1. Stock broking is one of the first industries in India where Internet has shown its vast potential. Online trading has helped to cut through sub broking intermediaries, push down transaction costs, bringing in transparency and thus has empowered the investor as a whole.

2. Erstwhile era of trading involved cries across the floor of the stock exchange to trade in paper shares which later on replaced with Demat trading.Demat Trading.

3. Demat trading means that shares are held in electronic form with depositories which are namely NSDL and CSDL. Demat trading was introduced in phased manner from 1999. Demat trading is a prelude to online trading. Dematerialization of all shares has provided a platform for online trading and today online trading has spread its wings to futures/derivatives trading in stock markets, investment in mutual funds, post office schemes, insurance, applying for initial public offer and commodity trading.

4. Benefits Online Trading.

(i) One is able to strike the price at one’s will as per individual convenience for place and time.

(ii) Intermediaries are removed.

(iii) Competitive brokerage.

(iv) Entry of female in male dominated area.

(v) One can trade live on stock exchange irrespective of location.

5. Requirement Online Trading.

(i) Internet.

(ii) Online trading account.

(iii) Knowledge of trading in stock market.

6. How to Open an Online Trading Account?

Following platforms exist where online trading account can be opened and prominent among these platform accounting for 70-80% of business are listed below :-

(i) ICICI Direct.com (Owned by ICICI Group).

(ii) Indiabulls.com.

(iii) Sharekhan.com (Owned by SSKI).

(iv) Kotak Securities (Owned by Kotak Mahindra Group).

(v) HDFC Securities (Owned by HDFC Bank).

(vi) 5 Paisa. com (Owned by India Infoline.com).

7. Opening an Online Trading Account.

(i) Choosing an online trading account.

(ii) Submission of requisite document which requires residence proof, bank details and PAN Card.

(iii) Receipt of user ID and password.

(iv) Methods of transaction of funds.

How These Online Platform Operates.

8. After the account has been opened, user is all set to trade on internet The data in form of password and transaction password travels in 128 bit encryption mode and is safe to operate in internet.It has three parameters -trading account, bank account and demat account.

9. ICICI Direct.com and HDFCSEC.com has an inherent advantage where all the above are integrated and thus drawl of funds and credit of funds post purchase/sales of shares/other instruments occurs on its own. However, for buying purposes the user has to allocate upto which amount can be utilized for purchase of shares/ other instruments. However, major drawback with both of these is a high brokerage rate up to 0.85% per transaction for an average investor.

10. Sharekhan.com, Indiabull.com and 5paisa.com have tied up with various banks for credit/debit of funds however, instructions need to be given by the user for credit/debit of funds which may take up to 24 hours of execution.

11. Share/instruments which are either sold/purchased are credited in users demat account and thus restricts online platform from indulging in any malpractices.

Commodity Trading.

12. India being an agrarian economy thus a lot of potential exists for commodity trading. The term commodity future means that a retail investor is taking a position on a future price which may / may not favourable at the time of expiration of the contract. These prices are dynamic and can be changed by the minute. One can take same contract and move out when the going is not favourable.

13. These markets have two critical function to perform i.e. price discovery and price risk management.

14. ADVANTAGES.

(i) Producer can" get an idea of the price likely to prevail at a future point of time and can thus plan crop pattern.

(ii) Consumer gets an idea of future price and can thus plan his purchases.

(iii) Exporter gets an advance indication of likely price to prevail.

15. Disadvantages.

(i) Speed of internet.

(ii) Online frauds by hackers.

(iii) Non maintenance of secrecy of password by user leading to misuse.

CONCLUSION

16. Online trading is increasingly drawing market share from the offline world and with Indian households investing less than 2% of their savings in shares and debentures and thus market of online trading is likely to expand by leaps and bounds with increase in penetration of internet in Indian household.

17.About The Author:I am a financial analyst who specialises investment for India and provides real money making opportunities from internet in my personal blog http://www.indian-share-tips.blogspot.com