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Online Stock Trading


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Definition

Online stock trading is what a person does when he or she wants to buy or sell stocks, bonds, mutual funds, options, or other types of investment securities via the internet. They are termed as Online Stock Traders. Many agree that the internet is a much faster and easier way to manage brokerage accounts than calling a broker on the phone and waiting for him or her to complete transactions.

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The Internet and Online Trading

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Now that we live in the internet age, we can trade from almost anywhere, and be updated with information in an instant, especially with technological advancements in mobile devices such as the Iphone, Ipad & smartphones.

Buying and selling securities via the internet, also known as “online trading,” became extremely popular in the late 1990s when people’s access to the internet became fast and easy. Over time, people have learned to trust the internet and the security it offers for monetary transactions, and many people now use the internet as their primary source for buying, selling and trading investment securities. Online accounts are also commonly used for simply monitoring brokerage holdings.

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Instant Update of Stock Prices and Charts

Stock and/or Option Investing Online provide instant updates of all shares prices, charts and information. You can enter and confirm an order, and within seconds it can be executed, and you will be notified in your account and via email, of all the details of the transaction. Compare that to an off-line trading system, and you could be waiting for more than 24 hrs.

There are all sorts of other information that is updated instantly, that might be of interest to a Stock or Option Trader intraday. For example a live profit/loss update of all your positions and account is a popular piece of information we simply take for granted these days. An Option Trader also knows the advantages of getting instant information at his/her finger tips, like knowing the intrinsic value of an option for example.

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Online Stock Trading and Order Execution

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Online Share Market Trading is also highly customizable when it comes to order execution and modifying existing orders. Apart for being able to setup your standard Market Orders, Limit Orders, Stop Loss, Stop Limit Orders, Market if Touched & Limit if Touched Orders, you can set slightly more complicated orders to get your desired effect.

You can set up One Triggers the Other, One Cancels the Other, One Triggers Two Orders, Multi-leg Option Orders and one of my favorites is setting my stops to be active only at or just before the day’s close, to prevent being whipsawed by intraday price action noise. This really comes in handy if you are an end of day trader, so you can set and forget your orders, having the peace of mind that you have an order ready to execute, should your order conditions become true.

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Online Stock Trading Accounts are Easy to Open

It is simple to open an online stock trading account. All that is necessary is some research to determine which brokerage company will be most suited to meet particular needs, a computer, and internet access. Usually, a few pieces of personal information are required such as a social security number and other bank account information, but most of the paperwork can be completed on line. Some brokerage companies require that certain forms be signed on paper and mailed to a physical location.

Once an account is opened, it may be possible to begin online stock trading almost immediately, assuming there has been some cash transferred into the account to get things going.

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Brokers and Online Accounts

Most brokers and brokerage houses now offer online stock trading to their clients. Another great thing about trading online is that fees and commissions are often lower.

It is a good idea to go with an online brokerage company that has been around for a while. You won’t find one that has been in business for fifty years of course, but you can find a company that has been in business that long and now offers online trading.

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Brokerage Trading Platforms

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Most brokerages provide the trader with a trading platform which has a wide array of investment information and trading features such as:

• Databases of information on listed companies.

• Price data of major global indices.

• Prices of precious metals and major currency exchange rates.

• Price and volume graphs of shares.

• Daily market reviews.

• Real-time access to prices and price information.

• Real-time access to market depth.

• In-depth company research reports.

• Advisory services providing regular research and investment ideas covering equities, options strategies and a combination of both.

• Daily positions and portfolio valuations.

With just one account you are able to trade, manage and protect your portfolio. In many situations your account allows you to trade multiple products on multiple markets and operate in single or multiple currencies on one trading platform.



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Cash vs. Margin Accounts

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When a person intends to always buy new securities using existing cash, that person can take the money from his or her cash account to do so. If a person does not wish to always purchase securities in full cash, or if that person does not have the cash available for a purchase, a margin account can be used.

