Online trading: can it be a legitimate business?

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Online trading truly has spiked in popularity in recent years thanks to developments in technology. Gone are the days when wannabe retail traders had to send off for a share certificate in order to get involved and make some cash. Now, it’s possible to learn about trading in just a few days and get signed up to an online platform in a matter of hours. For those who get involved, it seems like a golden opportunity to make money.

But with some online trading schemes gaining a bad reputation in recent years, some traders are finding themselves put off. There is, as with any service, a risk of fraud and scam – and there’s also a perception among non-traders that it’s all just a waste of time. This article will look at what exactly constitutes a legitimate business and consider whether online trading fits into this category or not.

Making a profit

In order to be a successful and legitimate business in the long term, of course, the only real indicator of success is whether or not profit is made – and once everything else is stripped away, this quickly becomes the only priority. It’s certainly possible to make money from this, and there are ways to raise the likelihood that you will become one of the many traders who manage to do it. There are tools available that can help traders as well as a lot of trading industry analysis out there for people to consume, so these are definitely worth looking into, especially if you’re new to the industry.

But trading comes with inherent risks, and there are no guarantees that it will work out. This is especially true for those who trade contracts for difference, or CFDs. These instruments can be profitable, but because they use leverage, they can also seriously magnify any losses that are incurred – and there are many horror stories of some traders losing all of their deposits. So while there is some money to be made by experienced and devoted traders, it’s not the sort of business that has a semi-guaranteed route to success.

A proper job?

But profitability isn’t the only concern that a new trader is likely to have. Legitimacy is about much more than money – it’s also about building respect in the eyes of your peers. There’s a perception among some people that trading is not a “proper” job, and this has intensified in recent years in the aftermath of the financial crisis. But by explaining clearly to your friends, family and wider network that your trading business is fully legitimate and above-board, you can quickly eradicate any fears they might have.

Eyes of the law

There is some clear good news for traders, though. In the eyes of the law, it’s definitely possible to get a trading business verified in a legal sense. You can sign up as a sole trader, for example, and when asked to declare the nature of your business, you can simply say “trading.” Or you can set up a limited company and run your trading activities through it, although this is in many ways a more complex process.

In fact, registering in some way is something that you’ll have to do for certain types of trading, given the tax obligations involved. You will probably have to pay income tax on any profits you make, for example, while you may also in some circumstances need to pay capital gains tax. As a result of these complexities, it’s definitely worth speaking to an accountant or a financial advisor who can help you understand what your different obligations are. And remember that while hiring an accountant and sorting out your tax return are two onerous tasks that may seem intense, it’s vital that online traders do this sort of thing and keep it all above board in order to legitimise the profession and ensure it earns the respect it deserves.

Working as an online trader may be seen by some as a waste of time, but it’s a business like any other – and it’s one that plenty of traders in the past have managed to make profitable through hard work, research and effort. In the eyes of the law, too, it’s a perfectly legitimate activity – and provided that you take steps to understand the obligations it places on you as a taxpayer and business owner, it’s unlikely that you’ll fall foul of any regulations or do anything to render your business illegitimate.