How to Invest Online - Investopedia

It’s never been easier for traders to invest in today’s volatile financial markets with a plethora of online trading platforms to choose from. However, with so many options to consider, selecting an online platform that meets your specific investment needs can be both time-consuming and overwhelming. To speed up the learning curve, let’s walk through the basics of online investing and outline some of the important factors traders need to consider before placing their first trade.
When selecting an online broker, here are several essential things to consider.
Regulation: Ensure the broker is registered to sell securities. Investors can easily do this by checking the Financial Industry Regulatory Authority’s BrokerCheck and entering the broker’s name in the search function.
Platform Security: To protect your funds and identity, select an online broker that has enhanced security features—such as two-factor authentication (2FA) and SMS/email notification login security alerts—and agrees not to sell your personal information to third parties.
Fees/Commissions: If you intend to trade actively, it’s important you choose an online broker that offers competitive trading commissions, as they can add up fast. Although many discount brokers offer zero commission, be aware that they may make money through a wider spread between the bid and ask price. Also, find out if the broker charges minimum deposit fees, annual or monthly account maintenance fees, data fees, and activity fees. Yes, some brokers will charge you for not trading within one calendar quarter!
Product Offerings: Make sure the platform you select offers all the products you want to trade. For instance, if you like to trade complex strategies that utilize different investment instruments, ensure that the platform offers stocks, exchange-traded funds (ETFs), options, and futures trading. Well-known online trading apps like Robinhood Markets, Inc. (HOOD) are even starting to offer leading cryptocurrencies on their trading platform and trialing a new crypto wallet. Traders just starting may want to consider an online broker that offers a paper trading or stock simulation account to hone their skills before risking real money.
Online Reviews: What are other customers saying? Pay particular attention to reviews about customer service, platform usability, and account fees. To get a more accurate reflection, ensure that the broker has many reviews, and look for patterns in what customers are saying. For example, if many reviews are complaining about poor customer service, there's a good chance that the broker may need to improve in that area.
Two-factor authentication (2FA) is a security system that requires two distinct forms of identification in order to access something. Investors can protect the security of their online trading accounts by setting up 2FA.
Investors should familiarize themselves with basic order types that are universal across all trading platforms. Knowing how they work and when to use them helps get the best execution and manage risk.
Market Order: This is an order to buy or sell a security at the best available price. For example, suppose the bid/ask spread in Apple Inc. (AAPL) was $180.00 – $180.10, and a trader wanted to buy the stock at market. They would get an immediate fill at $180.10—the best ask price. Traders typically use market orders when they want an immediate execution.
Limit Order: A limit order specifies the maximum price a trader is willing to pay for a security (buy limit order) or the minimum they’re prepared to accept (sell limit order). For instance, let’s say the bid/ask spread in Apple is $180 – $180.10, but the trader thinks they can sell at a higher price. They could place a limit order at $200, meaning that their stock will not sell unless the bid price reaches at least $200. Limit orders are useful for traders who are more concerned about the price than immediate execution.
Stop Loss Order: This order helps control a trader’s risk by buying or selling at the market price once a security has traded at or through a specific price. In other words, if the security reaches the trader’s stop price, the order becomes a market order and executes at the next best available price. Let’s say a trader purchases Apple stock for $200 but wants to exit the trade if the share price falls below $150. They would place a stop-loss order at $150. If the stock drops to $150, the stop-loss order becomes a market order, and the trades get filled at the best available bid price. Online investors should get in the habit of always using stop-loss orders to minimize risk and protect their capital.
Take-Profit Order: As its name suggests, this type of order sets a specific price to close an open position at a profit. If the price of a security reaches the limit price, it will automatically trigger a sale. However, if the price doesn’t reach the limit price, the order remains unfilled. It’s also called a buy stop order. For example, a trader who uses technical analysis has noticed overhead resistance on the Apple chart at $180. Therefore, they decide to place a take-profit order at $179 to close their long position should the stock retest that level.
As well as these basic orders, many online trading platforms offer more complex order types, such as all or none (AON), fill or kill (FOK), and one-cancels-the-other (OCO).
The size of the global online trading market topped over $8 billion in 2021, according to market research.
There are plenty of free resources on the web to help with online investing. Traders can check the latest stock quotes on Yahoo! Finance and Google Finance. These sites also provide fundamental data like market capitalization, price-to-earnings (P/E) ratio, and company financials. If you’re a charting enthusiast, take a look at sites like TradingView—an intuitive web-based charting platform and social network that allows traders to perform detailed technical analysis, share ideas, and discuss market trends.
Those who want to run scans based on technical and/or fundamental metrics should check out FINVIZ. As well as screening for stocks, investors can quickly see what sectors and stocks are moving using the site’s heatmap. This research tool—which has a free and premium service—even applies to the ETF market and filters by timeframe, making it useful for both buy-and-hold investors and online day traders.
Even if investors plan on executing their trades, they may still consider seeking the services of a registered investment advisor (RIA) to help navigate the financial markets and gain access to exclusive full-service broker research.
When selecting an online broker, things to consider include regulation, platform security, fees/commissions, product offerings, and customer reviews.
Basic order types for online investing include market, limit, stop, and take-profit orders. These orders help investors book profits and manage risk.
Investors can visit Yahoo! Finance and Google Finance to find stock quotes, a stock’s fundamentals, and company financials. Those who want to screen for stocks, ETFs, or commodities should explore FINVIZ, a research tool offering a free and premium service.
Investing online allows traders easy, cost-effective access to global financial markets. Before getting started, it's important to know what you're looking for in an online trading platform and to conduct some basic research to ensure the broker meets all of your investing needs and complies with all regulatory requirements. Investing online offers traders the flexibility to make their own financial decisions or collaborate with a registered investment advisor.

Robinhood Blog. "Crypto Recurring Investments Are Here." Accessed Jan. 10, 2022. "Types of Orders." Accessed Jan. 10, 2022. "Online Investing." Accessed Jan. 10, 2022.
Fortune Business Insights. "Online Trading Platform Market Size, Share & COVID-19 Impact Analysis, By Component (Solution and Services), By End-Users (Banking and Financial Institutions, Brokers and Others), and Regional Forecast, 2021-2028: Summary." Accessed Jan. 10, 2022.
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