People tend to choose a discount broker because of the low rate of commissions involved. The rates of commission could be cheaper even if you trade in stocks as compared to place orders over the phone. A few years back at a question asked to the investors on what is the piece of advice their stock brokers go on to provide. Apart from yes and no the one thing that emerged is that most of them did go on to trade with the top discount brokers India. Be it whether you monitor your own investments or allow someone else to monitor it on your behalf.
Though low rate of commissions could be the key but there are several reasons why you need to be cautious. When low commissions are presented an investor is presented with a greater opportunity to be earning a lot of money. The general assumption is that they cannot lose as their natural tendency is to sell at the first sign of trouble. Being quick to cut down on your losses, as you cannot compare the same thing to be making money. In case if you stumble upon an investment where there is a scope of earning money you end up selling before even making a move.
Considering the other side of the coin, a good stock broker is really worth the commissions that you end up paying. Most of them have an average rate of commission that could be as high as 2 % of the total transaction cost.
Be aware of the risks associated of trading online with a discount broker
Online trading without the aid of a discount broker might seem to be a lucrative option of building wealth but a host of hidden gimmicks are there that you might not even be aware early. The ease of trading along with low costs may prompt the traders to trade a lot often. This would mean such a situation where you sell the best picks once you just start. The nature of trading may force the traders to pick up a conservative mode of trading. This poses to be another risk of online trading as random stock fluctuations are something that it is virtually impossible to get away from.
This random approach of profitability could be exclusive in the short term scheme of things. But to earn profit in the long run this is something that cannot be relied upon. What is the worse aspect is that most of the traders end up losing money in the process. By the time a beginner figures out things, it becomes really difficult and they would have gone on to lose a lot of money by then.
If you are into frequent trading you might end up purchasing low priced stocks. By online trading you can make trades in a quick manner and commissions can be earned quickly. For a successful investor this is a scope of earning profits , not into trading stocks.