Investor doing transactions in the stock market from a trading platform in his computer
Timothy Ronaldson
By: timothy-ronaldson
Read in 8 minutes

What Is a Trading Platform and How to Choose One

As a small business owner, you may be looking to invest money in the stock market but are unsure of how to do so through a trading platform. You may not even quite be sure what a trading platform is and how it works.

If this explains the situation you’re in, it’s completely normal. Plenty of people are in your exact same shoes. Investing and trading can sometimes be difficult topics to understand and complex to fully grasp.

Investing as a small business owner doesn’t have to be so complicated, though. Once you’ve got the basic concepts of investing down, it’s time to understand what a trading platform is and then choose one that fits your needs best.

Before we get ahead of ourselves and start discussing specific trading platforms, though, let’s discuss what a trading platform is, how it works, the benefits of using one and how to choose one.

Still lost? Read this first: Stock Market 101: What Is the Stock Market and How Does It Work?

What Is a Trading Platform?

Simply put, a trading platform is a piece of software that allows you to make trades on the stock market and manage your investment accounts. It is a way for everyday people to buy and sell stocks, bonds and mutual funds without the need to work directly with a broker or investment manager.

In this way, you can think of a trading platform as the online interface for your bank. Your online banking login allows you to transfer money and schedule bills to pay directly from your bank account, rather than needing to walk into a branch and have a teller or bank manager do that for you.

Just like online banking platforms, there are trading platforms that offer a variety of different features and functionality. But at their core, they all do one thing — allow you to make stock market trades from the internet.

How Does a Trading Platform Work?

Stocks are bought and sold through what is known as an exchange. Traditionally, the only people who were able to do so were brokers, because they hold a license that allows them to do so. The old-fashioned way that brokers trading stocks — and how it is still done in some forms today — is by doing so on the trading floor of, say, the New York Stock Exchange.

Today, stocks can be traded through a broker via phone or electronically as well. This is where a trading platform comes into play. The trading platform acts as an online broker, performing the same duties that a human broker would do in other situations.

The trading platform allows you to do research on your own through various reports and analytics and allows you to request the purchase or sale of stocks on your own without the need to speak directly with a human broker.

Benefits of Using a Trading platform as a Small Business Owner

There are many benefits of using a trading platform as a small business owner. Among them are:

  • By using an online trading platform, you don’t need to contact a broker and wait for a response if one is not available. You can log onto your trading platform account any time you wish to do research or initiate a trade.
  • As a small business owner, time is always of the essence, so you want to be able to get what you need to get done quickly and efficiently. In addition, the times you may be available to research investments and make trades may not be the same time when brokers are available to help. While you can request trades outside of the stock exchanges’ trading hours, though, no transaction can officially go through until the exchange opens again.
  • Another big benefit of using a trading platform is that you can conduct research independently. All the information you may want to know is right at your fingertips. This allows you to make trading decisions on your own, without having to wonder if a human broker is making a purchase or sale suggestion based on a vested position they have.
  • One final benefit is that trading platforms sometimes charge lower fees for trades than traditional brokerage firms, whose costs are typically higher.

How to Choose a Trading Platform That Works for You

There are two main factors that should go into your decision when choosing a trading platform. The first is the features the platform has, and the second is the fees it charges. What you’re looking for is the best combination of the most features that you desire with the lowest fees possible — for obvious reasons.

One of the top features you should look for is an easy-to-use interface from both desktop computers and mobile devices. You should look for a trading platform that provides access to as many stock markets as possible — so that your investment options aren’t limited –. Also, make sure the platform of your choice provides you in-depth information, analytics and reporting on all the stocks available to trade.

You also want to find a trading platform that meets your needs in terms of your investment level. Some trading platforms have a high minimum investment, while others have a lower threshold. You should research and find a trading platform that allows you to invest in day one at an investment level that you’re comfortable with.

One additional feature you should look for is flexibility. Some platforms limit the transactions you can make, depending on how much equity you have in your account. Some also require pre-approval to execute more complex investments such as margin trading.

As for fees, it’s quite simple: Look for the trading platform that charges low fees for making trades, as this will keep the most of your money in your account.

#CaminoTip
When you are looking for a trading platform that fits your needs, pay attention to 2 things: the features it offers and the fees it charges.

Conclusion

As a small business owner, you’re probably always looking for a good investment. One way that some people like you make those investments is through the stock market.

Nowadays, it’s easier than ever to do so through online trading platforms. But before you can dive into making your first trade, you need to understand what a trading platform is and then select the one that fits your needs the most.

Keep Reading:

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