At the present time, online trading is already very familiar to us. Even many beginners start their first trading using an online platform. But did you know? Many years ago, long before the internet developed as it is now, trading already existed.
Yes, we can still trade even without the internet. This article will tell you how trading activities were done back then and how it differs from online trading today. Next we will call the trading activity at that era as traditional trading or offline trading.
PROCESS & PLATFORM
Trading in the days prior to the internet era were done offline: investors needed to come or call the broker’s office to counsel and make transactions. But since the early 2000s, the development of the internet also affected the world of trading. Now investors can trade without visiting a broker’s office. You can trade anywhere as long as you have internet access.
ACCESS & CONTROL
Unlike online trading that frees you to trade anytime and anywhere without depending on anyone, during the offline trading era, a trader can’t trade without the support of any broker. Self-trade is not allowed in offline trading. Here, on the client’s behalf, brokers place buy or sell orders and charge according to this. Hence, the brokerage is quite higher here. To execute orders, you need to get in touch with the broker’s office every day. If the broker is unavailable for a day or two, you won’t be able to trade by yourself.
Offline trading requires every trade – whether it is a buy or sell decision – to go through the broker. By assistance, we mean here active help such as punching the orders and other day-to-day processes. Even with the online trading on the rise, there are broking houses that have in-house dealers, equity advisors, and relationship managers who guide the clients as and when they need the help. However, with online trading, traders who have years of experience in the stock market gradually become self-dependent in picking up the quality stocks and putting the orders. So we can associate online trading with ease of trading.
With offline trading, there are just two options if a client wants to trade: either the client needs to visit the office of the broker or call the broker to make a transaction. This is very inflexible especially for workers because they must spend time to visit and call the broker.
Our busy work schedules rarely allow us to do any of the aforementioned. There have been many instances during the offline trading when the clients have missed a particular trade, either because of the unavailability of the dealer at the desk or lack of communication.
Online trading is a simpler, digitized version of offline trading. It is simply buying and selling assets through a brokerage’s internet based trading platforms. As long as you have a trading account and internet access, you can make your own decision and execute that anytime you want.
ACTUAL TIME INFORMATION
To carry out trading efficiently, a trader needs full-time access to real time info, including updates on any crashes or booms in the market. An enormous benefit of online trading is that it displays all this actual time information on an accessible platform.
On the other hand, offline trading puts you one step behind in this aspect as the market keeps updating itself every second. It is difficult to keep track of the minute-to-minute or how the markets are performing throughout the day. The brokers give all the information about the trade to the client either through a contract note or confirmation call, which is done after the market hours. Limited information about the trade cripples the options of the trader to decide. The time taken to place a call and then hit trade also increases the time taken to complete the transaction.
As traders do online trading by themselves, the cost is much lesser. And because the client executes the trade themselves, ruling out the need for middlemen. As there is no direct role of a broker here, there is no enormous cost attached to it.
Moreover, in offline trading, there would be more than one people involved. For instance, during call and trade, there would a dealer who would punch the order, a relationship manager who provides active assistance to the client and representatives who call and confirm the order executed during after market hours. The fee imposed on the offline service includes fees for all such helps.
Therefore, the fee charged in online trading is relatively lower compared to offline trading.
In online trading, users get full control over the transactions through online trading platforms. Therefore the risk or chances of potential fraud are low. Otherwise, in offline trading, there are certain cases when the brokers execute trades on behalf of their clients without receiving permission, which can cause significant losses to the users. And unfortunately they cannot do anything because they do not have full-time access to the transactions made; it is all done by a third party.
Which type of trading is better?
After going through an article which almost batters offline trading, one might think online trading is a better option by leaps and bounds. With the introduction to the internet, business has changed and the financial industry runs almost completely online. Everything is just a few clicks away, and with the whole setup on a single platform, online trading is a lot more promising. However, realistically speaking, there are some countries whose internet coverage is not too good and even, so there are still many brokers that offer traditional trading services.
There is no correct answer to which trading is a better option for you. It is up to the individual to decide which option suits them the best.