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As the name implies, online trading enables a person to buy and sell stock, bonds, mutual futures by operating his own computer. With the introduction of broadband Internet, it is becoming quite easy for a person to take part in the trading of stocks from his home. In earlier days, when there was no facility of Online Trading, any person interested in selling or purchasing stock would either had to call their broker or had to go to the broker's office to make necessary transactions. Now, these brokers have set up their offices on the Internet. Electronic access is now available to all the important stock exchanges of the world. Therefore, the practice of online trading in stocks, mutual funds, bonds etc. is becoming more and more popular. Let us now understand how the system of online trading works. A person, who wants to buy or sell stocks or other financial instruments, can take part in online trading. To do so, the person has to open an account with an online brokerage firm. An account usually requires some amount of monetary commitment or disclosure on the part of the Person. Shares are now traded in demat or electronic form. Therefore, the person should have a demat account for all the shares the person owns. This demat account and the bank account of the person should be linked with the online trading account. When the online trading account gets activated, the person can trade in different financial instruments like shares, bonds or mutual funds as per the person's wish. All the transactions take place electronically using the Internet and without any middleman or a broker. The greatest advantage of online trading is that anybody having an Internet connection can participate in online trading. The only limitation of the trade is the amount of money available in the bank account linked with the online trading account. A beginner in online trading must ensure that he or she understands well about the way online trading goes on and the present market trends. If you do not have any knowledge regarding what to buy, when to buy and when to sell, how long to hold onto a stock then you may end up in a disastrous position. Unless you do have proper idea about the performance of the market, the transactions made by you would be more like gambling. A person will be able to earn a lot of money in online trading in case he or she is quite knowledgeable about the stock market.
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