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What are trading platforms?

Trading platforms are portals through which users access and manage their trading accounts for their financial markets. This helps the users maintain their accounts. Generally, such platforms are offered by brokers in exchange of some fee or discounts on trade commissions. With the advent of the discount broking industry, several platforms are also available for free or rather, access to platforms is included in the brokerage you pay. These platforms can be used to conduct research, keep a track of various financial products you wish to trade in, place orders, store your past trade details as well as to authenticate users. Trading platforms have opened up the possibility of e-trading or online trading.

Key Points:

  1. There are basically two kinds of trading platforms. The old or traditional method of buying and selling products - what we call Floor Trading and the new technologically influenced method that the world uses electronic trading.
  2. Arguably the most convenient platform for trading is the method of e-Trading or online trading or electronic trading.
  3. A broker is simply a licensed person through whom you can buy and sell stocks. When you use an online platform, it essentially acts as an online broker.

The trading products you can purchase using these platforms can include stocks, commodities, derivatives, bonds etc. which can be traded between the traders on the stock market with intermediates such as investment banks, stock exchanges, brokers and market makers. A communication network is set-up between the various intermediates and the traders, which facilitates proper execution of the whole system.

Types of Trading Platforms

There are basically two kinds of trading platforms. The old or traditional method of buying and selling products - what we call Floor Trading, and the new technologically influenced method that the world uses - Electronic Trading.

Floor Trading

This orthodox method requires people gathering in a place for exchanging products. This place is known as a trading floor. These products include stocks (shares), commodities and various kinds of financial instruments.

When floor trading was widely practiced, venues for such trades were usually stock exchanges. These places were thronged by investors communicating through an intermediary which became the means of communication between them. This could be a broker or market man, while the method was called the ‘Open Outcry’ method.

This method eventually paved the way for all the modernised ways of trading and hence is the best platform for investors and traders.

How Do Trading Platforms Work?

The first time a company offers its stock to the public in the form a share it is known as initial public offering . The company’s stock price varies on the economic conditions of a company as well as the organization’s profitability.

A broker is simply a licensed person through whom you can buy and sell these stocks. When you use an online platform, it essentially acts as an online broker. If someone wants to buy any product, he can contact a brokerage service. They would place an order and let him know the market price of the product. If the investor is interested, they would include a commission for themselves and process the order forward. If the user wishes to buy stock, the broker would forward his order to a stock exchange, which would approximately take 3 days to complete including the money exchange between the broker and the investor.

For online platforms, websites give the user options and availability of the stock he wishes for, across all the platforms available. If he places an order, it gets stored in a database. After the confirmation of the trading account and payments, the order gets forwarded and the user gets his stock, in the form of money, transferred to his trading account.

Wrapping Up

  • Trading platforms are where users can buy and sell financial products.
  • There are basically two types of trading platforms - Floor trading and Electronic trading.
  • Broker is a licensed person with whom you can buy and sell stocks.
  • Online trading is basically replacing the human with an online broker, where you choose on your own, which stocks to buy and sell.
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