Let’s have a look at how slippage works with a simple example. If you are looking through current stock prices and you come across a share that is currently selling for five dollars and you decide to buy one hundred of them (costing five hundred dollars – or so you think). You then approach a brokerage service in order to conduct the transaction for you. The brokerage service gets all of the particulars and collates them in order to submit them to market specialists to make the purchase. This can take a couple of hours. By the time the broker has got all of this information collated and sent off the share may have jumped to six dollars per share. Your initial price of five dollars is now not available to you. For the same volume of shares you will have to pay six hundred dollars.

In this example the slippage is one hundred dollars. That is why trading online using the right methods can help reduce (or avoid) slippage. If you managed to purchase your shares while they were five dollars you would have made one hundred dollars instead of becoming a victim of slippage.

This negates the need of slow manual processing methodology. It ensures that your trade goes straight through to the market and ensures you get the best price for the stocks you want. Manual processing was often slow and by the time the broker had collated all of the orders for a specific stock – the stock had lost (good for the buyer) or gained points (bad for the buyer). This can also be a curse in that because of the speed of the transaction you will have no time to actually change your order to best suit your requirements. STP puts a little more power into the hands of the buyer rather than the broker. However, it is important that you do not make any mistakes in the order.

Don’t be afraid to utilise the services of a new brokerage institution. You can save yourself thousands of dollars in fees over the course of your share trading career. Because online trading is a relatively new method of conducting share trades; it may be in your best interest to use a new service that is competitive and innovative.

To avoid losing everything, you can practice how the stock market works through the use of virtual online trading games. This is just like the real trading exchange in the stock market industry except that you are using virtual cash in order to participate and exchange stocks. This is also called by many as the Stock Simulator. You can trade stocks using the real prices on the market so that you can practice the game of stock market before venturing in the real risky world of the stock market industry.

These Virtual Online Trading games have symbols that change real time. Some real time quotes would include the stocks of AMEX and even the NYSE (New York Stock Exchange). The stocks are also updated every second so that the one participating in the game would still be on track and not left behind and have an updated exchange rate as well.

These games would help you to be prepared as to what you have to do in cases where the virtual stocks would go down. This is like training before joining the real thing. Many beginners of the stock market are using these games to broaden their understanding of the world of stock exchange. Some of these games also have forums where the gamers can ask any questions relating to stock exchange and get answers from experts to help you confidently earn that exchange once you are ready for the real world of stock market .

Because it is so easy to purchase stocks online; it is too easy to over commit. If you think a stock is at the right price to buy then you might get carried away and spend a lot more money than you would have otherwise. This is another thing that is a disadvantage when trading online – you don’t have a support network or advisors letting you know when to buy or sell. You are alone (for the most part). It is too easy to make a poor decision which leads to an eventual loss rather than gain. If a business that you have invested in has no chance of recovering fiscally then you have no chance of making back your money.

You are also at the whim of your broker. Some brokers require a minimum purchase before they will enable you to purchase stocks. They are also expensive to employ. Their pay is not based on how well the stocks are performing – they get paid either way. This is why they are more than happy to allow you to make decisions for yourself rather than giving you proper guidance. Some brokers even go as far as charging you for not trading enough.

People who take advantage of direct access trading when trading online are those who want to get their shares bought and sold in the quickest possible manner. Because direct access traders give the buyer a direct line to the market – they are able to conclude their transactions in a couple of seconds. These people include day traders who wish to buy shares and sell them over the course of a single day. Day traders focus on buying in large volumes and then selling them quickly in order to capitalise in the change in stock prices over the course of a single day.

Event-based traders can also take advantage of the speed that direct access trading affords them. Event-based traders are reliant on buying stocks because of a specific event that may have bought the price of shares down for a specific company. Because the event may be based upon some news that soon becomes irrelevant the stock is likely to recover exceedingly fast. This gives the event-based trader the upper hand. They are able to buy and sell a stock over the course of an hour to hopefully make a profit.

Some online trading brokers will not look out for their client’s commercial interests. These brokers are best suited to veterans in the online trading industry because they will not question the buyer’s motives. They will generally offer processing services that cuts them out of the transaction while just taking a fee for the services rendered (which sometimes does not seem like much – however it is their connection you are using in order access the market). If you are new to the online trading world they will probably be better served with a brokerage institution that can offer some advice on what to purchase.

