What is a Trading Platform?

by Amanda Harvey

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Introduction

The question ‘What is a trading platform?’ is an important one to answer for anyone wanting to be involved in trading on the stock market. A trading platform, often known as an online trading platform, or an electronic trading platform, is a computer software program used to execute transactions within the financial markets. This type of program allows an individual to place orders for stocks, options and various other investment vehicles through a financial intermediary such as a bank, broker, or exchange.


What is a Trading Platform Used For?

A trading platform is used to connect buyers and sellers, and in many cases has superseded traditional stock market floor trading and telephone trading. A trading platform allows traders to conduct transactions from any location in which they are able to access the Internet. They also enable almost immediate execution of orders, which is a point of great importance in the fast-paced world of trading.

A trading platform also provides access to specialized markets which were previously unavailable except through a limited number of trading companies. There are specially designed platforms which allow specific types of trading strategies, for example, high frequency trading to be implemented.

Many trading platforms provide tools for analysis and charting which can assist a trader in their trading strategy. Most platforms offer live streaming of market prices as up-to-the-minute information is an integral part of their service.

What is the History of Trading Platforms?

The use of trading platforms began in the 1970s, with certain stock exchanges offering brokers the ability to electronically place orders using a private network. In the early days of electronic trading platforms, orders were usually not executed immediately, but were confirmed some time later.

In the early 1990s, the first widely offered trading platforms were launched. By 2001, electronic trading platforms had become extremely widespread, and during the few years following, a new development ensued in the establishment of trading portals, which are online arenas offering a variety of different platforms in one location.

What are the Advantages of Trading Platforms ?

One big advantage of using an electronic platform is reduced costs due to greater automation. There is also increased liquidity, as greater numbers of buyers and sellers are brought together to conduct transactions, regardless of location. A further advantage is generally smaller bid/ask spreads (the gap between prices offered to buy and sell), which is also a result of increased trading and liquidity.

What is a Trading Platform Suitable for Trading Options?

There are many trading platforms available with specific features designed to assist options traders. These options trading platforms range from very simple to extremely complicated and often include analytical and pricing tools. Some of the key considerations in selecting an options trading platform are a user-friendly interface which allows speedy entry and execution of orders, efficient customer service, and reasonable costs. The three online brokers which offer platforms preferred by Stock Options Made Easy are Interactive Brokers, Firstrade, and optionsXpress.

Conclusion to What is a Trading Platform?

A trading platform is a computer software program which enables traders to place orders and have them executed from any physical location. A variety of financial instruments, including shares, options, bonds and commodities may be traded through an electronic platform. There are many financial entities such as banks and exchanges that offer trading platforms, and this way of trading has become very widely used; almost to the point of supplanting traditional trading methods.

Electronic trading platforms are of benefit to the individual trader and the market in general, as they have reduced costs and bid/ask spreads, as well as increasing liquidity with a wider pool of traders easily able to participate in a range of market activity. It might be suggested that one answer to ‘What is a trading platform?’ is that it is one of the greatest developments to ever happen in the stock market.


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