Online trading platforms

Most people can’t buy company stocks, bonds and other financial assets directly. Instead, they use brokers – financial intermediaries who can carry out these transactions on your behalf.

Online trading platforms are computerized systems that link to brokerages, reducing the administration involved in placing a trade. Instead of going to a broker, telling them what you want and then asking them to go to the trading floor to actually buy them, these platforms let you do it with a click of a button. You simply select the relevant security, enter the price you’re willing to buy or sell at, and wait for the transaction to complete. In essence, anyone can become a trader, not just those working at banks or stock exchanges.

Features of online trading platforms

Desktop trading platforms and mobile platforms for trading offer many of the features that only banks and hedge funds could access in the past. And, in many cases, the facilities available today are even better.

Place different types of orders

For instance, trading platforms allow you to place different kinds of orders.

  • Market order: These orders are the simplest. They let you buy or sell instantaneously at the going market price. When you buy at this price, you should expect to buy close to the ask
  • Limit orders: Also called “pending orders” on some platforms, these allow investors to buy and sell their securities in the future at a predefined price. Buy stop orders are a certain type of order that becomes active only after a security reaches the specified price. Sell stop orders sell securities at below the current market ask. Buy limit strategies purchase securities at prices below their current price, while sell limits sell at levels above the current price.
  • Good ‘til cancelled: These orders remain active until you decide to cancel them. Most online platforms reset such orders after around 90 days.

Analytics

Many trading platforms also offer sophisticated analytics that let you evaluate the quality and timing of your trades. Technical analysis options let you do things like track moving averages (100-day, 200-day and so on), market beta, and warnings for specific price cycle action.

Trading calendars and news

Platforms also post helpful trading calendars. These give you advanced warnings about certain planned announcements – such as federal reserve minutes – that have a tangible impact on pricing. These allow you to react the moment news comes through, instead of having to wait and missing out on potentially lucrative trades.

Pricing

Online trading platforms differ considerably in their pricing. For that reason, they can be challenging to compare.

Here are some of the ways they charge traders for upkeep of their services:

  • Per trade fees: Per trade fees are charges that apply to your account whenever you make a trade. Some providers offer fixed fees, while others charge a percentage of the transaction value.
  • Subscription fees: These fees apply monthly, quarterly or annually. Generally, they remain fixed, regardless of the number of trades you make. However, some providers offer discounts, and may scrap on-running subscription fees altogether for active traders
  • Account minimums: You may also have to deposit a minimum amount in your account to begin trading on these platforms. However, most have $0 account minimums.  

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