The Advantages of Trading Online with the Advanced Technology Available Today
Trading online is one of the major changes that advances in technology have brought about. Time was when investing in the stock market was an activity reserved for rich people with a lot of time to spare. With developments in computers and telecommunications, the average person can now invest in the stock market with a mouse click.
First introduced in the United Kingdom in 1994, trading online enables an investor to bypass the traditional stock brokerages and replace them with online brokerages to handle investments in stocks. In the past, an investor had to open an account with a stock brokerage firm, comply with their requirements and transact business through time-consuming verbal or written communications.
With trading online, an investor needs to open an account with an online stock brokerage. Thereafter, everything is handled through a computer or cell phone. Opening an account with an online brokerage is the first step and entails complying with the requirements of identity and income that are required by law for security reasons. Once the account is approved and opened, the account holder can instruct the online brokerage to buy or sell stocks at anytime.
In the traditional system, the investor relied on his or her stockbroker to provide investment advice based on the stockbroker’s expertise and experience. In trading online, the brokerages provide real-time information about stock prices, market trends and individual stock developments. This enables the investor to make faster, more intelligent decisions.
Speed is another advantage of online trading brought about by cell phone technology. Where access to a computer is not available, online trading can be conducted on the go through the use of a cell phone. Vice versa, transaction reports are more readily available with online trading.
Trading online has helped to bring down the costs of investing in the stock market. Because of the competition provided by online trading firms, the commissions charged by traditional stock brokerages have significantly dropped. Online brokerages charge lower fees per transaction or a flat fee regardless of the transaction amount.
Perhaps the most far-reaching benefit of trading online, however, has been to lower the minimum amount needed for trading. Traditional stock brokerages would impose relatively high minimum levels for opening an account, thereby restricting participation to the more affluent individuals or institutions. Online trading, with its lower minimum amounts, has brought investment in the stock market within reach of a wider, middle-class market.
Trading online is subject to the same government regulations that traditional stock trading is. Financial reports, tax liabilities and account statements are standard, with the added advantage of being more readily available online. This, in turn, enables an investor to track his investment history more easily and use this information for future investment decisions.
Convenience notwithstanding, trading online still requires care and caution on the part of the investor. Information about the various online brokerages can be easily obtained. Some traditional stock brokerages even maintain online sites lending credibility to online trading. Discussions with friends who engage in trading online can also be helpful and enlightening.
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