Online trading did not have a very smooth journey. Investors were sceptical as were brokers. Markets were still in a state of flux, people were still wary of the risks of online trading, brokers were worried about cannibalization and the platform itself was evolving. Today, brokers are moving toward the online platform as it offers simplicity, cost saving and scalability.
Here is what you need to know about online trading and how to go about it…
Focus on the ease and simplicity of online trading
Online offers you convenience and simplicity. You don’t have to walk into your broker’s nearest office, delivering the cheque, collecting the payment or even calling up the dealer for execution of trades. All that can be managed from the comfort of your house or office just sitting on your laptop with a good internet connection. Everything is done online on the internet. You can also download the app on your mobile phone and execute trades. With the proliferation of smart phones and notepads, you can even operate your trading account on the move. The beauty of online trading is that everything from your bank account, your trading account and your demat account can be managed through a single platform.
Watch out for the transparency in trade and make the best of it
Online trading, among many other things, is about transparency. When you call up your broker on phone you never know whether the order has been executed and at the price you wanted it executed. Online trading overcomes all these problems. You can place order at the price you want, check your order book for status, get granular details of your transaction from your online trade book and also track dividends and other corporate actions. Once you are logged into your account, you virtually enter a world of trading where execution, research and audit is done seamlessly. Additionally, with electronic contract notes, no need to physically file these notes and you also get demat statements and capital gains statements online from your trading account.
Online trading is all about granular personalization
One of the reasons people still prefer offline trading is due to the personal touch it offers. Sitting with your broker and discussing markets over a cup of tea is something everybody relishes. But that may not exactly be the way forward. Going ahead, investors will have to increasingly rely on personalized services offered by online broking platforms. That is not all. You will have the benefit of robotic managers; chatbots etc which will help you navigate without any offline help. That is where newer concepts like robo advisory are becoming popular which are actually trying to replicate the complete experience of sitting face-to-face with a broker or advisor. Traders and investors are gradually getting used to a more impersonal and rule-driven approach to trading even as the onus is on the brokers to make the experience as life-like and real as possible. This trend will only get accentuated.
Online is all about execution smartness
Execution begins with placing the order. Which order type you should use? For example, you can use market orders when the market is falling and you are looking to buy. Alternatively, you can use limit orders where you can get a better price whether you are buying or selling in a volatile market. When you are lax about the way you place online orders, it adds up to quite a big cost over time.
Address the critical issue of security risks
Security risks may not be too prominent when you are trading offline. You are still required to sign the cheque and also sign the Debit Instruction Slips (DIS) before a trade can get through. That is not the case with online trading. Lot of focus is on online security and the onus is on you as the trader / investor to enhance your security. You must have multi-level authentication, avoid accessing the trading platform from cyber cafes and unsecured wi-fi networks, regularly upgrade your hardware and software regularly, install and update your anti-virus and anti-malware programs etc. These steps will go a long way in making online trading safe and secure. But, security is something you really need to focus on.
Real advantage of online is in its seamless and fluid nature
Let us understand what we mean by this seamless chain. When you open the trading platform you review the trading ideas for the day, then use the online screeners to shortlist stocks and execute your transactions at the best possible price. Once the trades are executed, you can view the orders in the order book and review the trades in the trade book. All debits and credits to your trading account, bank account and demat account are real time. From the time you get the trade idea till you file your tax returns, the entire process flow can be managed seamlessly through your trading account. E-KYC, made things a lot simpler!
As an online trader, there is convenience, speed and control. What you need to take care of is the security aspects.