Online Stock Trading – Pros & Cons

 

With the advent of latest technologies and the concept of “Anywhere Anytime” and “Trading on the Go” gaining momentum, online trading continues to grow in quick manifold. According to a recent survey, more than 14 million households in the U.S. are signed up with an online trading service. The success of online trading can be attributed to the access it offers to almost all types of stock, bond or any other type of security. But the clear underlying fact while dealing with stocks is that regardless of the mode of trade, there’s always a certain risk factor attached. Online trading has a number of benefits and also a few cons involved. Let us have a brief look at the Pros of them.

 

Online Trading – Pros:

 

Online trading offers unique benefits that will make you support the decision of going in for more online trading when compared to hiring a broker to handle your trading tasks.

 

1. Lower / No Fees

 

One major criterion that gives online trading a huge leap over traditional brokerage firms is the lower transaction costs and the elimination of commission payments. There are online platforms that charge very minimal charges for your trading transactions. The average amount that a person normally spends to buy and sell stocks online ranges from $4 to $10 depending on the platform you choose.

 

2. Control and Flexibility

 

In trading business, the ultimate point is doing the right trade at the right time. The time a trader takes to plan and execute the tasks, decides his profit probability. With online trading, a trader can execute a trade anywhere, anytime and more instantly. While the traditional stock broker system requires more of time between the trader and the broker to actually come to a decision about trading, Online trading does everything just by a click. When time is properly utilized more trades can be executed and thereby more profits can be reaped.

 

3. Access to Online Tools

 

With the advent of more and more tools and techniques that are easily accessible online, traders are able to execute their trades in a more efficient and planed manner. Most of the online trading companies like TradeKing, Interactive Brokers and Motif offer customers an extensive and impressive collection of tools to help traders optimize their profitability.

 

4. Real Time Monitoring

 

When compared to traditional stock brokerage in which there is no way to monitor the performance of the trades which are placed, online trading sites offer a wide range of stock quotes and trade information that make it easy for traders to see the real time performance of the stocks in which investments are made.

 

Disadvantages of Online Trading

 

In fact only with an in depth knowledge of both the sides of online trading, can a trader possibly decide if to go ahead with online trading or to just resort to the age-old traditional brokerage setup.

 

1. Too fast is sometimes too risky:

 

Online Trading might prove to be super fast in executing trades. But in reality there should be a lot of quality time to be spent on the decision making process.Though time is the essence of Stock trading, it is true in both the senses – trades has to be executed on time and also quality time should be invested before executing a trade. It is necessary that a proper line have to be drawn as where to start and where to stop.

 

2. Absence of expertise advice from Brokers:

 

Financial transactions and all trades that involve money speculation need real mastery over the trade and its tactics. A trader might have sound knowledge about the stock market but a specialist in the industry will obviously know a lot more and will know the ups and downs of the market trend as he is in this line of business for a long time. Right from creating an investment strategy or to understandafter effect the market it requires a huge expertise and experience and when online traders are left to their own performing such tasks, sometimes things don’t fall in prefect place.

 

3. Purely Machine Dependent:

 

Online Trading depends purely on your computer and its Internet connectivity. In case of a network drop or connectivity issue, then trading might get interrupted and opportunities might be lost.Also there are chances of mishaps or errors by faulty operation of the computer. A trade might get stuck up in the middle of the execution process and money might be lost. So it is vital that you understand the process of verifying the trades and statement reviews before you actually venture into the field of online trading.