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What is the difference between online broker vs traditional broker?

What is the difference between online broker vs traditional broker?

Difference Between Online Broker vs Traditional Broker

The stock trading market has completely revolutionised after the advent of internet. Before this, trading used to happen only through stock brokers who used to place the buying and selling orders on behalf of the investors. An online stock trading account helps in simplifying the process of trading as compared to the traditional stock broking. There are a number of benefits of having a trading account online.

An online broker is quite similar to the traditional stock broker in terms of services he offers at the basic level. Just like the traditional broker, the online broker is the in charge to complete the trade on behalf of the investor. The professional then earns money in terms of commission which is earned once the transaction is completed. The online brokers, on the other hand perform all these services with minimum direct contact to investors where the traditional brokers are often more open to more interaction.

The biggest difference between traditional broker and online broker

One of the biggest differences between the online broker and traditional broker could be attributed to a fact that the online broker offers virtual access to the account of the client. The computerised access could offer updated market information to clients, helping the individuals to research and customise the detail for fulfilling their investment needs.

Additionally, with the help of technology, the online brokers may even circumvent the extra costs which are inherent for dealing directly with major stock exchanges. While dealing with the online brokers, the clients aren’t able to talk to the person directly regarding trading. As trade off, the commission paid to the online broker is considerably lower as compared to that charged by the traditional brokers. The investor who is relatively new to the field of investment, or the one who needs significant individual assistance in their investment could find that online brokers are too “hands off” for their requirements. On the contrary, the online brokers provide considerable opportunities for research for experienced investors and might definitely save prominent amount of money through reduction of commission.

stock broker

A lot of people value the traditional broker– client relation, but changes in this industry have caused a lot of investors to move from the traditional trading to the world of online trading. Both these types of brokers have their own advantages and choosing which one to work with comes with its own features as well as benefits. New and amateur traders mostly feel much more secured while working with a stock broker. On the contrary, the investors who have either bought or sold stocks previously might prefer handling things by themselves. You need to carefully look at all the differences between these 2 types of brokers for making the decision.

Below are some of the points highlighting the main differences between online broker vs traditional broker.
1. Cost
2. Hours
3. Assistance
4. Information
5.Trading
6. Convenience
7.Fraud
8. Expertise and Knowledge

1. Cost
Cost is considered to be one of the most important differences between traditional broker and online broker. The cost charged by a traditional broker is generally much higher than that of online brokers. Some of the online stock trading companies provide various free of cost trades every quarter, even though other brokers charge almost equal to what the traditional brokers charge.

2. Hours
The hours of working of the traditional brokers are quite similar to that of the stock market hours i.e. 9.30 to 4.00 PM. Online trading happens throughout the day, throughout the week, with absolutely no additional cost irrespective of the time when an order is placed.

3. Assistance
While working with the traditional brokers, a part of the commission that the investor pays is for the personal relation with the broker. The brokers could provide advice and guidance to the clients and they usually get to personally know the clients well. People who think that interaction is quite beneficial often tend to work only with the traditional brokers for maintaining this relationship. In most of the cases, the clients don’t really develop any relationship with the brokers during trading online and might not even speak to him.
But typically there are some professionals and sale assistance which are available to the clients who ask for help with trading even though these services might cost even more.

stock graph

4. Information
The online brokers offer a vast library of information including the updated charts showing the trading information as well as trends. The clients may easily customise the login pages so that they can see their stocks easily.

5. Trading
With your online stock trading account, the investors may easily place their orders. On the contrary, a traditional account signifies that the investors will have to avail services offered by the broker for placing the orders. The instructions are particularly given to brokers in the offline trading that creates dependence on broking firm. This type of dependence does not exist when you trade with an online stock trading account.

6. Convenience
The online trading account is considered to be a very good option for the people who have a well working internet connection. They may easily track their order from the comfort of their house or office. Just in case if the investors aren’t able to get an access to the stock broking websites or don’t get an access to the internet connection, they may place their orders over phone with the brokers.

7. Fraud
Since online stock trading offers the user’s full control over transactions, the risks related to any potential fraud is eliminated. There are instances when brokers execute the trade on behalf of the clients without getting permission, which might cause some prominent losses to the investors who choose to go for the offline trading route.

8. Expertise and Knowledge
When the users choose to go for online shares trading account for investment, they might get a little carried away. Without conducting proper research as well as understanding about the ways the stock market work, they might buy/sell the shares which might result in a huge loss. It’s avoidable with the help of offline trading option as the brokers possess an extensive experience as well as knowledge which could prove to be quite beneficial for the users since they get accurate guidance through stock brokers. Luckily, most of these stock trading agencies, which provide online stock trading services, provide an access to the research reports and the other fundamental and technical analysis for assisting the account holders for gaining a deep understanding for making the right decision for investment.