What is Online Trading?
Online Trading is a method that facilitates buying and selling of financial instruments such as mutual funds, equities, bonds, derivatives, stocks, ETFs, and commodities through an electronic interface.
Online Trading has simplified a complex process into a few clicks.
A couple of decades ago, a buyer or seller had to reach out to a broker on the phone or physically to execute a trade, that demanded significant effort and time. Previously, a broker had access to modify and execute the trades. With online trading, the control is in your hand. This has ensured a better user experience and transparency.
How to Trade Online?
With the stock market popularity sky-rocketing every day, more people are jumping into the race however, only a few thrive in the longer run. The reason is simple: Discipline. Certain attributes must be cultivated to succeed in share trading. Let us understand them in brief:
Open a Demat and Trading Account
First things first, one needs to apply for a Demat and Trading Account with a Depository Participant & Stockbroker and complete the documentation process (PAN, Aadhar, etc.) to begin online trading.
Knowledge and Analysis are Key
The stock market is not a get-quick-rich scheme. One needs to gain knowledge about the financial markets. There are several courses on the internet which teach basics to advance.
Strategy & Psychology
Before you start investing real money, it is recommended to practice with a demo trading account. This empowers you to get familiar with price dynamics and develop a trading strategy. While spending more time in the market, you can nurture a strong mental resolve needed to trade in the ever-fluctuating stock market.
Additional Read: How to start trading online?
How does Online Trading work?
Back in the old days, every share which was purchased or sold had to be documented physically making it a tedious activity with enormous dependency on the broker. A physical paper trail had its share of risks in terms of damage, loss, or forgery. Online trading, however, has resolved most of these concerns.
Understanding the Journey of an Online Trade:
- A buy/ sell order is initiated by the investor on Demat & Trading Account
- Once a relevant match is found, the trade is executed
- After execution, a trade confirmation is sent by the stockbroker to their clients
- Then, the clearing process is initiated by clearing member/ clearing corporation
- The Clearing Corporation settles the trade-in T+2 days (T= Date the order was placed, 2 days = 2 Working Days) and credits the shares in the Demat account of the buyer
- A digital record of the executed order will also be available to the user on their respective online trading platform for future reference
Things to Remember Before You Start Online Trading
- Demat and Trading Account is mandatory
- Choose the broker that meets your requirements
- Research thoroughly and analyze before taking trades
Practice through demo trading accounts to test various strategies.
Benefits of Online Trading
- Online trading is cost, time, and effort efficient. It saves energy and brokerage fee
- Complete control over order placement and portfolio management
- Tracking every stock and their returns in your portfolio is hassle-free
- With lightning-fast payment gateways like UPI etc. fund transfer is swift and convenient
- Secured trading with transparency
Additional Read: Futures and Options (F&O) - Meaning, Types, Difference?
Choose the Right Trading Platforms for Online Trading in India
The options available for online trading are aplenty however, you need to choose the right one and let us assist you in identifying the parameters to choose the right platform.
Simple and Easy to Use Interface
The most important aspect of choosing a broking agency is to check how simple is the platform and how uncomplicated is the user interface. You will be spending considerable time on the platform, and it should be simple enough for you to navigate.
Low Brokerage Fees
It is important to compare the brokerage fees of various broking agencies and then select one. As you will take multiple trades in the process the brokerage fees will turn out to be a concern, in the long run, thus, choosing the right platform, in the beginning, can save you a lot.
Market Features
There are various financial instruments on which you can trade in a stock market. It is important for the platform you choose to have diverse options available which simply means to allow you to provide access to all kinds of instruments. E.g., Bajaj Financial Securities Limited provides you with best-in-class interest rates for Margin Trade Financing (MTF).
Technological Features
Speed is critical for online trading, and this can be achieved only through apex technology. Technology is also critical to upholding the security requirements of a user and this should be non-negotiable.
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