[BLOG] Online trading...how can you go about it?
It is true that online trading isn't a well-known product in Africa, but how do we go about it?
Trading stocks online can give you a chance to access even the U.S. market. With a minimum of US$1,000 an investor can open a cash account.
What's more, unlike with companies listed on the Ghana Stock Exchange (GSE), an individual can trade U.S. stocks on their own.
To do so, you have to set up an account through a local stock brokerage, but the broker doesn't manage the account. The local firm gives clients access to exchanges such as the New York Stock Exchange, NASDAQ and the American Stock Exchange.
Once the client decides to trade online, it can be done from a web-based page, which is a basic version allowing the trader to buy and sell shares. The investor can also trade from downloadable softwares that offer information on the losses and gains for the day.
An investor can be an active or day trader or medium-long term and set up either a cash account or a margin account to trade.
A cash account allows you to purchase stocks equal in value to the amount in the account, but a margin account allows you to buy shares valued at a multiple of your balance. The minimum amount needed to set up a margin account is US$2,000.
Here's how it works: the active trader, with the margin account, is given a four-to-one margin, which allows them to buy up to four times the amount of stocks that can be bought with a cash account.
This means, an individual with a cash account of US$2,000, can only buy US$2,000 worth of stocks, while if you have the same amount in a margin account you can buy up to US$8,000 worth of stocks.
On-line trading purchases are no more risky than purchasing through a broker. It revolves around price changes of the stock.
The risk is like any other security; the price can go up and down. But before you get into it, do your research. Meanwhile, there are ways to practice before putting up any of your hard earned money.
Isaac Twumasi-Quantus is Webmaster, Editor @Africa Business Communities.
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