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Online trading refers to buying and selling financial instruments like stocks, currencies, commodities etc using a digital mode such as an online trading platform. It allows traders to trade from the comfort of their homes without having to visit а brokerage firm. Online trading has made access to the stock market wider for the average population in India. In this article, we will understand what online trading is and how it works.
Page Contents
What is Online Trading?
Online trading gives traders access to trade financial products digitally using а personal computer or mobile app. It eliminates paperwork and physically visiting premises to trade. Some of the major instruments that can be traded online include:
- Stocks: Traders can buy and sell shares of publicly listed companies through online stock broking platforms connected to stock exchanges. This allows participation in equity markets.
- Currencies: It is possible to speculate on forex markets and profit from exchange rate fluctuations between currency pairs through online forex trading platforms.
- Commodities: Hard commodities like gold, silver, crude oil and soft commodities like cotton, coffee etc. can be traded online on commodity exchanges.
Online trading has made financial markets easily accessible to retail traders as it allows them to manage their own trading accounts, execute trades in real-time and track portfolio performance from anywhere without broker intervention.
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How Does Online Trading Work?
To start online trading, a trader first needs to open а trading account and a demat account with а brokerage firm. The trading account is used to place buy and sell orders and maintain cash balance for trading. The demat account holds all the purchased stocks in electronic format. The typical steps involved are:
1. Open Trading & Demat Account
The first step is to open an online trading account and a linked demat account by providing KYC documents and initial funding to an online trading platform like Dhan. No physical paperwork is required as the application process is fully digital.
2. Download Trading App
The brokerage will provide access to an online trading platform. You can also download the app on your mobile to trade on the go.
3. Transfer Funds for Trading
Transfer adequate funds to trading accounts using net banking or UPI. Surplus funds lying idle in trading accounts also earn interest.
4. Place Buy/Sell Orders
Login to а trading platform and place buy/sell orders for desired stocks/commodities based on trading strategy. Orders get executed in real-time by connecting with stock exchanges.
5. Track Portfolio Performance
Portfolio of purchased scrips automatically reflects in the trading platform to track daily profits/losses and total capital appreciation. Periodic statements are also shared.
The trading platform offered by the broker seamlessly handles the account opening documentation, connecting with stock exchanges for trading, settlement of funds and stocks between traders, brokers and exchanges as well as portfolio tracking and monitoring. This makes online trading very convenient.
Conclusion
Online trading has truly revolutionized the way individuals access and participate in financial markets. However, to make the most out of your trading you need to have the best online share market app by your side. So, while choosing a trading app make sure you look out for the simplest UI, fastest execution, and best support. Happy Trading!
