Everything You Need to Know About Online Trading

Financial stability is one of those things that many want but few have. But how exactly can one attain it? While many believe in working their 9 to 5 careers till they attain some element of stability, this path is plagued with pitfalls ranging from infrequent salary increments against the disproportionate rise in the cost of living, to the volatility of the job market. The real answer to the question that is financial stability rests in the art of allowing your money to work for you. This is also known as “investing”. And while investments in themselves cover a wide range of financial ventures, one simply cannot discuss investments without touching on trading.

Trading is the process by which investors buy and sell shares, usually with the help of a brokerage firm. If you are brand new to the market, it is good to note that shares refer to a piece of a corporation that one can buy and sell. What this basically means is when you buy a share of stock, you are investing in the company, which in turn may give you, the shareholder, a share of their profits in the form of dividends. Also noteworthy is that the only difference between online trading and its more traditional counterpart is that online trading is done over an electronic network – usually the internet.

Though stocks and securities trading was initially restricted for the richer portion of the population, it is fast becoming a venture accessible to just about anybody. Furthermore, advances in technology have propelled the market forward by allowing anyone with access to a computer and a network to get started on this financial venture on the path towards financial stability. Even more amazing is the more recent concept of international stock trading that allows for one to invest in stocks that are overseas. This has opened up markets that were initially inaccessible to local investors allowing them to tap into about 70% of the world’s stock investment potential with a click of a button.

But how exactly do stocks work? And how can one get started on an online trading venture?

Traditionally, stocks were bought and sold through stock brokers. These are individuals that are licensed to buy and sell shares through a particular exchange company, all at a commission. Oftentimes stock brokers also offer advice on what stocks to trade and when so as they have studied the market. With the advent of online trading, these individuals have largely been replaced by online brokers through which you can order the buy and selling of stocks yourself. Though the human stock broker has mostly been replaced, one can still find brokerage firms that offer services, including live brokers, who can assist you during trading.

When getting started on online trading, choosing a suitable online broker is one of the first decisions you must make. This choice is based on a number of criteria including how much money you wish to invest, how often you wish to invest and any other services you may need such as broker-assisted trading. There are numerous options when it comes to online brokers, so you are sure to find on that will fit your needs.

Once you settle on an online broker you may now start thinking of what type of account you would want to open. You may open an individual or joint account depending on whether or not you are investing as a group or alone. Other account types include retirement accounts, custodial accounts, cash accounts or margin accounts. These are chosen based on the purpose of opening an account and the preferred means of payment.

As soon as you have opened and funded your account, you can now start trading. Most online brokers offer delayed quotes on stock prices, though this may result in bounced orders when dealing with volatile stocks whose prices change rapidly over the course of a few minutes. A few websites offer real time quotes and are thus better for rapidly changing stocks.

There are various ills that have been associated with stock trading. These range from erratic prices and corporate scandals. However, in addition to those, you must be wary of investment fraud. With schemes such as pump-and-dump schemes and fraudulent IPO’s, you as an investor must engage in extensive research before grabbing for a tempting offer. Remember, if it seems too good to be true, it probably is.

At the end of the day, contrary to popular belief, trading is not a guessing game. If you study the market and research extensively you can be sure to make great returns. With online trading, you can do it all from the comfort of your home with all the information you may need is a click away… In short, there has never been a better time to get into stock trading.