Page 71 - THE MARKET WHISPERER

THE MARKET WHISPERER 69

Your Guide to Opening a
Trading Account

When you buy a stock, for both technological and regulatory reasons, you
need the services of an agent known as the broker. The broker mediates
between you and the stock exchange. When you deposit your money with
your chosen brokerage company, you receive (usually free of charge)
trading software that connects your buy and sell orders to the various
stock exchange computers.

The broker might be the bank that enables buying and selling stocks
along with additional banking services, or it may be an independent
company specializing solely in providing brokerage services. Usually a
specialized broker will be cheaper and more effective than the bank.

In the not too distant past, people wishing to buy or sell stocks had to
take themselves off to the broker’s offices, wait in a queue, and pay a hefty
commission. In short, a loss of no small amount of money even before the
stock rose by just one cent. Active traders bought and sold stocks at cheaper
prices through phone calls with the broker’s transaction room, and highly
active traders set up expensive communications systems connecting them
directly with the various brokers. Those days are well over. The Internet
revolution brought the stock exchange directly into the personal computer
of every single person in the world who wishes to buy and sell stocks. In
fact, the public now has access to the most advanced trading systems
which, not so long ago, served only the professionals. Data that once could
be accessed by only the privileged few is now open to public use.

As the Internet continued to develop, trading programs developed,
procedures were totally computerized, and commissions dropped. The
minimum commission when I started out as trader stood at $15, and it’s
now $1.50 with ample room for it to drop further. The more the commission
fees dropped, the more useless brokers’ phone-in transaction rooms
became. Rooms that were populated by tens if not hundreds of employees
turned into a desert of screens and computers, serving only a small
number of traders who still have not internalized the Internet revolution,
and are willing to pay exorbitant commissions for an unnecessary phone