The volume of online commerce has increased greatly in the late 1990s with the appearance of powerful computers and fast connections. Online traders buy and sell securities and currencies through online broker trading platforms.
Through the Network, you can trade in stocks, bonds, options, futures, currencies and other assets. The main advantage of this method is the speed of execution of transactions, because all transactions are carried out in electronic form.
Online trading is a way to buy and sell securities electronically using a computer or other devices. Information technologies provide buyers and sellers access to exchange-based trading platforms such as NASDAQ, NYSE Arca and Globex (also known as electronic communication networks, ECN)
Although many private investors trade through the Internet, the volume of their operations is incomparable with institutional, inter-dealer and stock trading. However, in developing economies, especially in Asia, private investors are responsible for a significant share of trading volumes.
The market has become more accessible, but this does not mean that online trading can be taken lightly. After the broker’s account is opened and everything is ready for trading, the trader needs to familiarize himself with some basic concepts and principles.
Limit orders. They allow the trader to set a price, upon reaching which the limit order will be converted to a market one and executed. Inexperienced traders are advised to use limit orders only.
Warrant all or nothing. They let the broker know that the trader needs full, but not partial, execution of the order at the specified price. Orders of this type are indispensable for some strategies, for example, for selling call options with coverage.
Foot and stop limits. A stop sell order protects the investor from losses in case of a fall in the value of shares below a certain level. When triggered, it turns into a market order and enters the stock exchange.
Short sale and purchase for closing positions. A short sale order orders a broker to sell a certain number of shares that the investor does not have. If they fall in price, you can submit a buy order and close the position with a profit, returning the borrowed shares to the broker.
Day and GTC orders. The effect of unfulfilled daily orders is terminated after the end of the trading session. On the other hand, orders valid until cancellation (GTC), depending on the broker, can exist up to 60 days.
Extended trading hours. This system allows investors to respond to news and corporate information before the next trading session. Extended hours have some risks. First of all, due to a decrease in liquidity, volatility increases. As a result, prices during extended hours may differ significantly from prices prevailing during the main trading session.
Trailing foot. Sliding orders help the trader to protect profits. As the stock grows, they follow the price, retreating from it by a certain value (say, $ 2). If the price suddenly drops to this value, the order becomes market and closes the position.
Bracket warrant. Helps investors protect profits, limit losses and structure trading based on projected movements of stocks and other assets.
They are created by combining with two orders of the reverse direction. For example, a buy order is combined with two sell orders — a limit order above the market and a stop below. Conversely, a sell order is combined with two buy orders – with a stop above the market and a limit order below.
The number of orders at each level is the same. By default, auxiliary orders are 1 point apart from the main one. This value can be changed for each transaction or set new default values in the trading platform.
The terms “limit order”, “trailing stop” and “bracket order” seem somewhat complicated and incomprehensible, but in fact there are simple things behind them that are easy to understand by experimenting a little with a demo account. For example, a trailing stop allows you to follow a stock as it grows and close a position in the event of a fall. The limit order allows you to buy stocks at a predetermined price below the current one.