Online Stock Trading

Online trading, or direct access equity trading (DAET), of financial instruments has became very popular in the last five years or so. Now almost all financial instruments are available to trade online including stocks, bonds, futures, options, ETFs, forex currencies and mutual funds. Online equity trading differs in many things from traditional trading practices and different strategies are needed for profiting from the market.

In traditional trading, stock trades are executed through a broker via phone or via any other communicating method. The broker assists the trader in the whole trading process; and collect and use information for making better trading decisions. In return of this service they charge commissions on traders, which is often very high. The whole process is usually very slow, taking hours to execute a single trade.
Long-term investors who do lesser number of trades are the main beneficiaries.

In online trading, stock trades are executed through an online trading platform (trading software) provided by the online broker. The broker, through their platform offers the trader access to market data, news, charts and alerts. Day traders who want real-time market data are provided level 1.5, level 2 or level 3 market access. All trading decisions are made by the trader himself with regard to the market
information he has. Often traders can trade more than one product, one market and/or one ECN with his single account and software. All trades are executed in (near) real-time. In return of their services online brokers charge trading commissions (which is often very low - discount commission schedules) and software usage fees.

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