Benefits of Online Trading

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Back in the day when trading had just started in India, the stocks used to be traded in a fashion known as the “Open Outcry system”. This was a system that took place on the trading floor where the person would shout or use hand signals to indicate price changes or buying and selling of shares during market hours. The person interested would approach these people and strike a deal and would take down notes on a slip or form and then after the session they would go back and register all the trades made for the day. The process was cumbersome and exhausting and only those who had access to the building where it happened could benefit from this. However, this has become an outdated process and with the advent of technology, everything has become online. No more shouting or screaming and fighting for getting shares on the market floor.

In the present, online trading has made it easy for the common man to trade stocks with minimal interference from the broker. From websites to mobile apps, trading has become convenient for all with just a few clicks. And this has seen a huge number of participation from all age groups from across the country. So what are the benefits of trading online? I’m sure you can name many yourself but we’ll cover some here as well just in case you may have missed out a point. So let’s go!

What is Online Trading?

Online Trading is the process of trading your stock directly from a website or an app instead of calling the broker or other traditional methods. These platforms are provided by internet based brokers like TradeSmart. It’s very easy to access these platforms as all you need is a good computer system or mobile phone that has an internet connection and you start trading. Basically, you can easily buy and sell stocks from your home or workplace.

The process of online trading

When you place an order online to buy or sell stocks, the process gets executed within seconds. But at the same time, there is a lot happening behind the scenes which help execute these trades in seconds. The process involves.

• You place and order and it gets registered
• The order then gets placed in a database
• It then waits for a seller or buyer depending on the order placed to match its order and when found, a confirmation message is sent to both parties.
• The order and price is reported to the regulatory bodies
• The records of the transactions are then stored by the regulatory bodies incase they want to study your past transactions
• A contract is sent to your broker who sold the shares and to the one who bought them
• Then the broker has a maximum of 3 days to settle where they exchange the cash and shares
• The money then gets debited and the shares are officially in your account.

What are the advantages of online Trading?

With technology incorporated in trading, this has brought several benefits. The benefits of Online Trading are as follows:

• More independence from stockbrokers
  Prior to the online trading era, stock traders would contact their stockbrokers on the phone. While calls were recorded, the chances of human error were huge. While trading something as critical as leveraged stocks, especially over Intraday trading, a single error could cause massive losses.

  In the case of Intraday trading, all you need is that the internet connection should be stable. Rest, everything is on a screen in front of you. Omitting the trader and phone call significantly reduces the time taken and chances of human error.

  Also, when the market is volatile, the dealers of stockbrokers remain busy. That is not the case with online trading. Everything can be managed by the trader instantly at the click of a button.

• Online Trading is quicker
  Earlier, to trade stocks, you would have to call the stockbroker’s dealers. Then at times, your call would be placed in a queue. After connecting to the broker, you would read the exact details of the stock and sale. With online trading, all this happens at the click of a button. In the case of Intraday trading of even minutes matter for volatile stocks. Thus, online trading is quicker.
• More exposure to stocks and finances
  In the case of online trading, all stocks and finances are visible on the webpage. You make independent decisions and eventually are exposed to detailed statistics of stocks.
• Location flexibility
  As of present, most of the reputed trading platforms have apps for phones. This means you can manage your stocks from literally anywhere. All you need is an internet connection. While dealing through an app on your phone, you can trade on the go.

• Trader gets alerts
  While dealing with stocks by phone, you have to constantly ask the broker for clarifications. In the case of online banking, you can change the settings to get email and SMS alerts. This can help you keep a track of your stock transactions from time to time.

• You can keep track of stock prices in real-time
  Online trading allows you to deal with stocks in real-time. This means you can check the exact price of the stock on the internet instead of confirming it from the broker every time. Also, since the trading is quick, you would get the stock at the exact price.

  In the case of highly leveraged Intraday trading, even a few minutes of delay could cause losses into thousands or more.

• Cheaper than phone trading
  Online trading is cheaper than phone trading for both the broker and the trader.  In the case of phone trading, the broker must invest in dealers. This also means the broker will charge a fee from the investor for maintaining the infrastructure.

  This is also the reason most major stockbrokers have created their own online trading platforms. It saves them the cost and saves money for the trader too.

• Single platform for access to all stock exchanges
  Online Trading platforms allow you to trade across multiple stock exchanges at the same time, mostly through the same website. This means you are managing not only multiple stocks but your assets across multiple stock exchanges from a single computer.

  In the case of trading through the phone, even if your broker allows you this facility, trading across multiple stock exchanges will be cumbersome.

Conclusion

Online Trading is no doubt a way better option than trading on the phone. It saves your time, reduces risk, is more convenient, and saves your money. There is no question on whether one should shift to Online Trading, but one needs to decide which broker to work with. With this technology, opening a demat account also has become faster, simpler and can be done at the comfort of your home.