Online Trading – Meaning, Trading Process, Benefits, Order Types & more

Online Trading has created a lot of opportunities for new-age traders. If you are a stock market enthusiast and want to Trade Online then, this can be the best time to start investing online.

With the advent of the technologies that are used in the trading arena, it is becoming better day by day for the traders. Online trading is more or less like you do online shopping.

You just need a few basic things like a bank account, internet connection, and internet banking facilities. Along with these, last but not the least, a device from which you can place the order.

It is the same for online trading as well – A Demat account, trading account and bank account, internet facility and trading platform on your device and you are sorted.

So, here in this article, we will read about almost everything that you need to know about online trading. We will start with its basic and dig deeper into some of the more interesting facts about online trading.

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What is Online Trading?

Online Trading of Shares means you have an online platform where you can buy or sell shares. So, Online Trading Meaning is as simple as it sounds. You buy and sell the securities online and the fund is also transferred online.

Online Trading

With the online trading platform, you can trade different types of investment vehicles. There are stocks – equities, commodities, mutual funds, and other investment vehicles as well.

Online trading facilitates the trading process by bringing the complete trading setup at your convenience. You can trade anytime and from anywhere using the online platforms.

There is no paperwork involved, no need to go to the brokerage house or the stock exchange to trade shares. It is all there on the device which you use – laptop/tablet/desktop or mobile.

With a good internet connection, you can check your investment all the time. You can monitor and place your bids and trade shares anytime.


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How you can Trade Online? (Steps of Online Trading)

If you are wondering How to do Online Trading there is a simple guide for the same. You can Trade Online by following these below-mentioned steps –

  • Firstly, you need to open a Demat account. As you may know, this is the account that holds all your investments – equities, commodities and other investments. Demat account is provided by brokerage houses, so you need to find a good broker and open the account. Make sure the brokerage house is registered with SEBI. You should also check the brokerage charges and other charges the firm charge for their services. You will get the trading platforms, a trading account with it for trading.
  • Secondly, you need to learn the basics of the market. You must understand and able to predict market movements. For the same, you can take up online classes, or some trading courses, and also read yourself from online portals.
  • Thirdly, you need to put your learning in action. By this, we mean you need to practice what you learned. Before entering the market with real money at stake, it is better to practice with some demo accounts and virtual money. There are different stock simulator which can help you practice trading. Since you are not investing any real money, there is no fear of losing any.
  • Finally, you need to plan your trading strategies. You need to decide the investment goal, investment budget and the result you want. Accordingly, you need to set the investment strategy.

Top Brokers who offers Online Trading Facility

Zerodha TradingAngel Broking TradingICICI Direct Trading
5Paisa TradingSharekhan TradingHDFC Securities Trading
Upstox TradingIIFL TradingAxis Trading
SAMCO TradingMotilal Oswal TradingKotak Securities Trading
Mastertrust TradingKarvy TradingIDBI Direct Trading
Fyers TradingSMC Global TradingYes Securities Trading
Alice Blue TradingEdelweiss TradingStandard Chartered Trading
Paytm Money TradingAditya Birla TradingSBI Trading
Profitmart TradingAnand Rathi TradingReliance Trading
SAS Online TradingChoice Broking TradingReligare Trading
Bonanza Portfolio TradingGeojit TradingTradebulls Trading
Indiabulls TradingNJ Wealth TradingVentura Trading

How Online Trading Works in India?

Do you want to know How Online Trading works?  So, for online trading set-up in India, there are few organizations. They are the stock exchanges, Depositories, Depository participants (Brokerage Houses), SEBI and finally, the investor or the trader. Each of these is linked and work together to complete the process of online trading.

You open a Demat account with a DP – which is registered with a Depository (either CDSL or NSDL) and also registered with SEBI. You have a bank account linked to your Demat and trading account. So, when you place a trading order on your trading platform, the order is processed by your brokerage house.

Then the Depository debits or credits the shares traded to your Demat account. The bank account gets debited or credited according to the transaction. SEBI is the regulator under which all these organizations work in India.

It takes around 2 days from the day of the transaction, for the settlement of an online trading order. It is really important to know how it works for Online Trading Learning and trading in the market.

Online trading is quite simple and thus completed within less time. There is no hassle in placing orders and getting your orders executed with the right kind of trading platform. This enables the traders to trade smoothly and this is the forte of online trading.


