The COVID-19 pandemic had shaped the economic landscape of 2020, and because multiple industries were hit by the combination of weak consumer demand and mitigation methods, people have shifted towards new income streams.
Online activities were among the top picks, considering the ability to work remotely. One of the main areas that saw a huge inflow of new people is online trading, as brokerage houses already reported record-breaking new account openings starting from March. What are some of the main benefits and pitfalls of getting involved in the financial markets will be the main topic of this article, the main goal being to help those that are looking for a new income idea.
Potential financial independence
As compared to having a regular 9-to-5 job, in the case of online trading people have the ability to gain financial independence. Not relying on a boss and working based on a flexible schedule are some of the main benefits of trading.
Traders are aware that these benefits come hand in hand with more responsibilities and risks, but for those believing freedom is one of the most important values, this might be one of the activities to consider. They can trade from home with just a PC and an internet connection, or even remotely using an Android or iPhone-based trading platform.
Alternative to traditional bank deposits
“Spend less than you earn” and save a small portion of the monthly income is one of the basic financial management rules. However, record-low interest rates around the world mean zero or negative returns on savings accounts or bank deposits. Everybody is searching for yield, and unfortunately invest-and-walk away avenues are very limited.
Online trading is one of the activities with the potential to provide returns if traders are committed to learn how financial markets work, develop a winning strategy and mindset, as well as keep a tight risk management protocol.
Especially now that currency debasement is very likely during the next few years, it is important to preserve purchasing power and protect against the diminishing value of fiat currencies.
Giving up on the stability of fixed income
But as with any other activity, online trading comes with several downsides which should be known by all the beginners. A significant change in mindset should occur, given this isn’t resembling a regular job.
Trading is not a fixed-income source and the weekly, monthly, or yearly return will be dependent on a broad range of factors such as the ability to trade profitably consistently, the market performance, risk management, capital available for trading, and others.
Study, hard work, and flexibility required
Becoming a successful online trader is not easy. You need to learn fundamental and technical analysis, understand how the global financial system works, and develop a rules-based system that will fit your schedule and personality. There is no get-rich-quick scheme that could negate all the hard work that needs to be done in order to achieve consistent results in this endeavor.
Professional traders have managed to develop skills like pattern recognition, diligently applying risk management parameters, or emotional regulation, with training, study, and a lot of painful lessons learned along the way.