When online trading was first launched in the year 1999, there was a very slow and tardy acceptance of the new trend. The reasons were not far to seek. Markets were still in a state of flux, people were still wary of the risks of online trading, brokers were worried about cannibalization and the platform itself was evolving. That is no longer the case. Brokers are increasingly moving toward the online platform as it offers them simplicity, cost saving and scalability.
Here are 6 key factors that you need to understand about online trading vis-à-vis its offline counterpart. Remember, online trading is here to stay…
Online offers you ease and simplicity
First and foremost, online offers you convenience and simplicity. You need not worry about walking into your broker’s nearest office, delivering the cheque, collecting the payment or even calling up the dealer for execution of trades. All that can be managed from the comfort of your house or office just sitting on your laptop with a good internet connection. With the proliferation of smart phones and notepads, you can even operate your trading account on the move. Remember, everything from your bank account, your trading account and your demat account can be managed through a single platform. That is how simple and convenient online trading is!
Online offers you greater transparency of trade
Very importantly, online trading is all about transparency. When you call up your broker on phone there is a waiting period and you never know whether the order has been executed and whether it has been executed at the price you wanted it executed. Online trading overcomes all these problems. You can place order at the price you want, check your order book for status, get granular details of your transaction from your online trade book and also track dividends and other corporate actions. Additionally, with electronic contract notes, no need to physically file these notes and you also get demat statements and capital gains statements online from your trading account itself.
Lower operating costs means lower brokerage charges
If brokerage rates have come down drastically in the last few years it is largely on account of the advent of online trading. Online trading is a one-time investment for a broker. Subsequently, the operating and maintenance cost is substantially lower than running branches and outlets by employing an army of people. Now these reduced costs get passed on to the customer in the form of lower brokerages. The reason so many discount brokerages have cropped up in India in the last few years is because brokerage rates can be dropped through an online-only model. The eventual beneficiary has been the customer.
You must get used to the online personalization of trading
One of the reasons people still prefer offline trading is due to the personal touch it offers. Sitting with your broker and discussing markets over a cup of tea is something everybody relishes. But that may not exactly be the way forward. Going ahead, investors will have to increasingly rely on personalized services offered by online broking platforms. That is where newer concepts like robo advisory are becoming popular which are actually trying to replicate the complete experience of sitting face-to-face with a broker or advisor. Traders and investors are gradually getting used to a more impersonal and rule-driven approach to trading. This trend will get accentuated in the years to come.
Address the all important security risks
Security risks may not be too prominent when you are trading offline. You are still required to sign the cheque and also sign the Debit Instruction Slips (DIS) before a trade can get through. That is not the case with online trading. A lot of focus is on online security and the onus is on you as the trader / investor to enhance your security. To begin with, you must have multi-level authentication, avoid accessing the trading platform from cyber cafes and unsecured wi-fi networks, upgrade your hardware and software regularly, install and update your anti-virus and anti-malware programs etc. These basic steps can go a long way in making online trading a safe and secure experience. But the onus is entirely on you and security is something you really need to focus on.
Above all, online is one seamless process
But the most important aspect of online trading is that the entire process is one seamless chain. Let us understand this chain. When you first open the trading platform you review the trading ideas for the day, then use the online screeners to shortlist stocks, try and execute your transactions at the best possible price, review the trades in the trade book, debit your bank account and credit your demat account. From the time you get the trade idea till the time you actually prepare and file your tax returns, the entire process flow can be managed seamlessly through your trading account. With e-KYC, the process has become still simpler! Comparatively, the process in offline trading is infinitely more complex.
The reason online trading has picked up in a big way is due to the genuine merits that it offers. Yes, you need to provide extra care to safety and security but that is really not rocket science. The convenience, transparency and seamless interface are worth a lot to you!