First of all it is convenient and easy. You don't have to leave your room. Who could have imagined a few years before to trade on stocks while lying on his bed with his laptop in front of him? But this is how easy online trading has become. And who wouldn't want that extra bit of comfort.
Then there is the advantage of paying substantially less commission on your transactions. On the physical market the brokerage you pay is a lot higher than what you do while trading online. The online trading firms charge a nominal brokerage which hardly affects your margin. These firms make their profits by the sheer volume of trade they do.
With online trading you can trade at whatever time you feel. Yes, you can trade beyond actual trading hours of the market. So now you can come back from you regular work, take a shower, have your dinner, spend time with your family and before you go to bed spend an hour looking at your investments.
You are also spared the mounds of paperwork that you had to do earlier. It gets so easy now. Every thing is digitized and just a few clicks will complete an entire transaction. No bothers. No hassles.
But one major issue with online trading is the time lag. With broadband, transactions happen a lot quicker these days. But still there is some time lag. Once you place your order it has to reach your broker, reviewed by him and then registered for transaction. By this time the rates could have altered significantly. This is not an issue when you place an order over the phone. You are then working with real time rate and live feeds.
Then there is also the issue of frauds and hacks. There have been instances where hacks have gained access to accounts of investors and carried out transactions to their own benefit. Frauds also use the internet to alter the prices of certain stocks to their own advantage.
As with any new innovation there are both positives and negatives. Only time will tell if online trading would one day completely replace the trading in physical markets.
Apart from your knowledge of the stock market and the intuition that one needs to succeed in the stock market there are a few infrastructural facilities that one needs to succeed in online trading.
First of all you need a computer that matches your competition. Today the processing speed of computers is amazing with processors of more than 3 GHz a common thing. Along with it the RAM has also increased manifold with many computers today coming with 2 GB RAM if not more. Also has increased the HDD or the hard disk memory space with most computers coming with a minimum of 80 GB of free space. Of course the upper limit is much higher.
You see banners that speak about the achievements of their brokers, claims to other investors stocks to win twice in the first 3 months, and other such ad material. Surprisingly, not as many people as you would expect flock to them.
To get more customers, some brokers offer free online transactions for a period (approximately one month), if you order their services. So, if you would like to save on brokerage fees, you can try these out, and why not if you are a beginner and simply interested in a few stocks trading?
On the other hand if you are a seasoned operator and do many trades every month, perhaps this is not your cup of tea. It will please you to learn, brokerage houses offer multiple transactions at a reduction of costs. Just as if you were a businessman who places bulk orders and thereby manages to obtain bulk discounts.
In such services, you just have to pay monthly subscription fees, therefore maximizing your saving. But remember- this will work for you only if you are a regular investor in the market, it means that you exchange on a monthly basis.
However, others do not offer discounts neither free online trading. What they offer us is the use of their stock trade software. Some of these software offer live stock prices, it is so essential if we want to survive at the markets.
Like you know, trade is really perfect on all calendars. You can make big money overnight. In fact, some brokers that offer for free trade do not even charge commission fees, but fees to use their software.
Apart from the brokerage, the software will then be your best friend. So if you are in the process of selecting a brokerage firm, ensure they keep a good stock trade software. Some would offer low fee, but not be equipped with a stock of commercial software.
That just may cost you your money . A good commercial software will provide access to stock prices in real-time, historical data on stocks, and some technical diagrams, which are indispensable tools so that you will not lose out on occasion.
Indeed, technology has provided us savings options like never before . However, these trading services online do not offer the whole thing.
If you are a new trader, and making trades for only a month, you can take advantage of the free services. However, do be careful in selecting your provider broker.
Do a thorough background check on your shortlisted companies and make sure they are well equipped with the best software. After all it is your hard earned money at stake here.
Both John Porter & Abhishek Agarwal are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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