Online trading is also called investing online or investing in a self-directed way. Online trading or trading online has emerged as a standard for traders and individual investors for the last few decades. At present there are a large number of brokers that offer online services accompanied with exclusive platforms for trading.
A General Synopsis of Online Trading
Before the introduction of internet stockbrokers were called by investors and orders were placed by means of the telephone. The order was later entered by the brokerage firm in the system that linked exchanges and trading floors.
It was in August of 1994 that K. Aufhauser & Company sprung up as the very first of its kind brokerage firm that offered online trading through “WealthWEB” owned by the company. Since the year 1994, significant growth and progress has been experienced in the field of online trading. At present, investors can enter orders online directly and at the same time they can also trade with different investors by means of electronic communication networks that have been set up. However, there are some orders that are entered online, but they are routed via the broker because this helps the agents to monitor and approve the trades that are done online. This is a very important step that helps in protecting both the brokerage firm and the client from any sort of incorrect or unlawful trades that have a sudden effect on the portfolio of the client and the license of the stockbroker.
Online brokers have been given another name which is discount brokers. Online brokers or discount brokers are very popular because of the speed at which they enter online orders and also because of the fact that they handle online orders and entries very easily. At the same time it should also be noted that the commissions and the fees of the online brokers or discount brokers is also very low in comparison to the fees or the commissions charged by brokerage firms that provide full service.
There are basically two different types of online brokerages that have emerged recently. There is one typical type of brokerage firm that offers direct access type of trading to the exchanges and a very common example of this type of brokerage is Interactive brokers. The other brokerage type is TD Ameritrade deals in routing orders to firms that are market makers and the TD Ameritrade gets its orders filled in this way. Knight Capital Group, which is at present called KCG Holdings serves as the perfect example of a firm that appears in the form of a market maker.
Effective Tools and Platform of Online Trading
The investors who have a strong desire for online trading always provide a great trading platform and it is this trading platform that serves in the form of a hub for the investors because the investors are allowed to sell and purchase securities like equities, stock, fixed income, mutual funds and options through this platform. Along with this platform, the tools required for tracking and monitoring securities, indices and portfolios and even research tools, news releases that are op to date and streaming quotes are also provided to the investors. All these tools of online trading are provided to the investors because these tools are considered to be very important for trading in a profitable manner. Many a times, it is also found that some of the most robust tools like in-depth and full analyst report, screener’s, customized backtesting and analysis are also available in order to get a view of the investment strategies that have been employed in times of difficult periods in the trading history.
Online investment and online trading have found two recently develop in several parts of the world. There are independent fund houses and online portals that are found promoting their individual transaction portals online. The commissions of brokers in online trading vary from one broker to another and the commissions are found to be largely dependent on the typical services that are provided by the account and the brokers.
There are certain precautions that are very important to be taken by investors who are planning to get into online trading. The very first thing that should be taken into account while planning to get into online trading is proper research about the online broker who is being thought to be employed. It should be ensured that the brokerage firms that are employed for online trading should be licensed by the provincial or the state jurisdiction. This helps the investors in avoiding the circumstances of falling victim to schemes and securities that are unlawful. This is called boiler room scam in the online trading language and it turns out to be very dangerous for online traders. The risks involved in online trading should also be clearly understood by the online traders. Online trading can turn out to be a very beneficial sector for people who like to get into this field because of the good returns.
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