11-08-2012, 04:50 PM
investing online
investing online, or self-directed investing, has become the norm for individual investors and traders over the past decade with many, if not all brokers now offering online services with unique trading platforms.With the advent of the internet, investors can now enter orders directly online, or even trade with other investors via electronic communication networks (ECN). Some orders entered online are still routed through the broker allowing agents to approve or monitor the trades. This step assists in the protection of both the client and brokerage firm from unlawful or incorrect trades which could affect the client’s portfolio or the broker’s license.
Online brokers are most often referred to as discount brokers, due to their lower fees as opposed to full service brokers who also give advice to clients.
Online brokers are most often referred to as discount brokers, due to their lower fees as opposed to full service brokers who also give advice to clients.
Before choosing to invest or trade online it is important for investors to research the online brokers that they plan to employ, assuring that they are licensed within their state or provincial jurisdiction. This step will help to protect investors from falling victim to unlawful or illegal securities schemes (e.g. Boiler Room scams). The USA Federal Government provides practical tips to avoid investment scams via their OnGuard Online website. One tip is "Don't believe everything you read in online newsletters, investing blogs, or bulletin boards. Fraud artists often float false information and "hot tips" as part of their efforts to rip-off investors or manipulate the market for a particular security." They also advise that one "Turn to unbiased sources when researching investments, such as the U.S. Securities and Exchange Commission (via their EDGAR database), your state securities regulator, and securities industry self-regulatory organizations (including the Financial Industry Regulatory Authority (FINRA), Amex, and Nasdaq)." [1]
Investors must also fully understand the potential risks of investing without the help of a trained Stock Broker or Investment Advisor. These professionals are experienced both in trade and education and forgoing their advice could be costly. For this reason, most online brokers offer a number of investment tools.
Once the above two steps are complete it is dually important to research the sector, business and financial statements of each company whose stock they plan to purchase. This, along with diversification and basic portfolio theory, will assist to mitigate some of the risks associated with the volatility in both the stocks and the stock markets.
Once investors have chosen an online brokerage that best suits their needs, they will be provided a trading platform. This platform acts as the hub, allowing investors to purchase and sell securities (fixed income and equities), options, mutual funds, and foreign exchange. Included with the platform are tools to track and monitor securities, portfolios and indices, as well as research tools, real-time streaming quotes and up-to-date news releases; all of which are necessary to trade profitably. Often, more robust research tools are available such as full, in-depth analyst reports and analysis, and customized backtesting and screeners to see how particular investment strategies would have been realized during different historical periods.
Some of the popular online brokers include: E*Trade, IDealing, Scottrade, TD Ameritrade, and Fidelity. Schwab is an example of a hybrid broker combining a traditional, brick-and-mortar brokerage house with discounted trading online, with the usual benefits of both available to customers. Commissions vary from broker to broker, depending on the services included with the account.
electronic trading, sometimes called etrading, is a method of trading securities (such as stocks, and bonds), foreign exchange or financial derivatives electronically. Information technology is used to bring together buyers and sellers through electronic trading platform and networks to create virtual market places such as NASDAQ, NYSE Arca and Globex which are also known as electronic communications networks (ECNs).
The act of placing buy/sell orders for financial securities and/or currencies with the use of a brokerage's internet-based proprietary trading platforms. The use of online trading increased dramatically in the mid- to late-'90s with the introduction of affordable high-speed computers and internet connections.
The use of online trades has increased the number of discount brokerages because internet trading allows many brokers to further cut costs and part of the savings can be passed on to customers in the form of lower commissions.
Another benefit of online trading is the improvement in the speed of which transactions can be executed and settled, because there is no need for paper-based documents to be copied, filed and entered into an electronic format.
Firstly E-Trading referred by Stock Exchange and NASDAQ, set up in 1971, was the world's first electronic stock market
With the commercialization of internet at the outset of 1990 decade, Reasons are the rising pressure of trade and competition. During 1995 and 1999, many new experiences and inventions came up ranging from advertising to auctioning in the world of e-commerce &E-Trade. By the year 2000, the e-Trade reached out to millions of users through World Wide Web. now e-Trade is going hand in hand with business motive. It incorporates profits motive and it has impact of national and international regulations.
An electronic communication network (ECN) is a financial term for a type of computer system that facilitates trading of financial products outside of stock exchanges. The primary products that are traded on ECNs are stocks and currencies. The first ECN, Instinet, was created in 1969. ECNs increase competition among trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours.[citation needed] ECNs are sometimes also referred to as Alternative Trading Systems or Alternative Trading Networks.
To trade with an ECN, one must be a subscriber or have an account with a broker that provides direct access trading. ECN subscribers can enter orders into the ECN via a custom computer terminal or network protocols. The ECN will then match contra-side orders (i.e. a sell-order is "contra-side" to a buy-order with the same price and share count) for execution. The ECN will post unmatched orders on the system for other subscribers to view. Generally, the buyer and seller are anonymous, with the trade execution reports listing the ECN as the party.
Some ECN brokers may offer additional features to subscribers such as negotiation, reserve size, and pegging, and may have access to the entire ECN book (as opposed to the "top of the book") that real-time market data regarding depth of trading interest.
ECNs are generally facilitated by electronic negotiation, a type of communication between agents that allows cooperative and competitive sharing of information to determine a proper price.
In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary.Such platforms allow electronic trading to be carried out by users from any location and are in contrast to traditional floor trading using open outcry and telephone based trading.