Investing Online - An Overview

Investing online, or self-directed investing, also known as online trading or trading online, has become the norm for individual investors and traders over the past decade with many brokers now offering online services with unique trading platforms.

Prior to the advent of the Internet, investors had to call up their stockbroker and place an order on the telephone. The brokerage firm would then enter the order in their system which was linked to trading floors and exchanges.

Online investing has experienced significant growth since that time. Investors can now enter orders directly online, or even trade with other investors via electronic communication networks (ECN). Some orders entered online are still routed through the broker, allowing agents to approve or monitor the trades. This step assists in the protection of both the client and brokerage firm from unlawful or incorrect trades which could affect the client’s portfolio or the stockbroker’s license.

Online brokers are most often referred to as discount brokers. Their popularity is attributable to the speed and ease of their online order entry, and to fees and commissions significantly lower than those of full service brokerage firms.