Buy and sell securities using a wealth of research and advanced tools on our intuitive trading website.
In other words, online trading is a fairly popular method of transacting in financial products online.
Brokers have gone online, with their platforms providing all kinds of financial instruments like stocks, commodities, bonds, ETFs, and futures.
Previously, when a buyer wanted to invest money in shares.
He used to call his brokerage firm and asked for putting in a request to buy stocks of a given company for a specified amount. Advantages And Disadvantages of Online Trading
The broker would then let him know the market price of the stocks and would confirm the order.
After the user confirmed his trading account.
Then, the broker’s fees and the time period required for the order.
And when the order would get placed on the stock exchange.
Types Advantages And Disadvantages of Online Trading
These are some of the most common types of online trading available.
- Day Trading.
Day Trading is one of the most common types of trading.
It’s a short term strategy where you buy and sell securities on the same day.
Previously, this type of trading was normally carried out by professional traders.
But, in recent years improvements in technology and the emergence of a wide range of online CFD trading websites.
Leads to that non-professional traders can also trade in these types of securities.
The most common types of day trading strategies include the following:
- Price Action Trading. Advantages And Disadvantages of Online Trading
- Scalping. Advantages And Disadvantages of Online Trading
- Rebate Trading. Advantages And Disadvantages of Online Trading
- Arbitrage.
- Momentum Day Trading. Advantages And Disadvantages of Online Trading
- Market Making.
- News Trading/Playing.
- Pattern Trading. Advantages And Disadvantages of Online Trading
- Position Trading.
Position trading is a long strategy where investors buy and hold securities for longer periods of time.
This type of investing often involves keeping securities for weeks and even months.
The decisions to buy and sell are normally based on extensive research of market trends and predicting changes in the market in the future.
The trader buys at the beginning of a trend and sells when the trend reaches its height.
Position Trading is based on extensive research.
If you have access to accurate facts and you can see trends emerging.
This is a potentially lucrative way to invest.
Features Of Online Trading
- Scalping.
Scalping is a fast way to trade.
With this trading method, traders take advantage of gaps created by bidding and asking spreads and order flows.
A profit is made by selling at an asking price that’s higher than the spread or buying price of a security.
- Online CFD Trading.
CFD’s or Contracts for Difference products let traders speculate on the price movements of various types of stocks on the market.
When you’re trading CFD products you don’t own the stock.
You simply buy the right to speculate on its market price change in the future which could result in a rise or fall in value.
Secondly, we need to know about the features of online trading.
- Single point of access –
There are two major exchanges –
- Bombay Stock Exchange (BSE).
- National Stock Exchange (NSE).
Where you can buy stocks.
With the online trading account, you can choose to buy from any of these exchanges.
Additionally, you will be able to sell stocks from the same platform as well.
- 24*7 access
Not only is the access provided from a single trading account.
But it is also flexible enough so that you can log in from any location and at any point in time.
More importantly, you can access a trading platform like ours from your internet browsers (on a laptop, desktop PCs, etc).
As well as from applications (on your tablets, smartphones, etc).
Prons and cons of online trading.
Online trading has gained massive popularity and the reasons for that are simple.
Firstly, it is convenient and easy.
And if you are lazy and you do not want to leave the room.
Then, 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 tranquil online trading has become. And who wouldn’t want that extra bit of comfort?
Then there is the advantage of paying significantly less commission on your transactions.
The online trading firms charge a symbolic brokerage which hardly affects your margin.
These firms make their profits by the abrupt 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 your regular work and before you go to bed spend an hour looking at your investments.
But while trading online, there are a few things that you should be careful about.
We will try here to provide you with some basic indicators.
Firstly you need to understand that however fast your internet connection is, and whatever software and hardware you are using there will be some time lag.
Secondly, you must get real-time updates and stock quotes from your service provider.
If it is delayed then you will be placing orders for rates which are long history.
And then it will take further time to process your order.
What you will finally get is something a lot different from what you were expecting.
So the feeds have to be live and real time. There can be no two ways about it.
Advantages
Online trading has the following advantages –
- Faster Transaction.
Online banking is fast and efficient.
Funds can be transferred between accounts almost instantly.
Especially if the two accounts are held at the same banking institution.
It can be bought or sold by a single click of the mouse.
Through this, a quicker exchange can be made which may also ensure quicker earnings.
- It is cheaper.
In online stock trading, the stockbroker fee which you will have to pay is lower when compared to the commission charged by the previous method.
If you trade in a sufficiently large volume of stocks, it is possible for you to be able to negotiate your broker’s fees.
- Convenient.
In Online trading, you only need to open the trading account.
You’re not bound by time and place as long as you have an internet connection.
Hence, online trading is convenient and accessible from anywhere with limited hassle. It also saves time.
- You can monitor your investment as per your need.
Online trading allows you to buy or sell shares as per your convenience.
It offers advanced interfaces and the ability for investors to see how their money is performing throughout the day.
You can use your phone or your computer to evaluate your profit or loss.
- It also estimates the middleman.
Online trading allows you to trade with virtually no direct broker communication.
Apart from reducing the overall trading cost, this benefit also makes the trading hassle-free, making this service much more lucrative.
Disadvantages
- Risk of excessive trading.
Firstly, the biggest disadvantage of online trading is that you may end up doing excessive trading.
That result in a loss which is not the case with offline traders.
Where you ask the broker to put the order at a particular price.
And when the stock reaches that price brokers execute that order and hence the issue of excessive trading never arises.
- No guidance from the broker.
Secondly, an individual will never be able to develop personal relations with the broker who can be of great help.
When you are in doubt as many brokers give advice regarding stocks which can result in profits for both investors as well as a trader.
In other words, if you have good financial knowledge.
and can take a decision on your own then only you should go for online trading.
- Error and connectivity issues.
Now, the next problem is since people are not brokers they can make mistakes in putting orders which can lead to big losses for investor or trader.
Besides, it is dependent on the internet.
And if there is some connectivity problem then you will be in trouble.
Because you will not be able to place the order which is not the case with brokers.
Where you can put orders on the telephone and it does not require any internet.
- Customer Services.
Online brokers have a tilt cost structure, which allows them to offer discounts on commissions.
You might have to wait a long time to have a phone trade, especially during explosive markets, because trained and certified traders cost money.
- Feedback implement.
Online trading means that you are your own investment manager, but this independence comes at a price.
Online brokers typically do not provide buy-sell recommendations.
Conclusion
Thus, the stock market, equity market or share market is the aggregation of buyers and sellers.
A loose network of economic transactions, not a physical facility or discrete entity of stocks (also called shares).
Which represent ownership claims on businesses; these may include securities listed on a public stock exchange.
As well as stock that is only traded privately.
Examples of the latter include shares of private companies which are sold to investors through equity crowdfunding platforms.
Stock exchanges list shares of common equity as well as other security types, e.g. corporate bonds and convertible bonds.
Stocks are categorized in different ways.
Firstly, one way is through the country where the company is domiciled.
For example, Nestlé and Novartis are domiciled in Switzerland.
So they may be considered as part of the Swiss stock market, although their stock may also be traded on exchanges in other countries.
For example, as American depository receipts (ADRs) on U.S. stock markets.
For example, Nestlé and Novartis are domiciled in Switzerland.
So they may be considered as part of the Swiss stock market, although their stock may also be traded on exchanges in other countries.
For example, as American depository receipts (ADRs) on U.S. stock markets.
As one can see from the above that online trading has advantages as well as disadvantages.
And if you are technology savvy as well as financial savvy than you should go for online trading.
And if you lack either of the two qualities that are being financially savvy or technology savvy than you should stick with offline trading.
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