Online Trading and Starting a Business – Know the Difference

Seep Gupta

17 Feb, 2023

In India, online trading is governed and regulated by the provisions laid down in the Securities Exchange Board of India (SEBI Act of 1992)^[1]. Online trading in India refers to the buying and selling of securities through internet-based trading and selling platforms. On online-based platforms, a person can buy or sell stocks, mutual funds, bonds and other securities through the broker who provides access to these online trading platforms. This article will give you an insight into online trading, provisions related to it and the difference between Online Trading and Starting a Business

What is Online Trading?

Online trading is a type of method where a person can buy or sell financial instruments such as mutual funds, equities, bonds, derivatives, stocks, ETFs and other financial-related commodities via an electronic interface. Online trading has simplified the hectic and complicated process of trading. Online trading and starting a business are two different and separate things.

Many online trading platforms and apps provide real-time analysis and the current updated status of the stock market at any time. This also helps traders to predict the estimated situation of stocks in the upcoming days and in the near future. Online trading platforms attract users in many ways, two of which are providing ease of commission of business and reduced commission fees. A person needs a properly funded online trading platform for smooth and seamless execution of trade online.

In ancient times and during earlier times, brokers used to act as middlemen and provided information relevant to the stock market and its complete analysis. Online trading platforms have ended this dependency on brokers and have simplified the process of trading to a great extent. Online trading provides great advantages and benefits as compared to conventional or offline trading. Online trading platforms provide users access to buy and sell commodities sitting anywhere in the world.

Procedure to Start Online Trading

Procedure to start online trading in India is simple and not that complex or complicated. Given below are the steps to start online trading in India:-

• In order to start the online trading journey in India, the person first needs to open a demat trading account with a stockbroker. After opening the account, the person first needs to log in to that account by adding money. There is a plethora of online trading platforms where a person can open an account.
• For opening the demat account, the person first needs to find an online stockbroker. The stockbroker helps in opening a demat or a trading account. The difference between trading and a demat account is that the trading account helps in placing a buy or sale order in the stock market, while the demat account stores the shares a person buys in the digital format.
• For opening a demat account and trading account, the person first needs to fill out an online application with the broker. The form-filling process is easy and can be completed in less than fifteen minutes.
• After making a demat and trading account, the person can log in to that account by adding money into that and can explore the platform. It is important to note that the person can transfer money from a demat account to his bank account as well.
• The last step is to view the latest stock details and start trading. Now that person has become familiar with the online trading platform; the person can view the live market shares and other stock market-related details in his trading account. He can start buying shares and bonds and can start his investment and trading journey.

Difference Between Online Trading and Starting a Business

You can check the differences between Online Trading and Starting a Business:

• Online trading and starting a business are two ways by which a person can earn money in India. Online trading is a form of investment or a method by which a person can buy financial commodities such as shares, stocks, bonds, debentures etc., via an online trading platform. It’s a new way of investment which offers both convenience and accessibility. With online trading, a person can buy shares and stocks by sitting in any part of the world and can place trades using a computer, mobile or any other electronic device from the comforts of his home.
• On the other hand, traditional business is a conventional form or way of earning money, which refers to the ownership and operation, management and control of the physical business such as a store, manufacturing or restaurant business. In India, traditional business is still a dominating way of earning money, especially in the rural and semi-urban areas of India.
• Traditional business owners first have to invest a pre-estimated significant amount of capital, both in monetary and non-monetary form, before the commencement of the business. These business owners are responsible for managing all the aspects and steps involved in the business, right from the production stage to customer service. The significant difference between online trading and starting a business is the type and the level of risk involved. Online trading is considered a high-risk, high-rewarding activity where investors can potentially earn significant profits or can suffer significant losses depending on the market conditions. On the other hand, traditional businesses consist of low risk as compared to online trading. Online trading and starting a business are different in terms of scalability too. Online trading can be scaled very quickly as online traders can invest and trade in multiple markets at the same time.
• Traditional businesses, on the other hand, require more time, resources and capital to scale, and their expansion is often limited and restricted by physical and financial resources available to the business owner. Both online trading and starting a business are good ways to earn money, depending upon the needs of the person. Online trading requires less amount of capital but involves a higher level of market risk because of its volatility, while the physical business also carries risk but significantly less amount of risk when compared with online trading.
• Other differences between online trading and starting a business are time commitment and expertise. Online trading doesn’t involve much time and can be done in a part-time manner from any place, while physical business requires a full-time commitment and may also require a physical or dedicated workspace. When talking about expertise, before investing in online trading, the person who is willing to invest should have in-depth knowledge of financial markets and instruments, while the person who wants to start a business requires a certain range of skills ranging from marketing to management.
• When it comes to exit strategy, both online trading and starting a business are different. The traditional business requires a long-term commitment or an exit strategy for liquidation, while online trading can be easily exited or liquidated.

Conclusion

In a nutshell, both online trading and starting a business are legally viable and feasible options for earning money in India. Both are different in many factors, and it depends on the needs of the person as to what source of earning money he or she wants to choose. But it is important to weigh the pros and cons involved in both online trading and starting a business.

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