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Pros and cons of online trading
August 20, 2008
As is the case with everything, online trading comes with its own set of pros and cons. Let's have a look at them:
Pros:
Fees and commission: Often the fees and commission are lower when one trades through the online route.
24x7x365: One can trade at any time during the day and from any part of the world.
Eliminates paperwork: Other than initial account opening paperwork all the other hassles like giving transaction slips when you sell the shares, giving and receiving of cheques to/ from the broker are eliminated.
Information: Free reports and downloads of share-specific information is readily available.
On the spot trading: Many times when you call a broker, there is a time lag between your call and the actual order execution which can result in a difference of price as decided by you. In stock trading even a few seconds here and there can make or break millions. This can be avoided when you yourself are trading online.
Cons:
Chances of losses can be high: If you are not stock-market savvy then online trading can be dangerous as you are yourself taking a call and hence chances of your making losses increase.
Technical snag: You need a computer and a high-speed Internet connection. If you do not have these then you can face problems while executing your orders like the time in uploading the order page or price page or your computer might hang if you do too many things at one go, or the internet connection is slow or there is a power outage.
No personal touch: There is a complete lack of personal relationship as there is no interface between the broker and the client.
Limited script trading: Broking houses have their own list of shares and mutual funds which is not exhaustive. So many times you might not find the stock or the fund in which you would like to invest. The same can be true for IPOs as well.
Remember that online trading should not be used for speculation. Get yourself fully educated about the nuances of trading, ask for a demo and help from your broking house.
List of some brokerage houses (the list is not exhaustive)
Motilal Oswal
ICICIdirect.com
HDFCsecurities.com
Sharekhan.com
Idbipaisebuilder
Religareonline.com
Kotaksecurities.com
Indiainfoline.com
IL&FS
10paise.com
Photograph: Oleg Nikishin/Getty Images
Also read: What if the Sensex falls below 10k? Invest still
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