#Trading#
##Online Trading##
Online trading is simply buying and selling assets through a brokerage's internet-based proprietary trading platforms. The use of online trading increased dramatically in the mid- to late-'90s with the introduction of affordable high-speed computers and internet connections.
Stocks, bonds, mutual funds, ETFs, options, futures, and currencies can all be traded online.
Also known as e-trading or self-directed investing.
Traditionally, investors and traders have to call their brokerage firms to make a trade for them. If John wanted to purchase 50 shares of Intel, he would call his broker with a buy order request. The broker would let John know the
market price and confirm the purchase order. If the investor is making a limit order , the broker has to confirm the limit price, how long to keep the order open for, what account to purchase the shares in (if John has multiple investment accounts), etc. The investment representative must also confirm the commission costs for making the trade. When all has been established, the broker would place the trade in the system which is linked to
trading floors and exchanges , such as the New York Stock Exchange (NYSE) or the NASDAQ. The client would receive a trade confirmation by mail and a monthly or quarterly statement of account showing a list of his investments. If John wanted to transfer some cash from his trading account to his checking account, and vice versa, he would also have to call in to make that transaction request.
Today, with the advent of the internet in the digital era, more and more investors are using online trading platforms offered by their brokers for DIY (do-it-yourself) investing. The online trading platforms serve as a hub with multiple tools for the investor or trader. The investor can place buy and sell orders; place market, limit, stop, stop-loss, and stop-limit orders; check the status of an order; view real-time stock quotes; read news on companies; view the list of securities currently held through the dashboard; etc. An investor can also access his or her investment statements, confirmation statements, and investment tax forms using the online system. Most discount brokerages that are affiliated with banks also provide added convenience for their digital clients by linking their bank accounts to their investment accounts. This way, an investor can easily initiate a transfer between accounts held under the same financial institution.
The advent of online trading has reduced costs for both investors and discount brokers. To encourage people to do their investing themselves, brokers have lower commissions for trades placed online than for trades placed over the phone with a representative.
