Jan 29

Online trading, or immediate access trading (DAT), of financial instruments has became very popular within the last 5 years or more. Now virtually all financial instruments are offered to trade online including stocks, options, bonds, futures and ETFs forex currencies and mutual funds. Online trading differs in lots of things from traditional trading practices and different strategies are essential for profiting from the market.

In traditional trading, trades are executed by way of a broker via phone or via every other communicating method. The broker help the trader from the whole trading process; and collect and employ information for creating better trading decisions. In return on this service they charge commissions on traders, that is often quite high. The full process is normally very slow, taking hours to execute a single trade. Long-term investors that do lesser variety of trades will be the main beneficiaries.

In online trading, trades are executed through an online trading platform (trading software) supplied by the internet broker. The broker, through their platform supplies the trader access to market data, charts, alerts and news. Day traders who desire real-time market data are offered level 1.5, level 2 or level 3 market access. All trading decisions are produced from the trader himself with regards to the marketplace information he has. Often traders can trade more than one product, one market and one ECN together with his single account and software. All trades are executed in (near) real-time. In return in their services online brokers charge trading commissions (that is often very low – discount commission schedules) and software usage fees.

Great things about online trading include, fully automated trading process which happens to be broker independent, informed selection and usage of advanced trading tools, traders have direct control of their trading portfolio, capability to trade multiple markets or products, real-time market data, faster trade execution that is crucial in day swing and trading trading, discount commission rates, choice of routing orders to different market makers or specialists, low capital requirements, high leverage made available from brokers for trading on margin, simple to open account and simple to handle account, and no geographical limits. Online trading favors active traders, who wish to make fast and frequent trades, who demand lesser commission rates and who trade in big amounts on leverage. But online trading will not be here for all traders.

The disadvantages of online trading include, need to fulfill specific activity and account minimums as demanded by the broker, greater risk if trades are done extensively on margin, monthly software usage fees, chances of trading loss because of mechanical/platform failures and need of active speedy internet connection. Online traders are fully responsible for their trading decisions and you will have often no one to assist them to in this particular process. The fees involved in trading vary considerably with broker, type, market and ECN of trading software and account. Some online brokers may also charge inactivity fees on traders. For more information please visit

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