Online trading involves investing or speculating in the stock market, forex market, or other financial markets through the internet.
Online trading has picked up in the past decade with the popularity of financial instruments like Stocks, Forex Trading and Cryptocurrencies among retail investors. Kenya has a developed ecosystem of online trading apps like – FXPesa, Faida which are overseen by local market regulator CMA.
Traders or investors who make daily trades on financial markets need certain tools and services to participate in the market and to monitor the trades & market events that affect them.
These days, trading is done almost exclusively electronically. There are certain common tools that you need for that such as a computer or tablet or smartphone and an internet connection. You should also have a phone connection, so that you can quickly get in touch with your broker.
However, there are more specific tools relating to day trading that you will also need. The exact combination of tools that you should use depends on your own requirements and strategy.
Here are basic tools that you would need to trade online, research & execute your trades:
- Device – Computer or Tablet or Smartphone
If you are an active trader who constantly trade the market or monitor their trades, then it is essential for you to have constant access to a device through which you can trade. Most traders prefer to use a desktop computer or a laptop as a trading device.
This is because a desktop or laptop provides a much bigger screen and it is easier to perform a complex action on them. You can also use a wider variety of tools and applications that may not be available on other kinds of devices.
Rather than relying completely on a single device, you may also consider using a combination of devices. It is best to use a smartphone if you want to be able to trade on the go. You can also use your smartphone to complement your desktop as a backup device or to act as an additional screen and source of information.
- Internet Access
In addition to having a device through which you can access the internet, it is equally important to have a reliable internet connection. The internet connection should be extremely quick and reliable. If your internet connection is slow or susceptible to downtime, then it can cost you a lot of money when you’re unable to enter or exit trades at the precise time that you need to.
For greater reliability, you should use a wired fibre optic connection. Also, speak to your internet provider about their various offerings, and ensure that they provide a reliable connection. Keep their number on speed dial, so that you can get in touch with them quickly in case of internet-related issues.
Also consider having a backup internet connection which you can use in case of failure of primary connection.
You cannot directly trade on the stock market or other financial markets. To be able to trade, you need a broker who will carry out the trades for you. There are several Kenyan and international brokers through whom you can trade. These brokers charge a spread or commission as fees for their services.
There are several factors that you should consider before choosing a broker. The primary factor is that they need to be well regulated.
In Kenya, a stock market broker needs to be regulated by the NSE whereas a CFD or online forex broker in Kenya needs to be licensed by the CMA. Examples of regulated brokers include FXPesa, Pepperstone, SBG Securities, Faida to name a few.
- Trading Platform
The trading platform is the software that you need to use to execute your trades. There are several kinds of trading platforms, however, a few highly popular trading platforms are the ones that most traders use.
A Good Trading Platform must ensure user safety and fast execution with 24 hours access and real time pricing and order placement.
It must also work on a variety of devices and operating systems. You should ensure that the trading platform offered by your broker works on all the devices and operating systems that you need.
If you’re a stock trader on NSE, then it is likely that you would be using the Online Share Trader (OST) platform on web & mobile offered by Chelsoft Active Trader. The platform offers real-time market prices along with order placement.
While most CFD & forex brokers in Kenya offer MetaTrader 4 and 5 to their traders. These platforms are available as desktop programmes, web applications, as well as mobile apps.
However, some brokers also offer proprietary trading platforms that are exclusive to them. Be sure to check out the features of such platforms to see if they are suitable for you.
For example, FXPesa provides a proprietary web and mobile trading platform called FXPesa Trader & FXPesa Mobile along with the option to use MetaTrader 4. While Pepperstone another CFD broker offers CTrader, Metatrader 4 & 5.
- Charting Software
If you’re a day trader, then it is essential for you to perform a technical analysis of the instruments that you want to trade. The primary tool that you need to use for such analysis is a charting tool. A charting tool must offer a real-time chart of the price movements of each instrument you want to trade.
Most brokers offer a charting software or tool along with their services. This charting software will help you to analyse the technicals of the instrument that you want to trade.
Additionally, there are certain advanced charting tools available in the market such as NinjaTrader and Trading View. You can buy such software separately online to help you with your analysis.
You can use several different kinds of charts such as bar charts, OLHC, pull-up price charts, tick & time charts through such software.
- Timely Market Data
If you want to stay abreast with the rest of the market, then you need to have access to real-time market data. This real-time financial data will help to make informed trades and give you an idea of the forthcoming price movement so that you can time your trades.
This financial data can include market news, market analysis, and economic calendar.
Depending on the financial market in which you are trading, you need the specialized financial data for that market.
For example, if you’re a stock market trader, then you need real time stock market data access to various reports such as portfolio valuations, transaction statements and stock holding reports. All NSE brokers use integrated platform that offers this data.
A forex or CFD trader would need real-time access to Economic Calendar, Market Analysis, Market News. Most forex brokers provide currency market data for free to their traders.
Depending on your broker, you may get the financial data for free or you may need to pay for it. Those brokers that provide such data for free typically charge a higher commission or spread.
An informed trader or investor must also use independent financial newswire sources like – Reuters, Bloomberg, WSJ, MarketWatch and direct exchange data from NSE or other exchanges they are trading in.
- Trading Simulator
A trading simulator allows you to trade on the markets without using real money. This is a great way for you to practice trading and gain some experience on how trades work. Using a trading simulator can be considered essential training for first-time traders just entering the market.
Almost every forex and CFD broker offer a demo account that comes with a trading simulator. This allows you to learn how to trade without risking any real money. Forex brokers like FXPesa and Pepperstone both offer this option. You can trade FX, commodities, shares, indices, on these platforms.
However, NSE brokers do not offer this option.
- Other Trading Tools
Various other tools exist for trading, some of which are highly specialized and some of which are commonly used.
For example, social/copy trading commonly in FX, algorithmic trading, risk management tools, charting and analysis tools, account management tools, SMS/Email alerts, trading history tools, and so on.
Not all brokers will offer all these tools to you as some tools are very specific to instruments like Social & Algorithmic trading in FX.
While Charting and Analysis tools, SMS/Email Alert, Account Management tools are common thing to be looked in most brokers in stocks or forex.
Most brokers will offer some of these tools, either upon extra payment or for free. Like Pepperstone offers most tools required by forex traders.
Final Word on Trading Tools & Services
Before you start trading, you should have a reliable internet connection along with a fast computer.
If it is possible, try to keep a backup device like a mobile along with a backup internet connection in case of device or connection or power failure. For example, you can use an office wi-fi connection along with mobile data as backup.
Make sure that you only trade through a regulated broker, and learn about risk management techniques.