Virtual Stock Market

Online Trading

In a paper and documentation crazy country like India, carrying out sensitive financial transactions through the Internet appears incredible. When online trading first came to India in the mid-1990s, market players and experts were sceptical of its role and success.

While most online brokerage firms are still to make profits, they do command a growing client base and offer wide ranging products and services which the average Dalal Street broker would not be able to offer to investors.

It is the mindset which has kept first-time investors away from tapping the Internet to trade at the stock markets.

Investors do not seem to accept a faceless financial advisor and would prefer a constant dialogue with the broker (even if it were fruitless).

Is online trading through the Internet safe?
The safety of transactions on the Internet depends on the encryption system used.Most leading online trading sites, including those in India, offer the 128-bit encryption, which is considered safe and difficult to hack into.Secondly, most online trading sites provide a secure user ID and password, so that secrecy is maintained.

Is there security of funds/money, demat shares and transaction documents?
In systems where the broking, banking and demat accounts are completely integrated, your money remains in your own bank account, and does not get transferred to the broker's pool account.

Most leading online broking sites provide a system wherein your broking account, bank account and demat account are linked electronically.

So while buying/selling shares, the system checks the funds/ shares availability and automatically credits/debits the accounts once the order is executed by the exchange.

And you don't have to be a computer genius
Trading on an established financial portal makes online trading easy. One does not need to be an expert. Most portals offer a free demonstration of the online trading site. And online trading sites are not very costly, as brokerage fees are low due to less back-office cost and paperless trading.

Accuracy is maintained
The advantage in online trading is that one is not at the mercy of the broker to see the latest buy/sell quotes.

The stock prices through the ticker are available with most online trading sites and the good ones offer live quotes (having direct data feeds from the stock exchange). Hence accuracy is maintained.

It is important to look for an Internet site which belongs to an established financial market intermediary -- whether a private sector bank, financial institution or a full service Indian brokerage.

The advantage is that these financial portals provide various products and services, including equity research, demat trading, financial market news and reports and a comprehensive learning centre.

The only risk factor to watch for is for technology outages (slowdown) and Internet site glitches which could make placing of trading orders difficult and investors may lose on making investments at the right time or price.