The Pros to Online Stock Trading
Many people would have you believe that the benefits to trading stock via the Internet are
unlimited. Be mindful, however, of "salesmen's puff". The pros to trading on the Internet can be
determined, regardless of the different ways that they are 'dressed up', and, essentially, fall into the
1. Low commissions
Before the days when it was possible to trade online, anyone who wanted to invest in the stock market(s) needed
to retain the services of a broker – something that still exists today, regardless of the fact of whether or not
you are trading online. As an established profession, brokers in the real world (as opposed to brokers in the
virtual world online) were able to charge their customers fairly large commissions on any trade done.
Consequently, unless you were an investor trading in a large volume of stock, or someone else (such as a mutual
fund) was trading collectively with others on your and their behalf, the net cost of this commission meant that it
was not economically viable for you to trade small volumes of shares.
The advent of the Internet changed all of this. It was, and is, now possible to offer customers online
trading services where the commission could be much lower (as overheads, etc. are lower) and the broker would still
end up making money. Indeed, today it possible to trade via the Internet for standard commission fees of
around $7 per trade.
As you may imagine, information is King when it comes to investing in the stock market. Knowing just the
right moment when to buy stock or when to sell stock is what will set you apart as a successful trader from the
millions of ordinary traders or, even, those traders who manage to lose money. Having said that, in order to
get your hands on this information you either need to (a) find it yourself, or (b) have it provided to you, or (c)
experience some pure luck – if not a combination of all three.
In this regard, along with the ability to connect to the Internet to trade in stock, you can also use your
computer function capabilities to run online stock trading software programs. In short, a reputable stock
trading software program will provide you with the ability to create (i) technical charts, such as bar charts and
line charts, (ii) technical analysis indicators, such as the Bollinger band, and (iii) real time stock trading
prices. You can then collect the information and use this to help you make a decision of whether or not to
invest in a particular stock.
In addition to making use of a reputable stock trading software package, you can also make use of the Internet
itself to provide you with lots of useful information in relation to your chosen investment stock. You can do
- looking at the company’s website.
- doing a search engine search on the company to see if there is anything you need to know.
- doing a news search to keep abreast of the latest news relating to the stock.
- sign up for RSS feeds, which will provide you with updates on the company as and when they become
Use of all of these tools should help to ensure that you remain a well informed investor.
3. No interference – free to invest
One major advantage that trading via the Internet has is the fact that you cannot be stopped or dissuaded from
investing in a particular stock. In other words, if you like the look of a stock, you simply log-on to your
online brokerage account and instruct your broker to purchase the stock in question. However, if you trade in
the real world, using a live broker, trading may not be that easy. You may find that when you phone up an
order to buy and/or sell a stock, your broker tries to persuade you not to take the course of action that you are
about to take, or point blank refuses to take the order – believing they know better than you do.
Although the above can apply to a single buy/sell order, it can also apply to your chosen investment
portfolio. For example, if you want to invest in penny stocks you may well
find that real life brokers refuses to act for you. Trade via the internet, however, and you’ll likely not
find this a barrier at all. In short, you have control over your chosen investment portfolio.
If you didn’t already know it, the Internet never closes, nor does it shut down to sleep, rest or take a day
off. By trading online you can move your investments around the world 24/7/365, thereby making sure you take
full advantage of what is going on in the world as it happens! Compare that to a real life broker and unless
you have brokers in every country in the world where you want to trade you’ll soon see that online trading provides
you with far more investment opportunities than a real life broker could possibly hope to give you.
5. Right here, right now!
In, possibly, no other industry could the importance of “time is of the essence” be more explicit than stock
trading. The matter of a few seconds really can make the difference between making a profit, a loss or a huge
loss. And, if you ever doubt this, think back to the events of 1929 and 1986 (stock market crashes).
Given that this is the case, which scenario do you believe is more beneficial – the one where you have to ring a
broker and ask him to buy/sell a stock, who then has to check the bid/ask price with a trader and revert back to
you for authorisation, or the one where you log-on to the Internet and send a sell order instantaneously?
Surely, with time being such a crucial factor, you need to use a method that is as instantaneous as possible, and
the Internet brings you far nearer to achieving this than any telephone instruction can!
6. No investment threshold
The final benefit that Internet stock trading has over real life stock trading is the fact that unlike the case
when you use a real life broker, when you trade online you do not normally have to give the broker an order to
purchase a minimum number of shares (for example, 500 shares) but, rather, can trade as many or as few shares as
you want. Currently, however, most online brokerages do require you to open a stock broking account with a
minimum balance of $500.
Next: The Cons to Online Stock