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A Look in the Past of Online Trading

Razvan Mihai

Analyst

For better understanding why nowadays trading is considered to be fast and easy to be done by anyone, we should have a look back in history.

For an individual to invest in the stock or the commodities market it was needed a big sum of money. First of all because there were no leverage and second the commissions paid for each investment or trade was big. To place a trade in the market the investor had to have to call his stockbroker and give him the order. The broker then enters the order in their system which was linked to trading floors and exchanges. For every operation made the stockbroker had a commission, so if an investor wanted to open a trade, he had to pay, if he wanted to close its position he would again have to pay.

Besides the fact that a lot of money were paid to the stock brokers as commissions, there was another problem, the time for the trade to get into the market. The investor had to call his broker, from whom he got the quotation and approve it, after that the broker sends the order into the market. With all these steps it would have been very difficult for someone to trade on a short term basis and make profits.

In August 1994, almost 20 years ago, K. Aufhauser & Company (later known as TD Ameritrade) became the first online brokerage house. They offered their clients the possibility to trade online via WealthWEB. Since then the online investing has known an impressive growth. Now anyone can have a trading account with one or more online brokerage houses. The orders are placed almost instantaneous and the commissions are very low or sometimes inexistent.

Another advantage of the online trading, beside the fact that the order is placed immediately with low or no commissions, is considered to be the trading platforms. Every online brokerage house is offering their clients a trading platform through which they can place and close orders, set Stop Losses and Take Profits, but this is not all. The platforms also give the user analytical tools for him to do his own analysis and take his own decisions.

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