Online trading: Dos and don’ts

Online trading has picked up in India due to the transparency and empowerment that it gives to investors. Here are some basic dos and don'ts to keep in mind when you are trading online.

Dec 28, 2018 11:12 IST India Infoline News Service

Stock markets felt the first impact of technology when online trading was introduced in the late 90s. In the last few years, online trading has emerged as the preferred means for retail investors to participate in stock markets. Online trading has picked up in India due to the transparency and empowerment that it gives to investors.

How online trading gained an edge over offline trading

For long, equity traders and investors were used to trading either by walking into a branch or by calling up the dealer. This had some serious limitations. First, the client did not know the status of trade execution till the dealer confirmed the trade. Second, the trader had little control over the execution price. Third, in offline trading, too much information had to be collected and collated from disparate sources. All this changed with online trading.

With the advent of online trading, both traders and investors had a lot more control over the trading process. They could see the bid-ask screen in front of them and decide on the trade price and quantity accordingly. The execution of trade could be done from your home or office by just logging into your PC or laptop and even cellphones now. The trader no longer has to depend on the dealer for confirmation of trades. They could check the order book for the status of execution and if required, the trade could be modified or even cancelled.

Above all, internet trading made it a convenient 24X7 market. The customer could place the trade even at night, although the trade would only be executed when the markets opened. With app-based mobile trading, the stock market has been condensed into your smartphone.

What to ensure when you are trading online

There are some basic dos to keep in mind when you are trading online:
  • Ensure that you reset your password and insist on dual authentication for accessing your trading account. Ensure that you regularly change your password to reduce the chances of hacking into your trading account.
  • Ensure that your bank account, trading account, and demat account are linked in one seamless chain. This will ensure that the debits and credits to the bank account and the demat account happen effortlessly.
  • Execute the power of attorney for automatic debits to your demat account. This way, you don’t have to go through the hassles of submitting the debit instruction slip (DIS) each time you sell shares from your demat account.
  • Finally, the audit trail is critical. Once your trade book is updated, cross verify this with your electronic contract note on a daily basis. Also cross check your profit statement with your ledger to understand what all charges have been debited to your account.
Not just dos, but keep some don’ts also in mind
  • Trading online is not just a privilege and convenience but also a responsibility to safeguard your interests. Here are some quick don’ts to keep in mind.
  • Don’t share your password or security codes with anyone else. Avoid letting even your family members access your trading account and execute trades on your behalf. Only you must operate your trading account.
  • Don’t set obvious passwords. Your name, date of birth, and marriage anniversary are classic giveaways. Try to complicate your password by including uppercase, lowercase, alphabets, numbers and special characters to add levels of security.
  • Be it internet trading or app-based trading, never access your trading account from a public place. Using a cyber café or unsecured public wi-fi to trade is not a smart thing. These spots can be easily hacked and your account could get compromised.
  • Don’t forget to keep an offline record of key documents such as contract notes, ledgers, profit statements, and capital gains statements. These can be useful in case of any disputes or legal questions you may have to address.
Enjoy the power of online trading, but also just keep an eye on the dos and the don’ts for safe and seamless trading at your fingertips.

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