Benefits of Online Trading

Online Trading in India in the recent decade has witnessed a boom and continues to scale new heights. The Stock Market hit another milestone with the number of Demat accounts exceeding the 10 crore mark for the first time in August 2022.

The sharp surge in stock market participation is attributed primarily to online trading. The number of Demat accounts has continued to multiply, with 10.4 crore accounts as of October.

Online trading typically is the process of buying and selling securities through online platforms. Most brokerage firms provide online trading facilities for their customers by offering simple and hassle-free platforms ranging from websites to mobile applications. Online trading has gained widespread popularity in India and has induced broader investor participation in the stock markets with multiple benefits of trading.

What are the Benefits of Online Trading

Online trading has a lot of benefits; here are the seven main benefits

  1. Quick Turnaround Time:

    Before online trading kicked in, investors would call their brokers to place buy and sell orders. Investors would have to read out the exact details of the transaction to their brokers to initiate a trade. Online trading has made these transactions quicker, as investors can place their trades easily with a few clicks. The facility has also benefited investors immensely, seeking to invest in volatile stocks. Since investors can place their orders quickly, they can exploit price fluctuations more extensively to maximise their profits.
  2. Location Flexibility:

    With online trading, investors can trade from any location. All that is required is a stable internet connection, and trades can be placed on the go. Since investors do not face location constraints, there is broader market participation. One can even invest in international equity from your own country by depositing the required amounts defined by the regulator with your equity broker.
  3. Cheaper Mode

    Online trading requires investors to pay a lower fee than the traditional method. In traditional trading systems, the brokers charge a fee from the investors to maintain their infrastructure. Since such requirements are eliminated by online trading, the charges are much lower. Moreover, online trading has introduced an array of offers for traders in the form of discounts, trading packages, etc, for investments in the equities and derivatives segment. Many brokerage firms have introduced a discount approach to offer low brokerages at competitive rates, making online trading less expensive.
  4. Real-time Updates

    Online trading allows you to place trades from your handheld devices. Investors can get real-time updates and notifications based on their portfolios or watch lists and can place orders quickly. A slight delay in the stock market can lead to substantial gains and losses. Hence, timing is a crucial factor when making investment decisions. Receiving real-time updates gives investors a chance to garner more returns. One can now download apps on their mobile phones and keep track of their portfolios in real-time. Online trading platforms are well-equipped with the latest features, such as analyst recommendations, technical charts, the latest news, and much more. Additionally, online platforms provide 24*7 access to information about a security’s performance for investors to stay updated with market trends.
  5. Great Exposures to Securities

    Online trading platforms offer extensive data and information about a large number of securities. Investors get more choices to make more efficient decisions. Also, varied resources are available for traders to enhance their fundamental and technical skills before entering the markets. This learning facilitates a deeper understanding of the stock market and helps traders make well-informed and more efficient decisions.
  6. Elimination of Mediators

    Online trading eliminates the need to involve a broker each time the investor makes a transaction. Online platforms offer more flexibility and a hassle-free experience for investors. Such platforms, therefore, provide greater control. Advanced online trading now includes algorithmic or robotic trading helps place trade automatically as the computer follows a specific set of rules - such as entry and exit defined rules. The robots use mathematical algorithms to assess when to enter a trade and how to exploit maximum returns out of a trading opportunity.
  7. Transparency

    Online trading platforms offer complete transparency relating to charges incurred by the investor, such as brokerage charges, taxes, etc. This gives investors more clarity while executing a trade.

Conclusion

Online trading platforms have helped attract a more extensive investor base seeking to enter the stock markets. There are multiple benefits of trading on online trading platforms. These platforms offer numerous benefits for investors, such as ease of access, flexibility, real-time updates, lesser brokerage charges , etc. Additionally, the online trading platforms provide customised support to their clients, incurring any difficulty with their trades.

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Frequently Asked Questions (FAQs)

Online trading can be a good way to make money, but it is important to do your research and understand the risks involved. There is no guarantee of profits, and you could lose money.

Online trading can be safe if you use a legitimate broker and take precautions to protect your account. However, there is always the risk of fraud or cyberattacks.

  • Convenient: You can trade from anywhere, at any time.
  • Cheaper: Online trading platforms typically charge lower fees than traditional brokers.
  • Real-time updates: You can see the latest market data and make informed trading decisions.
  • Access to a wider range of assets: You can trade stocks, bonds, commodities, and other assets.
  • More control: You have more control over your trades than you would with a traditional broker.
  • Education resources: Most online trading platforms offer educational resources to help you learn about trading.
  • Customer support: Most online trading platforms offer customer support to help you with any problems you may encounter.

Here is an example of a short squeeze:

In January 2021, the price of GameStop (GME) stock rose sharply from around $20 per share to over $480 per share in a matter of days. This was caused by a number of factors, including a short squeeze. A large number of investors had shorted GME stock, betting that the price would fall. However, the price of the stock rose sharply, forcing these investors to cover their short positions at a loss. This buying pressure drove the price of the stock even higher, creating a short squeeze.

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