If you have a lot of money to invest then you probably are not going to feel terribly keen to entrust such a large sum with a new or small brokerage. In this case you are better off shopping around for a large brokerage institution that has some big clients. That way you can be assured that you are dealing with a brokerage that has some experience in the online trading industry. Don’t feel like you are limited to a single broker either. Test how the broker conducts business if you have the money to spread around to multiple investments. Pigeon holing yourself to a single broker may be a mistake in the event you are able to find a better deal elsewhere.

Because online trading is such a massive market there is a lot of competition between brokers to get your business. Brokers are constantly out doing each other in the form of fee reductions, extra functionality and conglomerating services into a single access point. Instead of chasing data when attempting to make an informed decision you can just go to a single place to get all of the information you need. Some online brokerage services even send you messages to your cell phone that warns you of when may be a good time to buy or sell particular stocks. If you have a smart phone you make the transaction the second you receive the message.

The competition between brokers is not the only advantage of having multiple brokers available to serve you. It is also a massive source of information in itself. You can get real advice from multiple sources. Because of the inherent fluctuations in stock prices that can change within minutes – having people who cast a human eye over the data to ensure that their own information is up to date can mean the difference between purchasing a stock that will never recover and purchasing a stock that may double in value over the course of a day.

Online trading is all about buying and selling stocks. Conducting online trading allows investors to have a careful calculation of the stocks at hand and this allows the investors to analyze the data in a timely manner.

How it online trading works

When a business earns from its capital, it shares the earning to the stockholders through dividend. Stockholders are people who buy stocks in order to invest more on the business. The business also has an option to save the earnings and invest on something to gain more from it.

Brokers would buy and sell the stocks through an exchange. Brokers are persons licensed to trade stocks, they can be on the trading floor or they can do business over the phone. An exchange can be compared to a warehouse where people buy and sell shares and stocks. These exchanges are like auctions and others are conducted over the phone or electronically.

You would need an online broker when you decide to buy and sell stocks online. You will be the one to decide which stocks to order and to sell and you will be the one to request for the trades. Some brokers would require a minimum investment before they begin the trading.

Having an exchange of stocks online can be beneficial since the processes can be don fast compared to the traditional trading. However, you should also be wary of the scams which you can find all over the internet. They are sometimes on a chat room and once they have the stocks they dump it and eventually the investors would lose money.

•    What is the meaning of online trading?

Online trading or internet trading is nothing but the buying or the selling of various securities with the help of internet. It enables any client sitting in any part of the country to conduct and execute a trade with the assistance of the internet.

•    Since when did SEBI allow online trading?

In the year 2000 and in the month of January, SEBI gave the permission to the stock brokers letting them make use of the internet in order to conduct online trading. But this could be done only through the registered stock brokers.

•    Why is online trading preferred to offline trading?

Online trading or internet trading enables a person execute the trading without any time delays and with all the safety precautions needed to execute a seamless transaction.

•    What is the requirement for any stock broker for internet trading?

In order to be able to execute trading through the internet it is mandatory for the stock broker to be registered and have a net worth of atleast an amount of 50 lakh rupees. Other than these eligibility criteria, the broker is also required to have a proper operational system as well as risk management system.

•    What is the requirement for any investor for internet trading?

Online trading makes use of internet for the purpose of trading. Thus you can still execute trading even when you are travelling or are in any part of the country. The only requirement for an investor is an internet connection with any service provider and an access to computer or a PDA or a mobile device which enables you to make use of the internet.

These courses can be taken by anyone from Students, Serviceman, Women, house wives, business men, working professionals, etc. these training courses are either conducted at the training centre or may be made available to you in the form of a module that may be available online through the internet.

The online trading courses are not very expensive to take and have been made quite affordable for the people belonging to the middle class families. A few of these courses are also designed to be conducted as crash courses where basic or preliminary knowledge about the online trading is provided to neophytes or beginners who wish you gain information about online trading,

During this course online training is provided on various topics such as Online trading as well as share trading management, Fundamentals and Technical Analysis of online trading, concepts of day and intra trading, information about mutual funds, the procedures and the documentation of the share market, various options and future aspects, risk ratio, Tips on Online trading, etc.

A large number of online trading courses are regularly taken in various metropolitan cities such as Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangalore and many more which are spread out all across the country. Information about these courses can be obtained either through the newspapers or through the internet. For example, Perfect Academy Training Institute which is situated in Khargar, Mumbai, has one such online trading course.