Online trading, or direct access trading (DAT), of financial instruments has became very popular within the last five years or so. Now almost all financial instruments are available to trade online including stocks, bonds, futures, options, ETFs, forex stock markets and mutual funds. Online trading differs in many things from traditional trading practices and different strategies are essential for benefiting from the market.
In traditional trading, trades are executed via a broker via phone or via any other communicating method. The broker assist the investor in the whole trading process; and collect and use information for making better trading decisions. In return of this service they charge commissions on traders, which is often very high. The whole process is usually very slow, taking hours to execute a single trade. Long-term investors who do lesser number of trades are the main beneficiaries. neonvent crypto platform
In online trading, trades are executed via an online trading platform (trading software) offered by the online broker. The broker, through their platform offers the investor access to market data, news, graphs and alerts. Day traders who want real-time market data are given level 1. 5, level 2 or level 3 market access. All trading decisions are made by the investor himself with regard to the market information he’s. Often traders can trade more than one product, one market and/or one ECN regarding his single account and software. All trades are executed in (near) real-time. In return of their services online brokers charge trading commissions (which is often very low — discount commission schedules) and software usage fees.
Advantages of online trading include, fully automated trading process which is broker independent, informed decision making and access to advanced trading tools, traders have direct control over their trading collection, capacity to trade multiple markets and/or products, real-time market data, faster trade performance which is crucial in daytrading and swing trading, discount commission rates, choice of course-plotting orders to different market makers or specialists, low capital requirements, high leverage offered by brokers for trading on border, easy to open account and easy to manage account, and no geographical limits. Online trading prefers active traders, who wish to make quick and frequent trades, who demand lesser commission rates and who trade in bulk on leverage. But online trading is not 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 border, monthly software usage fees, likelihood 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 there will be often no one to help them in this process. The fees involved in trading vary considerably with broker, market, ECN and type of trading account and software. Some online brokers may also charge loss of focus fees on traders.