Online Trading Platforms versus Stock Exchanges
The
stock exchange market is one of the most liquid markets in today’s
economic dispensation.Trading in shares on these markets is one of the
most important activities in both the national and global economy. This
is because it is one of the most effective ways through which companies
can raise large amounts of capital with minimum liability. It also gives
traders the chance to own a piece of these companies, and hence the
possibility of earning profits.
For
traders, they can decide to use one or both of the available channels to
trade in stocks. These are online trading platforms and stock
exchanges. In the following paragraphs, the similarities and
differences between the two have been expounded in order to arm traders
with relevant information on which method to choose.
Charging of Commissions
On
this front, the two methods are inherently quite similar. This is
because in the traditional stock exchange, the stock brokers will always
charge a commission on each and every stock that is traded through
them.
The same is true for online
trading platforms as well. This is because the online brokers will also
charge a commission on the traded stocks. Sometimes this is hidden in
the costs. Despite what is usually said, they do not necessarily charge a
lower rate than the stock exchanges. These rates vary from one online
broker to another and sometimes may be higher than those in traditional
stock exchanges.
Capital Gains Tax
Governments usually levy a stamp duty in form of a capital gains tax on any stock that is traded on the stock market.
This
means that regardless of the platform, be it stock exchanges or online
platforms, the trading of shares will attract this tax.
Level of Competence Required of Traders
Although
there is no minimum requirement in terms of trading experience that is
needed for traders to participate in any of these markets, it should be a
guiding factor in choosing which platform to use.
For
greenhorn investors, stock exchanges would be a good idea to start with
since the advice of stock brokers as well as their experience will make
them more adept at judging markets, and hence enable the investors make
the best move.
For more experienced
traders, getting into online platforms in addition to the stock exchange
would be a good way of diversifying the places they invest their cash
or sell their shares.
Availability and Accessibility
The
online trading platforms are easily accessible to traders as all they
require is a computer and an internet connection. It is also possible to
move from one platform to another by just opening a new tab.
On
the other hand, one would need to physically move to the stock
exchanges, thus costing more in terms of time, energy and money.
Volumes of shares being traded
The
two platforms trade relatively the same number of shares in the same
region. However, online platforms may offer the traders more variety
since there are several of them, each of which offer a wide variety and
volume of shares.
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