Plenty of people talk about trading online when they’re looking for ways to make money off their investments in their spare time. However, few people understand what it really means to trade stock, or more importantly, what stocks to buy now. In simple terms, when you trade online you don’t actually “trade” something, you buy and sell positions in a certain company, future, or financial asset. There are many different types of trade to choose from depending on the market that you feel most comfortable with. Today, we’re going to look at the concept of online trading, and how it works in comparison to traditional or floor-based trading.
The Traditional Method for Stock Trading
Today, there are two ways that you can conduct trade in your chosen market. Either you can trade online, or electronically, or you can trade on the exchange floor. There’s been a significant push towards the electronic option these days, but there are still people who prefer to trade in the traditional way. When you trade “on the floor,” you get the experience that you would expect based on movie depictions of the stock market. The experience is a lot like the television, with people gesturing to each other on phones, rushing around and shouting. When you trade on the floor, you will tell a broker that’s responsible for buying and selling shares on your behalf when you want to buy something, and when you want to sell. Your broker would tell a floor clerk at the exchange what to do on your behalf, and they look for someone who’s willing to buy or sell specific shares. The two agree on a price, and your deal is completed, then you get called back with the final price that you traded at. This stock trading process can obviously take some time depending on what you’re selling.
The Electronic Method of Stock Trading
In the chaotic world that we live in, many people consider the traditional trading method to be too slow. As more people get involved with trading, there’s also the risk that the NYSE and similar stock exchanges won’t be able to continue providing the level of service that today’s traders require. Electronic markets and online trading can make the trading process a lot quicker and simpler. The computer networks match sellers and buyers online, rather than using human brokers, which means that it’s far more efficient. Plenty of large traders prefer this quick method to the standard on-the-floor option. Even if you’re an individual investor, trading online means that you can get a quicker confirmation on your trades, and you don’t have to wait around for days for the money to move in and out of your bank.
While online trading allows you to move things along in your trading strategy much faster, it’s worth noting that you will still need a broker to help you handle your trades. Most individuals simply won’t have access to the right electronic markets otherwise. Your broker will access the exchange market and find a buyer or seller according to your needs.