Online Stock Market Trading
Online Trading or Internet Trading refers to trading via the internet. Gone are those days of running behind a stock broker and managing loads of paper work. Present world is dashing with speed to meet their needs. The Stock markets are today literally at ;your finger-tips. Online trading changed the traditional value proposition of trading, allowing online brokers to supply investors with rich, interactive ;information in real time, including market data and investment research. Online stock trading eliminates physical stock brokers. Now, its just you, your Depository Participant, the custodian and the stock exchange.
Online Trading Saves Time: Time is like money. Most of us don’t find time in our hectic work schedules to go to stock broker and asking him to do market research. Through internet, it gives you not only the advantage to save time; it also enables you to trade from anywhere. Imagine a person sitting in a remote village having to contact his broker in a city to get a trade through. In present times a person can conveniently trade from anywhere using the tool of the internet. Investors who travel frequently also need not miss computer, a modem and a telephone line and then you can trade online.
Basic Requirements for Online Trading 1. Bank Account: This Bank should be having an alliance with the online trading service provider. This bank account will facilitate as a payment and receipts gateway.
2. Depository Account: The depository account also should be having an alliance with the online trading service provider. This account will act as a bank for the shares you hold.
3. Online Service Provider Account: This can be opened with any of the major service providers mentioned above.
Advantages of Online Trading: A ) Flexibility: Flexibility is the greatest advantage of online trading. Want to cancel your order or do it in seconds. If you want to modify the order, can do easily. For example, if you have placed an order to buy stock called B at $1,000. You keep tracking the movement of the stock for and in a couple of minutes you find that the prices are heading to downwards. What will be your decision Modify your order immediately and put a buy at $900. You can cashing on the market opportunities.
B ) Personal advice still available: The service providers combine off-line as well online services. They give you the personal touch added to e-trading thus combining structured advice and fast trades.
C ) Research information: Service providers carry stock analysis for your reference. This helps you in making the right choices. One cannot afford to hire analysts to review the stocks and companies with given our indent and situation, the sites that provide research reports could be useful.
D ) Value added services: Service providers offer a variety of trading options like Buy Today Sell Tomorrow (BTST) gives you the advantage to take short-term positions in the market and take advantage of price fluctuations. This is very useful when you want to cash in on new specific developments.
E ) Your Bank Statements: Bank Statements and transations that you have made for stocks online can be viewed at the click of a button on your computer. You do not have to run behind the bank executives to get your Bank Statements.
Disadvantages of online Trading: a ) Less knowledge: Elimination of a stock broker could also be a trouble. Without proper advise of stocking trade persons, it could prove risky to enter the stock game. Expertise and experience will helps you a lot. In a boom of stock market phase, money making is not a difficult task. If you see plenty of money, you start feeling like a stock market genious. You get carried away and make some mistakes that could be more chances of risk.
b ) Out dated information: Many sites let you have the ‘Added Advantage’ of research reports, may be outdated and not updated to the changes of fast trends. But take a look at one of the four corners on the web page and see the date of the analysis.
c )Higher Brokerage: If you buys stocks on 1st day of the month for $500 and sells it for $700 on 5th day, you have made profit of 40% in 5 days. You have also to think about the Depository Participant charging the brokerage. If you calculates the same, your return could be below 40%.
Services of Online Trading Service Providers: I ) Trading in shares: The service providers offer you various options while trading in shares. They give out a list of services that are provided by the best of the online service providers. II ) Spot trading: When you are looking at an immediate liquidity option, ‘Cash on Spot’ may work the best for you. On selling shares through ‘cash on spot’ money is credited to your Bank Account the same evening and not on the exchange payout date. III ) Buy Today Sell Tomorrow (BTST): BTST is a facility that allows you to sell shares even one day after the buy order date, without you having to wait for the receipt of shares in your demat account. IV ) Market Order: You could trade by placing market orders during market hours that allows you to trade at the best obtainable price in the market at the time of execution of the order. V ) Limit Order: Limit order allows you to place a buy/sell order at a price defined by you. The execution can happen at a price more favourable than the price that defined by you. You can place the limit orders during holidays and non-market hours too.
For making best online stock trading, one should forecast future stock prices, fundamental analysis combines economic, industry and company analysis to derive a stock current fair value and forecast future value.
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