TOPIC- ELECTRONIC TRADING - (E-TRADING)

INTRODUCTION When it comes to electronic trading, for most individual investors, taking a long-term BUY AND HOLD approach is probably the best strategy. They can include various exchange-based systems, such as NASDAQ, NYSE, ARCA, and GLOBEX as well as others types of trading platforms, such as electronic communication networks (ECNs), alternative trading systems. Electronic Trading a new way for to build OWN portfolio.

DEFINIATION “The process of conducting STOCK MARKET TRANSACTIONS (buy and sell orders) using an electronic platform that TRANSFERS the ORDERS to a physical PERSON to COMPLETE. Electronic trading has become a popular method due to its ability to conducts transactions quickly and effectively.”

OBJECTIVES To study on ELECTRONIC TRADING. To developing processes, methods, and systems for trading securities in the stock market according to the latest international standards. To creative an attractive, safe, competitive, transparent and credible investment environment. To understand the deep process of trading.

WHAT IS ELECTRONIC TRADING? ELECTRONIC TRADING, sometimes called e-trading, is the method of trading SECURITIES (such as stocks, and bonds), foreign exchange or financial derivatives ELECTRONICALLY. INFORMATION TECHNOLOGY is used to bring together buyers and sellers through an electronic trading platform and network to create virtual market places

HISTORY For many years stocks exchanges were physical locations where BUYERS and SELLERS met and negotiated. BUSINESS-TO-BUSINESS (B2B) trading, often conducted on exchanges, where large investment BANKS and BROKERS trader directly with one another, transacting large amounts of securities, and BUSINESS-TO-CONSUMER (B2C) trading, where retail (e.g. individuals buying and selling relatively small amounts of stocks and shares) and institutional clients (e.g. hedge funds, fund managers or insurances companies, trading far larger amounts of securities) buy and sell from BROKER or DEALERS. Who act as middle-men between the clients and the B2B markets.

Due to the problems that arose during paper shares, there was a need of a system that would make share transfer, buying/selling of shares, etc. an easier affair. Therefore in 1996, the Indian parliament passed the Derivatives act, which allowed online transaction of shares, thus making it much easier for the broker and investor. In the NEW ONLINE TRADING SYSTEM, an investor must open a demit account with one of the Stock Brokers to start trading online.

HOW ELECTRONIC TRADING WORKS ? Millions of people trade billions of shares of STOCK every day on a vast collection of COMPUTER systems that are incredibly reliable and, very nearly, error-free. There are so many things happening at once that system becomes difficult to comprehend, and the fact that the it works so well is truly a feat.

MAKING AN E-TRADING So let's make a trade. Since we're talking about electronic trading, the first step is to sit down at your KEYBOARD and log in to your brokerage account. Once you log in, regardless of the broker dealer, you'll be able to do several things: Look at your account to see how much money you have and how many shares of STOCK you have in your portfolio. Pull up stock quotes to see the current buy and sell prices of any stock. Enter an order to buy or sell a stock.

The systems that make this Web interface possible are Web servers very much like the servers for any INTERNET site. There may need to be hundreds of Web server machines -- a large broker dealer can have millions of customers. And the Web servers need to be operating with secure connections to protect privacy. But beyond that, the servers can be fairly ordinary.

ADVANTAGES OF E-TRADING Easier and convenient way to own shares.  Immediate transfer. Zero stamp duty on transfer of shares. Safer than paper shares, e.g., fake signatures, delay, thefts, etc. Lesser paperwork for transfer of securities. Less transaction cost. No “odd” problems. Even a single share can be sold. Automatic credit in demit accounts.

DISADVANTAGES OF E-TRADING Investors, who are trading for the first time, go with the flow and get immersed in technology and actually temporarily forget that they are actually using their real money.  There is no relationship that of a mentor between a professional broker and an online trading account holder, thus leaving the investor on his own to make choices of the right shares. Users who are not familiar with the ins and outs of the basics of brokerage software can make mistakes which can prove to be a costly affair.

This is like any other financial strategy, where your commitment to online trading takes research and dedication to make sure by yourself that everything is up to par. You have to take time out to do your own research where you will have to overcome a great learning curve to make some money from online trading a possibility.

TYPES OF TRADING DAY TRADING - Day traders buy and sell stocks throughout the day in the hope that the price of the stocks will fluctuate in value during the day, allowing them to earn quick profits. A day trader will hold a stock anywhere from a few seconds to a few hours, but will always square off all of those stocks before the close of each day. The objective of day trading is to quickly get in and out of any particular stock for a profit on an intra-day basis.

SWING TRADERS – The principal difference between day trading and swing trading is that swing traders will normally have a slightly longer time horizon than day traders for holding a position in a stock. As is the case with day traders, swing traders also attempt to predict the short term fluctuation in a stock's price. However, swing traders are willing to hold stocks for more than one day, if necessary, to give the stock price some time to move or to capture additional momentum in the stock's price.

POSITION TRADING – Position trading is similar to swing trading, but with a longer time horizon. Position traders hold stocks for a time period anywhere from one day to several weeks or months. These traders seek to identify stocks where the technical trends suggest a possible large movement in price is likely to occur, but which may not be fully played out for several weeks or months.

ONLINE TRADING – Online trading is not really properly described as a trading style. Rather, online trading is simply a term that refers to the medium used to enter and execute trades. Online traders, which can include long term investors, as well as day, swing and position traders, use either an Internet connection or a direct access online trading platform to access and execute trades with Web based brokers.

CONCULSION If you are a long-term investor, you can take this tutorial with a grain of salt. At least now you have some insight into how electronic systems give direct access to the market. We hope this has enlightened your outlook and helped you achieve a greater understanding of how the execution of stock orders is done. For those who are looking to become a trader, this is the tip of the iceberg and we'd advise you to do a lot more research in this area before jumping in. 

REFERENCES GOOGLE.COM E-TRADING WEBSITE