The arena of online stock trading offers many advantages while also having a number of disadvantages to people who are interested in entering this world of financial markets. The market has evolved from an open auction system to mainly a digital format. This evolution to the digital format has given people all around the world the ability to participate in what was once limited only to a privileged few. All that is needed for successful stock trading today is risking capital, internet connection, and computing power.
Historically, the online stock market has delivered very big returns to investors over time, but stock markets are also known to go down, which means that it takes away the possibility for both loss and profits. If you are unsure if you should start stock trading, we have made a list of the pros and cons of owning and trading stocks.
The advantages of online stock trading
Even though online trading of stocks for profits is usually viewed as an intimidating task, there are several advantages that any individual might experience. It is through these advantages that people in the online stock markets can estimate their potential profit.
The requirements for one person to begin stock trading are very small. Internet connection, capital, and computing power are the only things that you need to start your trading. After selecting a certain online brokerage firm and successfully opening a new trading account, you have access to the online market.
In the 80s and 1990s, the cost of making a single trade on the New York Stock Exchange was anywhere from 50 dollars to 1000s of dollars depending on the size and type of trade order is made. Today, online broken offer trade executions for under 10 dollars. The online trading market has greatly reduced all trading-related commissions and feeds which is why the stock market is now available to a larger audience than just a select group.
Online trading has increased how much people participate in market trading exponentially. So many traders are willing to sell or buy at any given price. This means that the process of exiting and entering an open position in the stock market has been streamlined.
The use of financial leverage has always been a big part of stock trading securities. Online stock trading has increased its availability.
Read more if you are interested in the Singapore Exchange market.
Disadvantages of trading
Discipline and emotional reactions
Online market trading provides people access to all the markets available on an everyday basis. While this is a good thing for some it might be very bad to others. A trader’s emotional state may influence his judgment on a certain trade. Whether it is fear or greed being the main drive for impulsive behavior.
Since online trading has introduced the market with much larger volumes and participation because of its easy access, periodic spikes in pricing have grown in magnitude and in frequency. The ability for traders to instantly enter a market has created the possibility of unpredictable and sudden swings in price. For example, the release of some unexpected news and change may cause huge damage to the market and traders.