Why trade online?

Tradition v/s Online Trading

As we have outlined in the previous article, online trading is the natural successor of traditional trading in our technologically advanced world. As for practically all aspects of our daily life, technological advancement has not only made online trading readily accessible to the general public but also made it much simpler.

Key differences between traditional and online trading from a traders point of view.

Traditional Trading Online Trading
Place order Can take several minutes – Via stockbroker Instantly – via trader
Accessibility Limited Anyone with an internet connection
Level of knowledge required Expert Beginner
Cost (Fees/commissions) Very high Low (depending on online brokers)
Assistance Personal relationship with broker No relationship with broker

How Online Trading works?

Online trading is done via online brokerage firms that act as the bridge between the traders and the financial markets. When a trader places a trade option on the trading platform of the broker, the latter in turns buys or sells the option on the corresponding financial market.

Given the popularity online trading has gained over the last few years, the number of these online brokers has also been increasing exponentially. Competition between them has further made the process easier, to the point where traders can usually start trading within the same day they register with a broker. The usual steps to start trading online can be summarised as such:

1

Register on the broker’s website

2

Fund their account

3

Verify their account (Compliance)

4

Start trading

Different types of Online Trading

Different types of Online Trading

When talking about online trading, most of us are referencing to manual online trading. Nonetheless, this is not the pinnacle of the technological advancements in this field. In fact, online trading can be divided into two categories: manual online trading and automated/algorithmic trading.

While manual online trading can be considered as automated to a certain degree, algorithmic trading takes it to another whole level. In general, traders only have to register an account with the brokers offering automated online trading and fund their account and the rest is taken care of by an algorithm.

The algorithm will search the financial markets to find investment opportunities most likely to make a profit and place the order automatically.

Advantages of Online Trading

Online trading is very well suited for traders who have little to no experience in the field. Some of the main advantages of online trading are:

  • Lower fees
  • Seamless Process
  • More control and flexibility
  • Eliminates the middleman
  • Avoid brokerage bias
  • Easy accessibility
  • Faster transactions
  • Real-time monitoring
  • Focused investment
  • Economical brokerage
  • Informed decisions
  • Better ROI