The Basics of Online Trading
- on 07.07.10
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The traditional method of trading in forex and stocks involved the investor calling up their broker and placing an order on the phone, who would then enter the order in the system which was linked to trading floors and exchanges.
However, with the advent of internet technology, this method is being overtaken by alternative means of trading in which investors can enter their orders online and even trade remotely via electronic communications networks with other traders.
Some orders that are entered online even then have to be processed through the broker to allow the agents to monitor the transactions and protect both the investor and the broker from illegal or incorrect trades which could affect either the investor’s portfolio or the broker’s license.
Online brokers usually charge lower brokerage fees as compared to their conventional counterparts who also have to give advice on trades to their clients. For this reason, online brokers are also known as discount brokers. Online investors are often advised to investigate the online brokers they plan to employ to ensure that they have trading licenses in their state or provincial jurisdiction and to avoid falling victims to bad business practices also known as boiler room scams such as illegal securities schemes.
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