Benefits of Online Trading

The Online Trading of Stocks has various benefits of its own like –

  • Online trading is quite simple. It works fast and effectively. This enables many stock market enthusiasts to trade on their own without any hassle.
  • It takes little time to execute orders. You can place orders with shortcut keys saving your time. With the online platform, there is no need to visit the brokerage house or stock exchange, which saves your time as well and effort.
  • The expenses of trading have gone down as well with trading online process. The maintenance costs and other charges are reduced by the brokerage houses on trading.
  • Online Trading Academy helps in learning about the stock market. Big brokerage houses have online trading academy which enables you to read from their resources on trading and the stock market,
  • You have full control over your investments when trading online. You place your trades, monitor them as and when you want, check your portfolio and do the changes if required.
  • Online trading makes your trading experience errorless to a great extent. As there is no paper trail, miscommunications can be avoided.
  • You have access to the research reports of various companies on your trading platform only. You do not have to go places to look for the reports. One can easily find them all on the trading platform for analysis.
  • There are also technical analysis tools on trading platforms which is a boon for the daily traders. It has become possible with the online trading facility and trading platforms.

Things to remember before you Start Online Trading

There are certain things you need to keep in mind before you start trading online.

  • Check whether your stockbroker has Online Trading Licence or not.
  • Do not ever trade from a shared computer or laptop or on a shared internet connection.
  • Always make sure that your device is protected from virus attacks via anti-virus strong software.
  • Do not ever forget to log out of your account once the trading session is over as it can lead to misuse of your account information.
  • Never select the option “Remember me” for any password or username of any of the accounts for online trading.
  • Make sure you take up an Online Trading Course for learning the basics of trading and the stock market.

Different Markets involved in Online Share Trading

Broadly, there are only two markets for trading – primary and secondary markets. While the primary market deals with the IPOs only, there is no regular trading there.

Nowadays, with online trading, IPOs are also subscribed and issued via online medium. Investors place their bids online. Then the issuing company allots shares to the selected applicants – in their Demat account. So, the complete process is online.

Secondary market deals with regular trading of shares, Online Trading Forex, Online Trading Gold and other commodities and investment vehicles.

The shares and other investment vehicles are traded in this market between investors and traders. The prices are decided based on demand and supply. To Trade Online Stocks, you need to participant in this market.


Different Types of Orders in Online Trading

In Online Trading Business, there are multiple order types you can use. Using the Online Trading App, you can place market orders. This is the basic form of order where the order is executed at the next available price.

Since there is no control over this type of orders, there are limit orders as well. Using these limit orders, you can buy and sell shares restricting your losses.

When you buy shares using a limit order, the order gets executed at a price below or at the price set in the order information.

When you sell shares with a limit order, the execution takes place at or above the price you have mentioned. There are other orders which you can use as well as cover or bracket orders. These different types of orders help you maximize your profit by limiting your losses.


More Stock Brokers who offers Online Trading

Alankit Assignments TradingJhaveri Securities TradingPrabhudas Lilladher Trading
Arihant Capital TradingJM Financial TradingShah Investor Trading
ASE Capital Markets TradingKIFS Trade TradingShri Parasram Holdings Trading
Asit C Mehta TradingK R Choksey TradingShriram Insight Trading
Astha Trade TradingKunvarji Finstock TradingSuresh Rathi Trading
BMA Wealth Creators TradingLKP Securities TradingSushil Finance Trading
Eureka Securities TradingMonarch Networth TradingSwastika Investmart Trading
Globe Capital TradingMy Value Trade TradingTrade Smart Trading
Integrated Enterprises TradingNarnolia TradingWay2Wealth Trading
Jainam Share TradingNirmal Bang TradingWisdom Capital Trading

What are Advances and Declines in Online trading?

Online Trading Platforms have this advance-decline ratio which is required for market analysis. Advances refer to the shares whose prices have increased and the declines refer to the opposite. This ratio helps in understanding the market scenario and participation in the market and volatility.

In Trading Online, you can analyze this ratio for predicting the market movement and trend. If the advances-decline ratio is higher, then, the market is at the overbought position.

Similarly, if the ratio is lower, then shares are oversold in the market. By analyzing this line and the ratio, you can predict whether a trend will reverse or continue.


How and when funds are received in Online Trading?

Online Share trading is done for making profit and investment for the future. So, it is crucial to understand how and when you can receive the Online Trading Funds.

As you open Demat account for online trading, you need to link a bank account with the trading account. When you buy shares, money equivalent to the price of the shares gets debited from your bank account.

You receive the shares in your Demat account. When you sell shares, you receive money in your bank account and Demat account gets debited.

This whole process takes t+2 business days’ time. Here, ‘t’ means the date of the transaction. So, if your transaction is taking place from Monday to Wednesday, then the transaction will be settled from Wednesday to Friday.

