How Does Online Stock Trading Work?

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Online stock trading works by typing data into a computer and sending the order through the Internet to be fulfilled. Find out how online trading changed the stock market with help from a personal asset manager in this free video on investing in the stock market and money management.

Part of the Video Series: Stock Market
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Video Transcript

Hi, I'm Roger Groh. Welcome to a few minutes, on online stock trading. How does it work? Well, remember the old days, when you had to go into your stockbroker's office, and physically sit there, and the person would enter, would write down on a sheet of paper, buy this, or sell that? They'd stick it in a pneumatic tube, and whammo, the tube would go up and around, you could hear it moving around the building, and it would go into an order room. They would put it on a teletype, the order would go to an exchange, an exchange would be made, and eventually that paper would come back, saying that you had done something, or had not. Well, that was not efficient at all, when it came to doing large amounts of volume, so computerized training in the 1980's, really came into its own, and what it did, was to set up an electronic barter system, between buyers and sellers. Now, how can you participate? Well, your discount brokers, especially Charles Schwab, really drove the transition, to the use of computers and online banking. You can do it right from home. You have to go, open up an account, and then, instead of physically writing down the orders on a piece of paper, like you had to do at a brokerage office, really you're doing the same thing, by typing in the data, into a computer, and then instead of that piece of paper going to somebody who teletyped it in, your order goes directly to the computer, the computer looks for the other side, and an order is fulfilled, or not, so that's a little bit about online trading. It's fascinating. Go to, in the history of the company, and look about it. It's a fantastic piece, on really what helped drive the entire technology business, here in the United States. I'm Roger Groh. Thank you for spending a few minutes with me.


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