What is it?
Online stock trading allows you to buy and sell stocks from the comfort of your home or office without having the hassle of having to call your broker every time you want to trade. For doing online stock trading you need to have a computer with a sufficiently good internet connection and an online broker, through whom you would make all such trades. It allows you to trade stocks at your discretion and also saves you a lot of commissions.
Choosing an online broker
There are a huge number of online stock brokers available, who would be only too happy to let you set up a trading account with them. What you need to look for in a broker to help you with your online stock trading is information that most of them would readily give you so that you become one of their clients for online stock trading.
You need to know the minimum investment necessary to make for starting in online trading. Make sure that there are no fees if there is no activity on their site for whatever reasons. Get their full list of commissions/fees which you would need to factor in every time you make a trade. Some online brokers also help you out with your online stock trading by offering you tips and suggestions, and their own outlook on the market and its prospects.
Opening an account
Opening an account with an online broker is generally a simple affair and can even be done online. You would however have to provide all the necessary paperwork and open an account with the stock exchanges, which will allow you to get all your stock price quotes electronically. The online broker may even have his own enrollment or other fees, for you to gain access to his online network so that you can trade in shares. You would also have to provide a wire transfer link to your bank account so that funds can be transferred both in and out of your account, in order to allow you to carry on the activity of online stock trading.
Most online brokers require that you deposit funds with them to start the trading activity. Initially, it's possible that you may only be allowed to trade in the underlying stocks. Trading options on futures, forex, may require additional registration documents and procedures as this is considered to be very high-risk trading. Also, if you intend to trade on margin, there may be separate documentation and funding requirements for this. Check all this with your broker.
Be cautious while trading
Online trading involves that you exercise the same amount of care and caution that you would in other trading activities. It may require even more caution, as you are on your own and the action of buying and selling is instantaneous. You need to constantly monitor your portfolio. Fortunately, the online broker you have opened an account with will make this easy for you. They have plenty of powerful analytical software tools which keep your portfolio updated on a minute to minute basis, and give you all the risk parameters you need. They also have tools to enable you to analyze and study any particular stock in depth to ensure that you are in the best position to make the right trading and investment decisions.
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