BUYING SHARES ONLINE -- The Ins and Outs of Online Trading

2007-03-08 10:33:40

( Online Shopping )



Since the advent of the Internet, investors have been given the option of online trading. This development enabled investors to buy stocks online, as well as sell them. But as with any other investment decision, online share buying requires a careful study of all its aspects.


Why Is It So Popular?

Buying shares online is an attractive option for a variety of reasons. Number one is its convenience; you can check on your stock investments at any time of the day. You also have access to relevant information and pertinent data that will be provided to you real-time by your online brokerage firm. In addition, online trading – whether buying or selling shares online – is generally cheaper in terms of brokerage fees. For these reasons, more and more people are trying their luck with it.

How It Works

There are two ways to trade electronically: one is conventional online trading using your internet browser and a web-based broker. Another is through Direct Access Trading (DAT) systems, using specialized software and a private network in buying shares online. With conventional online trading, you log in through your broker’s website and place your order, the broker then reviews it. Afterwards, your order is sent to the market makers for execution. In contrast, Direct Access Trading (DAT) systems allow you to trade stock directly with a market maker or specialist on the floor of the exchange, using special trading software. In terms of trade execution, DAT is faster than conventional online brokers, thus, there is a smaller risk for losses due to delays.

A Few Tips For Buying Stocks Online

If you are dealing with a conventional online broker, the first thing you should know is that trade execution isn’t instantaneous – it takes time! Keep in mind that prices can change quickly, especially in fast-moving markets. So you must ask your broker about outages, delays and other interruptions that may affect your trades. Make sure that your broker has alternative ways to execute trades. In addition, determine if the stock quotes and updates you receive are real-time or delayed. Check for your online broker’s ability to get the best price for you. Always contact their customer service representative if you have any inquiries or if problems occur. Finally, check with your local securities division to verify the registration status and disciplinary history of the online broker.


Final Pieces of Advice

Buying shares online (or selling them) can be a financially rewarding experience, but it is not without risks. So if you are new to online investing, don’t put all your savings into it. Start with a small sum, which is easier to handle and keep track of. As you gain more online trading experience, you can then increase this amount gradually. Trading online is not fool-proof. There will always be risks involved, so prudence and wise investing sense is crucial.


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