If it is done on Thursday or Friday, in that case, it will get settled on Monday or Tuesday. However, within the weekdays, if there are any trading holidays, then accordingly, the settlement time will also get adjusted.


How to Learn Online Trading?

There are multiple ways to learn Online Trading for Beginners. You can start with –

  • Reading books and online stock market articles and blogs. There are multiple sites where you can get free information about the market.
  • Buy technical and fundamental analysis books. Study them and learn by yourself.
  • If you find it difficult to understand, take the help of online courses.
  • You can also join trading academies for understanding the market and analysis of the shares.
  • Read about successful investors, their investment strategies and investments.
  • Practice trading with a stock simulator. It is very crucial before you start investing.
  • Follow the market regularly, check the stocks which are moving the price and volume. Try to track a few particular shares. You can understand their price trend and price movements.
  • Read the financial newspaper, to keep updated about the market. It is essential to be aware of the economic situation to trade fruitfully.
  • You can also attend stock market seminars. There you can listen to the eminent analysts, traders, and investors. This will also enhance your knowledge of the market.

How to choose the right broker for Online Trading?

To Trade Online in Shares, you need to have a trading account and Demat account. These accounts are provided by the brokerage houses (DP) and they charge for their services.

This is why you need to choose brokerage houses/brokers very wisely. There are various parameters you need to check before you click on the application for the Demat account with one of them.

The parameters can be jotted down to the following ones –

  • The experience of the brokerage house is a crucial factor. You need to see for how long they are in the business. Whether they deal with the products you want to trade online or not.
  • Charges come next on the list. Check and compare the charges for a few of the brokers whose services meet your requirements. If will be foolish to choose one randomly without comparing a few. Often, we check the brokerage charges and forget about the hidden and other charges. Always check for the other charges if any and how much.
  • Then you need to see whether the brokerage house is a full-service broker or discount service broker. This will determine their range of services. If you need only trading and Demat services, then you can go for the later one. However, if you need research and advisory services, then it is better to go for the traditional brokerage houses.
  • Finally, you need to see how much is the minimum amount you need to invest to start trading with the broker of your choice. You need to check whether it fits your investment budget or not.

How to choose the right Trading Platforms for Online Trading in India?

For online trading, trading platforms are indispensable. Trading platforms have opened a whole new world of opportunities and possibilities for traders and investors.

However, choosing the right kind of Online Trading App for your trading requirement is a tricky job. That is why we have come up with a few criteria that you need to check while choosing the best Trade Online App and platform for your trading needs.

Options for investment

You need to check the range of investment options available on the trading platform. Whether the trading platform has commodities, forex, and currencies for trading or not besides the basic equities. If you want to trade mutual funds, you need to check for that as well.

Support for different devices

Make sure your brokerage house provides a trading platform for different devices. Online trading doesn’t get restricted to desktop-based trading, so, you must have access to the trading account on mobile and other devices.

Analysis and trading tools

Check whether different trading and analysis tools are available on the platform or not. You must check whether the platform has technical analysis tools like charts, heat maps, trading indicators in abundance or not. These are required for informed and profitable trading.

User Interface

One of the crucial factors that you need to keep in mind while choosing the trading platform is its user interface. It needs to be user-friendly so that it eases your trading process. The platform must have easy access to various reports, and tools. There must be short-cut keys to place orders easily.

Updates & News Feed

This is another important part of a trading platform. There have to be news updates feeds from the market to keep you updated. This, in turn, helps you to make the right investment decision while trading.

Customer care support

Finally, the trading systems must have direct customer care support services. There has to be a chat option as well as calling.


Is Online Trading and Day Trading Same?

Though both the words sound similar, there is a huge difference between Trading Online and day trading. While you Trade Online means you use the internet and online trading services to place your bids, buy and sell shares in the stock market.

On the other hand, Day trading means trading on a daily basis. You need to square off the positions you take in the market on the same day.


Is online trading worth your time and money?

The answer to this question depends on your investment goal and the Best Online Trading practices you follow.

The time and money you put in trading stocks online can bring you profit if you thoroughly analyze the market and then invest. Investments done in a haste to grab profit can lead to great losses. It is important to take the advice from eminent traders, brokers, analysts when you trade online.

If you are a newbie in the market, it is highly crucial and when you are a pro, there is nothing wrong with listening to other views as well.


Online Trading – Conclusion

Online Trading as discussed above can be really a great way to earn daily income as well as plan for the future. If you want to Trade Online, you need a Demat and trading account with a bank account as you know.

You should choose your brokerage house carefully so that your expenses are limited and profit increases. It is also important to choose the trading platforms wisely to make the most out of it.


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