The Advent of Online Trading

Technology and the internet have spurred growth in many facets of our lives, and investing is not left behind. Online trading has gained wide acceptance and it is for good reason

A brokerage firm is any financial institution that facilitates the trade of financial securities, like stocks, between buyers and sellers. To invest in the stock market, you would normally need to go through a brokerage firm or specifically, the firm’s agent stockbrokers.

However, because the internet has made almost everything better, investors can now use online brokers to achieve the same results. Online trading has gotten popular and widely accepted over the years.

If there’s anything we have seen, it is that online trading is certainly as good as offline trading as far as security and speed are concerned. If you’ve never traded online before, you’re probably a little skeptical.

While online trading platforms indeed exist in Nigeria, they are not as popular as compared to more advanced nations and it is majorly because of this same skepticism.

So what’s the deal?

How Online Trading Really Works

The same way brokers help investors buy and sell through a stock exchange and charge commissions to do so, online brokers can also trade stocks through the exchange. When you buy and sell stocks online, you’re also using an online broker and that takes the place of the need for a human broker.

You get to decide which stocks to buy or sell yourself, you use real money, and if you need advice, some online brokerages offer advice through live brokers and broker-assisted trades. Some of these exchanges work like auctions on actual trading floors while others electronically match buyers to sellers.

The upside is that the commission charged by online brokers are very little compared to the fees paid to physical brokerage firms. Competition among online brokers is fierce, so it is an amazing time to be an investor as services are getting better and costs are crashing.

In fact, some online brokers do not charge commissions, deriving their compensations solely from selling your order flow to the market makers.

Some of the things online trading has given us is ease and accessibility. Anybody having a phone or computer, enough money to fund an account, and an ability to invest in the market, can now do so from the comfort of their homes! It is literally as simple as one click.

Online trading, just like any form of trading, has its ups and downs. However, most of the challenges are curbed by using the right online trading platform. In our next article, we would review the things to look out for when choosing an online broker.

Written by Lawretta Egba