this software, you can use different types of charts such as bar charts, OLHC, pull-up price charts, tick and timing charts.
- Timely market data
If you want to keep up with the rest of the market, you need to have access to real-time market data. This real-time financial data will help you make informed trades and give you an idea of the price movement ahead so you can time your trades.
This financial data can include market news, market research, and economic calendars.
Depending on the financial market in which you are trading, you will need the specific financial data for that market.
For example, if you are a stock trader, you need access to real-time stock market data to access various reports such as portfolio reviews, transaction settlements, and stock holdings reports. All NSE brokers use an integrated platform that provides this data.
A forex or CFD trader would need real-time access to economic calendar, market analysis, and market news. Most forex brokers provide forex market data to their traders for free.
Depending on your broker, you may get the financial information for free or have to pay for it. Those brokers who provide such data for free usually charge a higher commission or spread.
An informed trader or investor must also use independent financial news sources such as Reuters, Bloomberg, WSJ, MarketWatch, and direct stock market data from NSE or other exchanges they trade on.
- Trading simulator
A trading simulator allows you to trade the markets without using real money. This is a great way for you to practice trading and gain experience in how trades work. Using a trading simulator can be seen as essential training for first-time traders who are just entering the market.
Almost every forex and CFD broker offers a demo account that comes with a trading simulator. That way, you can learn how to trade without risking real money. Forex brokers like FXPesa and Pepperstone both offer this option. You can trade forex, commodities, stocks and indices on these platforms.
However, NSE brokers do not offer this option.
- Other trading instruments
Various other tools exist for trading, some of which are highly specialized and some of which are widely used.
For example social / copy trading, often in FX, algorithmic trading, risk management tools, chart and analysis tools, account management tools, SMS / email notifications, trade history tools, etc.
Not all brokers will offer you all of these tools as some tools are very specific to instruments like social and algorithmic trading in forex.
While charting and analysis tools, SMS / email notification and account management tools are common with most brokers in stocks or forex.
Most brokers offer some of these tools for either an additional charge or for free. Like Pepperstone, it offers most of the tools required by forex traders.
Last word on Trading Tools & Services
Before you start trading, you should have a reliable internet connection and a fast computer.
Whenever possible, try to keep a backup device like a cell phone along with a backup internet connection in case of a device or connection or power outage. For example, you can use an Office WLAN connection together with mobile data as a backup.
Make sure you are only trading through a regulated broker and learn about risk management techniques.