Electronic stock trading, or E-trading, is the practice of buying and selling stock and other assets using an electronic stock brokerage service. Electronic trading services allow users to sign up over the Internet and conduct stock transactions using a purely electronic interface on the Web. Electronic stock trading can have several advantages over traditional trading through a live broker.
Ease of Access
One benefit of online stock trading services is that they are easy for anyone to access and use. All that is required to use most online trading services is an Internet connection and funds in a checking account to invest. Accounts can often be set up within a few days and transfers can be made into accounts from a linked checking account on demand, so you can get money into investments quickly if necessary.
Another potential advantage of electronic trading is that the cost of transactions can be much less than using a traditional stock broker. Flesh and blood stock brokers are highly trained professionals; when you place a trade with real stock brokers you pay a premium for their time. Electronic trading services are automated, which can reduce the cost of placing trades, allowing electronic services to charge low transaction fees. For instance, Sharebuilder, a popular online trading service, charges $4 per investment when buying shares of a specific stock or mutual fund using their automatic investing tools.
Many investors pay investment professionals to manage their investments for them. While this can have advantages for those who do not understand investing, professional services often charge commissions that can sap investment gains. Electronic investing allows users to direct their own investments and buy and sell whenever they please without having to interact with middlemen.
Electronic stock trading also offers greater convenience than using a conventional stock broker. With online trading, trades can be made anywhere as long as you have access to the internet. For instance, if you are on a business trip to China, you could make trades from a laptop at your hotel without having to call anyone. Accounts are typically accessible at any time of the day, allowing users to look over their investments whenever they please.
Electronic stock trading services may offer a variety of subscription levels for different types of investors. For instance, some accounts are free and charge fees only when you make trades. Others may charge monthly fees, but allow traders to make trades for less money, which can be advantageous to investors that expect to trade often.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.