A margin account allows the customer to borrow a percentage from the total amount of the cost of a purchase. There is significant risk involved with buying securities with a margin account; however, some believe that the risk is worth the potential benefits.

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Risks Associated with Online Stock Trading

There are always risks when buying, selling or trading stocks, bonds, or any other types of securities. Risks can be elevated when an inexperienced investor tries to undertake complicated transactions online without the expert advice of a professional. However, for a novice investor dealing with a small amount of money, online stock trading can be a good learning experience.

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Technical Requirements for Online Stock Trading

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One of the most important requirement for online stock trading, and particularly, when day trading, is having access to a good Internet connection.

If the Internet connection, for online trading, was suspended due to weather, technical problems with the provider, unpaid bill, etc., active trades will continue to be processed until you provide further directions.

If there are no “stop loss” directions in place, then you run the risk of trades, during the interruption of the internet, running into losses.

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Survival Hints and Tactics

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If you are pursuing an online stock trading career, here are some of the pointers that will keep you on the path of success. You can incorporate these pointers into your trading system.

• Never add to a position that is losing. This is the main reason why small losses become larger ones that leads to traders who no longer trade.

• Always be aware of the trends in the market. Base your trades on market information. This will help you prevent big losses on your investment.

• Always be alert of the changes in the market as well. There are times when trading is not profitable. Anticipate every move in the market.

• Trust your instincts. If you feel that you will be losing in a certain trade, do not make it. It is better to be stay out sometimes rather than lose money.

• If everybody is now in, it is time for you to get out. You will not be able to pull in profit if the currency is overbought already. It is better that you exit that position and look for other trades.

• If you are new to investing, having the ability to actually speak with a broker can be quite beneficial. If you aren’t stock market savvy, online stock trading may be a dangerous thing for you. If this is the case, make sure that you learn as much as you can about trading stocks before you start trading online.

• You should also be aware that you don’t have a computer with Internet access attached to you. You won’t always have the ability to get online to make a trade. You need to be sure that you can call and speak with a broker if this is the case, using the online broker. This is true whether you are an advanced trader or a beginner.

By putting the necessary time up front into developing a long-range strategy and educating yourself, about the marketplace, will help ensure your success as an online trader.

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Is Online Stock Trading Right For You?

The nature of investment has changed to a large extent with emergence of Online Stock Trading. In past years, the view of the public about the stock market was greatly influenced by the television and movies which caused a lot of fear in the mind of public for the stock market and led to misinterpretations.

With the “Internet” this is all changed now. Trade has become a lot easier with trading online.

A lot of changes have occurred, but major changes are yet to be encountered when mainstream becomes more aware of trading online.

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The big question remains whether online trade is simply a shift in the way the traders have started to trade or investors investing, or is it more of a way for them to lose the money more quickly in the market? No one wants to think the latter but one must stay realistic.

Remember a person will trade more often if he or she can trade faster. This is what is provided by trading online, the means to trade faster.

The services provided by trading online have increased the speed of making transactions quickly, at the same time lowering the cost. With trading online, traders have been given unlimited access to large amount of unimaginable information.

This information can be quite useful for the investors to make the right decisions related to investments. Unfortunately, most investors don’t research enough to find the best investment opportunities, let alone manage them correctly.

In order to succeed as a trader, it is vital for you to fight against the downside of traders’ mentality when thinking about online stock trading. Use the internet to do this and gain unimaginable access to knowledge.

Decision making is extremely important when trading online. Trading is quite an exciting and adrenaline packed game. Each day is different with trading, as you will have no idea as to what might happen the next moment in the market.

But whether you gain or lose depends entirely on your decisions. Remember, if you have the confidence that you will make the correct investment decisions; you will certainly find yourself making a lot of profit.

Thus, a trader must learn and acquire the right investment knowledge in order to make an online trade a profitable one.

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Conclusion

Again, online stock trading is a beautiful thing – but it isn’t for everyone. Think carefully before you decide to do your trading online, and make sure that you really know what you are doing!


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