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Nuances Of Online Trading

Aug 18, 2007
As so many people opt for online trading one wonders what are the reasons for so many people going for something new leaving the traditional method. A little investigation throws up quite a few reasons.

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.
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