What are Online Trading Platforms and Why are They Important?
As the world is relying more and more on technology and the internet specifically, online trading platforms are gaining popularity and providing people with an opportunity to make a living and earn an income while staying in the comfort of their homes.
To invest and trade, everyone needs to use an online trading platform that suits their needs and wants. This is especially true for new traders.
To succeed as a trader and investor, you would need trading knowledge. However, part of that trading knowledge includes understanding what trading platforms are and how you can benefit from them.
In this article, we will discuss what online trading platforms are and why they are so important.
In This Blog
What is an Online Trading Platform?
A trading platform is simply a piece of software that is used for trading. They allow traders to open, close, and manage their trades with the help of financial intermediaries. These financial intermediaries are what we call “brokers.”
Brokers usually offer online trading platforms based on different factors. They are either free or come at a discounted rate in exchange for a few conditions. These conditions could include keeping a funded account with the broker. Or it could mean making a certain number of traders on hourly, daily, weekly, monthly, and yearly.
There are many different types of online trading platforms. Some of them offer basic features that are more suited for beginners. Then there are those that are more complex with sophisticated toolkits for advanced traders.
Every trading platform aims to serve a specific market, such as stocks, futures, options, currencies, and, so on. They all have something unique to offer and come with their own set of pros and cons. To determine which online trading platform is the best, you would have to take a look at your needs.
Mainly, there are two types of trading :
- Floor Trading. This is the old method of buying and selling products. It requires traders to gather in one place – called the trading floor – and exchange financial instruments of their choice.
- Electronic Trading. This is a new method that relies on technology, where people can buy and sell different financial instruments through online means.
How Do Online Trading Platforms Work?
The first time a company offers its stock to the general public, it does so in the form of a share. This offering is called an initial public offering (IPO).
Anyone who wants to trade does so with the help of a licensed broker. The platform is essentially your online broker when you use an online trading platform to buy and sell stocks.
If you want to buy any product, you would contact your brokerage service. The brokerage service would then place an order and let you know the product’s market price.
After that, if you are interested in trading or investing, the broker would include a commission for themselves and process your order.
When you buy or sell a stock or other financial instrument like currencies, commodities, CFDs, ETFs, etc through an online trading platform, your action gets executed and completed in a matter of seconds. However, many things are happening behind the scenes. These steps include things like:
What are the Benefits of Online Trading Platforms?
Online Trading platforms give many benefits. Everything from stocks and bonds to futures and currencies are now traded entirely online. After all, it is the easiest and most efficient way to do so.
But if we get down to the brass tacks of online trading, it has some very important benefits.
Below are a few key benefits and advantages of using online trading platforms.
1. It Gets Rid of the Middleman
When you use an online trading platform, you essentially remove a human broker from the equation. You are then using an online broker.
Of course, you still use real money. But instead of talking to an intermediary about investments, you decide for yourself which stocks to buy and sell. You request your trades yourself.
Essentially, you can buy and sell without ever speaking to your broker. This makes it a great choice for people who do not have the capital to hire a full-service broker.
2. It is Cheaper and Quicker
Brokers cost money. On the other hand, trading through an online platform is cheaper.
This is because when you trade online, the brokerage charge decreases significantly. Moreover, online trading is almost immediate and instantaneous. This means you won’t have to spend tons of time trading and investing.
3. It Provides Great Control to the Trader
As a trader, you want to have control over where your money goes.
This is one of the most important benefits of online trading. It gives you more control over your investments. You are free to trade whenever you want and wherever you want during trading hours. You are able to decide without the interference of a broker.
4. It Allows You to Monitor Trades in Real-Time
Online trading platforms come with a plethora of features and tools.
These features allow you to monitor your investing performance and conduct your research. You can view your losses and wins in real-time.
This then allows you to learn from your mistakes. It also gives you more confidence going forward in your trading journey. And that is something you should always bank on!
Types of Trading Platforms and How to Choose One for Yourself
There are many different types of online trading platforms to choose from. Before you choose one for yourself, you should always be aware of your needs and limitations. Ask yourself:
Once you have effectively answered these questions, you can then go ahead and choose an online trading platform for yourself.
How to Pick the Right Broker for You
A broker acts as an intermediary between you and the marketplace you are interested in trading for. Because exchanges only accept orders from individuals who are members of the exchange – which is a broker – you would require a broker to trade for you. This makes picking the right broker extremely important.
Here are a few things to always keep in mind while choosing your broker:
- Reliability: The most aspect of choosing a broker is assessing their reliability. You want to ensure that your broker’s servers are up and working during the most critical trading hours and don’t cause you any unnecessary loss by being unreliable.
- Features and Tools Offered: Apart from offering you a trading platform, a broker should also provide you with other services that can help you with the trading, such as analysis tools, charting tools, etc.
- Customer Service: A good broker should have impeccable customer service. They should always be available in case of a problem and provide support for any issue or question you may have.
- Regulations: Regulated brokers are much more trustable. A regulated broker will never manipulate the market prices. Moreover, they make your assets more secure since they are operating under strict financial regulations.
- Alternatives: The broker’s internet connection can go off at any minute. Therefore, look for a broker that offers alternatives, such as call and trade facilities, in case of internet emergencies.
The Bottom Line
Online trading platforms act as an important bridge between a trader and a financial market. Whether you are interested in stocks, commodities, forex, or cryptocurrencies,
Understanding the terms of trading platforms is fundamental for any trader. My goal with this article is to help people, especially women willing to trade. This is why I have written Trading for Success to let people understand how trading works and be confident in their trading journey.
If you enjoyed this article on What are Online Trading Platforms and Why are They Important? or have any questions for me, please feel free to leave them in the comment section below!
Recommended Resources: If you’re interested in learning more about online trading, check out my book “Trading for Success; 8 secrets why women are better forex traders” and take a deep dive into my blog.
And if you’re concerned about improving your finances, I have developed the best money tools based on my expertise and extensive experiences such as educational books on personal finance and trading basics, and a range of digital and audio products. All of these are to help you achieve towards getting you your desired outcome most efficiently and enjoyably, enhancing the learning process.