Important Guidelines on Online Trading for Beginners

November 30th, 2015 by hesty No comments »

Are you new to trade, investments, stock trades, etc. and don’t know where to start?

Trading accounts were the initial vehicles for investing in India; but with the facility of the internet online trading now enables you to trade from the comfort of your home or your office. Online Trading in India has picked up pace with various companies offering services for online trading. Angel Broking is one of the top broking companies in India. Now offering online opportunities customers can NOW avail online trading facilities. Other top broking companies in India include Kotak Securities Limited, Reliance Money, India Infoline, Indiabulls, Sharekhan, etc. These companies offer online trading accounts whereby trading can now be done online.

Online brokers are also available who charge less commission than full-service brokers to help you trade online.

The key benefits of trading online are many. To start with, understanding how the market works and the financial terms can be simplified with the help of online investment platforms that are available on the internet for the early investor. Understanding the market has been made easier with the facility of the internet. With a plethora of online books explaining how to trade, how the Indian stock market works, share tips, etc. there are immense benefits the young investor an avail through online investing. The Indian market is prone to go up and down – there is high unpredictability in it; so it is important to make wise and good judgment of investments.

There are three important things that you need to keep in mind when investing online; you firstly need the computer, a stable internet connection and a subscription to a 3-in-1 online investing account with a service provider.

Online trading is far simpler as you can transact with merely a few clicks of your mouse. You can find a stock picking service or program online that could help you to identify and choose the winning stocks – in order to invest properly. While stock investing involves a lot of fluctuations of stock prices there are certain ways that you can shape your investments through Internet Stock trading. Online trading also relieves you of the manual hurdles you may encounter investing otherwise such as- lack of tools, having to make endless calls, deluge of paperwork, being dependent on other people, maintaining bank and de-mat accounts (separately and manually), etc. The internet provides you with a wealth of information besides analysis and tools which can help you to make informed decisions. You can multi task and invest in different asset classes like equity shares, mutual funds and IPOs all at one time. Besides that, you are provided with up to date information and analysis in an investor friendly format.

Before you plunge into investing online be sure that you first register as a member for an integrated 3-in-1 online trading account with a service provider. The three accounts usually are:

1) Online Trading account – where you can transact online
2) An internet enabled bank account whereby you can transact payments through an online bank account.
3) A demat account – a place where your shares will be deposited

When you choose an online investing account keep in mind the following:

• Check the credentials of prospective trading partners: It is very important to check the credentials of prospective trading partners – Various websites such as D&B ( http://www.dnb.com ) can help check the background of an established business. It is of utmost important that before you engage in any online trading activity o do your research!

• Speed of execution: While deciding on your investing account, it is important to have a fast pace account. You should be able to place your equity orders and receive quick order confirmations even during the peak times.

• Customer Care: Ensure that you’re online investing account has a dedicated customer care cell that will help take care of your queries and problems. Some additional features offered by certain accounts such as SMS alert, intraday trading in equities, ability to sell shares next day before receiving delivery, etc all which are based on your investment needs all add a bonus!

• Quality of information: You should opt for those accounts that offer the best of information, research support and tools – all of which are user friendly and the information should also be up-to-date.

• Safety & Security of the site: It is important to check all the inbuilt security features that are built in your system.

Now that you have some basic tips to follow before you start online trading you can start your daunting task with confidence!

Online Trading Advantages and Disadvantages

November 27th, 2015 by hesty No comments »

Online trading, or direct access trading (DAT), 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 trading differs in many things from traditional trading practices and different strategies are needed for profiting from the market.

In traditional trading, trades are executed through a broker via phone or via any other communicating method. The broker assist 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, 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.

Advantages of online trading include, fully automated trading process which is broker independent, informed decision making and access to advanced trading tools, traders have direct control over their trading portfolio, ability to trade multiple markets and/or products, real-time market data, faster trade execution which is crucial in day trading and swing trading, discount commission rates, choice of routing orders to different market makers or specialists, low capital requirements, high leverage offered by brokers for trading on margin, easy to open account and easy to manage account, and no geographical limits. Online trading favors active traders, who want to make quick and frequent trades, who demand lesser commission rates and who trade in bulk on leverage. But online trading is not here for all traders.

The disadvantages of online trading include, need to fulfill specific activity and account minimums as demanded by the broker, greater risk if trades are done extensively on margin, monthly software usage fees, chances of trading loss because of mechanical/platform failures and need of active speedy internet connection. Online traders are fully responsible for their trading decisions and there will be often no one to help them in this process. The fees involved in trading vary considerably with broker, market, ECN and type of trading account and software. Some online brokers may also charge inactivity fees on traders.

Popular Online Trading Styles

November 23rd, 2015 by hesty No comments »

There are many methods and styles used by online traders to trade. The categorization of these online trading styles can be done using many criteria such as the trading products, trading interval between buying and selling, methods/strategies used for trading, etc.

Based on the product traded, online trading styles include stock trading, options trading, futures trading, commodity trading, forex trading etc. Stock traders trade equities or shares from companies. Option traders trade options, which enable one to buy or sell a right at specific time periods under specific market conditions. Online futures traders and online commodity traders trade contracts; contracts for products like crude oil and natural gas or contracts for treasury notes and bonds. Online forex traders trade currency pairs, they buy one currency and sell another one according to exchange rate changes.

According to the interval between buying and selling of products online traders can be broadly classified in to short-term traders and long-term investors. Usually traders with trading interval less than one year are known as short-term trader and those with trading interval more than one year are known as long-term investors. Short-term investors, forms the majority of active traders, trade products according to short-term trends. They trade products usually according to its merits. Long-term investors trade with long-term goals; they are usually company/industry specialists want to invest in growing fields.

Short-term trading can be further classified in to day trading, swing trading and position trading. Online day trading is the most active type of trading. Day traders’ trading interval does not exceeds one day. They buy and sell products with in seconds, minutes or hours for usually small gains. Day trading eliminates overnight risks. Day trading involves scalpers – those buy and sell large amount of shares/contracts with in seconds or minutes for very small per share gain, and momentum traders – trades according to the trend pattern of specific shares/contracts with in a day.

The buying and selling interval of online swing traders range from few hours to 4 or 5 days. They, like day traders, trade shares/contracts according to slight fluctuations in price, but they are willing to hold their position until the next day. Online swing trading involves overnight risks but have gain percentage higher than that of day trading. Online position traders trade equities/contracts with an interval of days to months. They relay on long-term trends and company performances. They have higher gain percentage and higher risks than online swing traders.

According to the strategies followed online trading can be classified in to Brother-in-law style -traders seek advice from brokers or other traders, Technical trading style- traders use advanced systems to find out trading trends, Economist trading style – traders relay upon economic predictions, Scuttlebutt trading style – trading according to information extracted from brokers or other sources, Value trading style – trading according to merits of individual stocks not to whole market, and Conscious trading style – combination of two or more of above styles to finding right opportunity.