What Is Real Time Stock Trading?
Real time stock trading is a fairly new development in the stock markets. At first only the big financial firms received real time data and were able to act on the information. Now the well-informed individual trader can have access to real time prices for her trading use.
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History
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Before the Internet and the online stock brokers, buying stock was a time-consuming process. An investor would call or visit her stockbroker and place an order to buy or sell stock. The broker would write up a ticket and fax or call it in to his trading desk. The trading desk would telephone the brokerage's trader on the stock market floor who would go to the area of the floor where the stock was traded and buy or sell the stock. This process could take from a few minutes to several hours and the price received could change significantly between placing the order and the completion of the order. Telephone placement of trades was the method of trading until the early 1990s.
Automation
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In the 1990s, the Small Order Entry System mandated by the U.S. Securities and Exchange Commission ushered in the age of electronic order completion. Stockbrokers were able to place and fill orders from computers on their desks. Real time price data was expensive. A Bloomberg terminal with real time price data leased for more than $1,000 per month. Only traders from very large financial institutions had access to real time investment prices and were able to trade on that information.
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The Internet
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The widespread availability of financial data now allows investors to look up the price for almost any investment product. The stock price data on Internet financial sites is almost always delayed 15 to 30 minutes. The delays are dictated by the stock exchanges. Delayed price information is OK for someone who wants to look up a stock price, but could be dangerous for the day trader who moves in and out of stocks in a very short period of time.
Day Trading
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Real time stock trading is the ability to see the current market price and place an order that will be completed at or near that price. The trader needs to be able to see what the price is right now and not delayed for 15 minutes or more. Online stock brokerage companies can provide real time price information to their customers. Day traders need real time stock price information. They often move in and out of a stock in a shorter amount of time that the typical price delay.
Warning
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Real time price information is essential to the day trader. The magnitude of a stock's price movement during the time of a delayed quote could mean the difference between a profitable and a losing trade. Traders need to make sure their trading accounts give them access to real time price information. It is the trader's responsibility to make sure he is receiving the most accurate information.
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