Online Stock Market Trading

Written by Jacey Harmon
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The Internet has played a major role in helping individuals to take personal control over their investments. People now have access to many research tools that used to be limited to just investment professionals. Research that was available was typically outdated, even if the material was just a couple of days old. In a highly liquid market like the stock market, up to date information can make the difference between winning and losing.

History of the U.S. Stock Market

The first formal stock exchange in the United States was formed in Philadelphia in 1791. A short period after, in 1792, a group of professionals called the Buttonwood Group, enacted a trading agreement that would later become the New York Stock Exchange (NYSE). At first, the NYSE traded primarily in bonds as there were heavy legal restraints on stock trading.

That changed by 1800, a period when bank stocks ruled the exchange floor. Even then, stock trading remained rather limited until the dawn of the railroad age. Prior to the expansion of the railroads most companies didn't have promising outlooks, prompting a lack of interest in trading corporate stock. Once the railroads started to expand and the economy expanded with it, trading in corporate securities took off.

Despite several competing markets, by the early 1900s the NYSE became the world's most dominant stock exchange. Fast forward to the mid-1970s when the Over-The-Counter market, known today as the NASDAQ, started to attract many young, fast growing companies and with them, investors money. Today, the NYSE and the NASDAQ markets dominate U.S. stock trading with each exchange easily trading over one billion shares a day in their combined total of over 8,000 listed companies.

Using the Internet to Research Stocks

One of the Internet's most valuable contributions to individual investors is the amount of research tools available. Investors have access to databases that contain valuable financial information for almost every company traded on the major markets. Current and past financial statements such as the income statement, cash flow, and balance sheet give valuable insight into the financial health of a company.

The Internet has many resources that provide up to date stock charts. Stock charts are valuable tools as they show the market's opinion of a stock. Savvy investors that learn how to read price and volume signals found in a stock chart can profit from an expected move. Prior to the Internet, stock charts for individual investors were generally delivered through the mail and were generally a week old. By the time an investor received a stock chart the market had made its move and the investor missed out.

Individual investors have access to online educational resources to aid in understanding the stock market. Individuals can learn about the many styles of investing and determine which approach is right for them. There are many sources online that help individuals understand stock market lingo and terms. Learning how to understand financial statements as well as reading charts is a great place for a beginning investor to start their education.

Trading Stocks Online

Another major benefit of the Internet for investors is how easy and affordable the Web has made trading stocks. Prior to the Internet, individual investors had limited trading capabilities. Investors had to rely on expensive full service brokers who often carried commissions of over $100 per trade. Discount brokers have become a major presence on the Web and are valuable partners that make trading affordable for any investor. Online discount brokers will have commissions as low as $6, but the majority of trades through discount brokers will cost around $10.

Real-time quotes have given investors the capability to see where their stock is trading up to the second. Prior to the Web, access to real-time quotes was limited to calling a broker. Otherwise, quotes were only available through financial publications or local newspapers. Quotes from publications were behind the market by at least one day. This hazardous lag would open investors up to unnecessary risk and potential loss. The up to the minute information found on the Web keeps individuals in control of their investment success.


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