Online Stock Trading Vs. Traditional

Online brokerages have changed how stocks are traded.

Online brokerages have changed how stocks are traded.

Many people value the traditional broker-client relationship, but changes in the industry have caused more and more clients to shift from traditional trading to online trading. Both types of brokerages have advantages, and deciding which one to choose comes down to a careful consideration of the features and benefits each one can offer you. New and inexperienced traders often feel more secure about working with a broker, while those who have bought and sold stocks in the past may prefer to handle things on their own. Take a careful look at the differences between the two before making your decision.

Cost

Cost is one of the biggest differences between online stock trading and traditional trading methods. The cost of a traditional trade is usually significantly higher than the cost of an online trade, averaging anywhere from $12.95 to $29.95 or more, with discounts and limited free trades offered to clients with large cash reserves deposited with the brokerage firm or in a linked bank account. The cost of an online trade is often as low as $3.95, and some online companies offer a large number of free trades each quarter, though others charge almost as much as the traditional brokerages.

Hours

The hours of traditional brokerages are typically the same as the stock market’s hours, 9:30 am to 4:00 pm Eastern time. Many traditional brokerages offer extended service hours in order to remain competitive with the online companies, but there may be extra charges involved, though this is becoming less common as they work to remain competitive. Online trading takes place 24 hours a day, seven days a week, with no additional fees no matter when the order is placed.

Assistance

When you work with a traditional brokerage firm, part of what you’re paying for is a personal relationship with a broker. Brokers can offer guidance and advice to clients, and they often get to know their clients very well over time. People who feel that such interaction is beneficial tend to prefer to work with traditional brokerages in order to maintain this relationship. In most cases, clients don’t develop any kind of a relationship with a broker during online trading and may never even speak to one, but typically there are brokers or sales assistants available to clients who request help with trades, although this service may cost more.

Information

Online brokerages have vast libraries of information, including up-to-date charts showing trading information and trends. Clients can customize their login pages in most online companies so that they can easily see the stocks they are interested in. Many traditional brokerages now offer similar services, but customers who are paying higher brokerage fees typically expect the broker to do the analysis and make recommendations for them.

About the Author

A recipient of a business and technology degree from the master's program at West Coast University, Cindy Quarters has been writing professionally since 1984. Past experience as a veterinary technician and plenty of time gardening round out her interests. Quarters has had work featured in Radiance Magazine and the AKC Gazette.

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