Things You Need To Know.
The stock market refers to public markets that exist for issuing, buying, and selling stocks that trade on a stock exchange or over-the-counter. Stocks, also known as equities, represent fractional ownership in a company, and the stock market is a place where investors can buy and sell ownership of such investible assets. An efficiently functioning stock market is considered critical to economic development, as it gives companies the ability to quickly access capital from the public.
Online trading is a very popular method of transacting in financial products online. Brokers have gone online, with their platforms providing all kinds of financial instruments like stocks, commodities, bonds, ETFS, and futures.
Traditionally, when a buyer wanted to invest money in stocks, he used to call his brokerage firm and asked for putting in a request to buy stocks of a given company for a specified amount.
The broker would then let him know the market price of the stocks and would confirm the order.
After the user confirmed his trading account, the broker's fees and the time period required for the order, the order would get placed on the stock exchange.
Before the era of online trading, traders had to call and give ‘buy’ and ‘sell’ order to their brokerage firms to trade for them. It used to be a very tedious process, and understandably caused many problems. Surprisingly, there are a few investors who still practice offline trading even today.
However, with the advent of the internet in this digital era, the vast majority of traders have moved to online trading platforms. You can place ‘buy’ and ‘sell’ orders, place market limits, put a stop-loss, check the status of an order, read news about companies, view the list of securities currently held through the dashboard, etc and you also have access to all your previous investment statements. Online trading has also reduced costs for both traders and investors.
When a user places the order for buying any particular stock on an online platform, their order gets saved in the database of the trading member platform and the exchange platform. This data is then used to look across all platforms selling that particular stock and displays the result with the best price available. If the price matches with the user’s demands and he confirms the order, then the process is validated by both the parties.
Many online trading platforms provide analysis of stocks, which helps the users to find the status of the stock market. This also helps them predict the situation of stocks in upcoming days and shape their decisions. Online platforms attract users through ease of use and reduced commission fees. Ultimately, having a properly funded account is essential to execute trades smoothly on a platform.
Benefits Of Online Trading
You can buy and sell without even speaking to your broker. This makes online trading alluring for someone who does not have the finances to work with full-service brokers.
It’s cheaper and faster – when a broker executes your trades, it costs you more money. On the other hand, when you trade online, a brokerage charge is levied but it is always less than what a traditional broker who has to place a trade physically, would charge you. Online trading is almost instantaneous.
One of the most important advantages of online trading is that it gives you greater control over your investments. You can trade whenever you want with online trading during the trading hours and you can also take your own decision without any interference from the broker.
You can monitor your investments in real time: Your online trading platform has a lot of advanced tools and interfaces to monitor your investing performance and to do your own research. You can see real time gains or losses whenever you login from your phone or computer.
Researching And Choosing A Stock - You should perform value research, technical analysis, try identifying patterns, understand short selling etc.
Try to decide which stocks you can afford to trade, diversify your portfolio, research before you invest and buy good stocks at a low price.
Here are common steps for beginners when learning how to buy stocks online:
1. Account setup: Open an online trading account
2. Navigate platform: Learn how the trading software works (website, mobile app or desktop).
3. Budget: Decide on a monthly amount you can afford to risk.
4. Strategise: Develop an investing style, such as buy and hold or short-term trading.
5. Manage risk and reward: Incorporate rules using order types (stop and limit orders).
6. Set goals: Focus on percentage returns and decide on your time horizon.
7. Find stocks to trade: Analyse news and research to find investment opportunities.
8. Avoid concentrated positions: Don’t put too much into a single position.
9. Index funds: Consider incorporating low-cost index funds such to gain broad market exposure.