Opening an online stock trading account is probably the best way to get started with the investment trade, especially for individuals who are interested in buying a few stocks but are not too keen on spending a lot. To create an online trading account, you would just need a few mouse clicks and some signatures. There are certain prerequisites or things needed to create an online trading account. A fully functional computer with access to the Internet, a bank account, printer, and a brokerage account are essential for getting started with the application process.
Probably a couple of decades ago, the only way to invest in stocks or indulge in share trading was via a stockbroker. The stockbrokers would take in orders, provide suggestions, and end up handling the entire process of selling and buying the stocks. With the advent of the World Wide Web, brokers no longer play the most significant role, as most of the trading happens online. That being said, the role of the traditional stock broker is still sought by investors who intend to trade larger stock quantities — usually businesses or extremely wealthy individuals. The average investor no longer requires the services of a broker as he can do the trading online. There are several benefits attached to online trading, especially for people who indulge in some casual trading.
The most important positive about online trading is cost. Traditional brokers are experienced and bring advanced academic degrees and skills to the trading table. Their services, quite obviously, does not come for free. Though they are very effective at what they do, they are quite costly as well. These brokers not just charge brokerage fees, an upfront fee, but they would also take percentage share of the earnings made. There could be some other kinds of fees as well, which could vary across different stockbrokers. Online brokerage firms, such as E* Trade, usually charge a flat inexpensive fee for their services.
The next benefit of trading online is the complete control that rests with the trader. Lack of complete control over the stocks and the related transactions is something that has been a huge issue in the past, when the stockbrokers had a stranglehold on the trading market. They would, at times, not obey the instructions of the trader and not perform a specific trade if they considered the trader’s call to buy or sell a stock unworthy. They supposedly had complete authority over a trade and had the rights to deny a particular transaction, if they were not convinced about it. Though this might had worked in the favor of the client and had mitigated a probable loss, it denied the trader an opportunity to make a huge gamble and get paid off enormously, if at all the risk-taking strategy worked out. With online trading, such middlemen do not exist, and traders have all the freedom to buy or sell the stock of their choice.
Instant processing is the other benefit with Internet trading. Back in the days, even making a single trade move was a tedious and cumbersome process. This often worked against the investor as crucial time got lost. Time is of immense importance when working in a stock market, as the share values could move either ways in a matter of few seconds. Online trading can perform trade moves almost instantly, besides providing real-time news and updates about a specific stock or company’s performance. In other words, the delay between the actual time when the stocks are purchased and investor’s purchase has been negated completely.
The fourth benefit is the freedom that comes with online trading. An online investor can make as little or as many number of trades he wants. Traditional brokers usually wanted a minimum allotment for trade, thereby making it quite difficult for the investor to carry out a single trade. In short, this made it impossible for the casual trader to trade stocks in volumes of his or her choice.