Online Trading

The internet has given all of us the ability to invest in the market. You don't need lots of disposable income or a personal broker to be able to trade online. All you need is a computer, a decent financial history, and enough money to open an account. And if you're a student, this may just be the perfect way to finance your online education.

An Open Field

But while the market has become more of an open field and not just the provenance of the wealthy, online trading is serious business and deserves a careful study before you decide to take the plunge into online trading. You will want to learn about the various kinds of online trading accounts, what to look for when choosing an online brokerage, and how to trade while taking precautions against fraud.

Online Brokers

Buying and selling stocks online requires the use of an online broker, which you use to request trades. Other services offered depends on the online broker you choose with some even offering advice from or assisted trades with live, human brokers.

As soon as you've opened and funded an online account, you have the ability to buy and sell stocks. However, the right way to do things is to obtain your stock quotes in real time to verify the up-to-the-minute price of your chosen stock. You may be able to get real-time stock quotes as part of the services you receive from your online brokerage. There are dozens of financial news websites offering delayed quotes and these tend to lag about 20 minutes behind the current market. It's important to realize that at a time when the market is moving fast, the delayed quote can be very different from the true trading price.

After obtaining your quote, and once having decided to make that trade, you'll need to choose between placing a market order or a limit order. The former makes your trade at the current price, while the latter makes your trade at a price to be specified by you, or at a better price. If the price doesn't dip down to at least the price you've specified, your trade won't go through, which may be an advantageous safeguard for those working with a set sum.

Some brokerages have creative additional offerings that may help bolster you against big losses when prices fall:

Stop Order—When the price falls below your specified limit, the order will execute at market price.

Stop Limit Order—Stop limit orders resemble stop orders, but execute at your chosen price rather than at market price. If the market is moving very fast, your broker may not be able to guarantee your set price and your stocks might just continue to decrease in value.

Trailing Stop Order—These too, are much like stop orders, except that your selling price is flexible rather than fixed. You set the parameter in points or percentages and the sale goes through when the price falls according to the scale you've created.