The vital role of technology in modern life cannot be overstated in view of today's world. Science and technology have intensely influenced the course of human civilization. Technology has provided us remarkable insights into the world we live in. Electronic trading or e-trading is yet another boon of science and technology. It involves trading of securities, foreign exchange and financial derivatives electronically. Information technology plays an important role in e-trading, it helps in bringing together buyers and sellers through electronic trading platform and networks to create virtual market places such as NASDAQ, NYSE Ar ca and Glob ex, which are also known as electronic communications networks (ECNs).
Electronic trading is bestowed with lots of advantages like with its help, it becomes very easy to find out the price of security as information is available online. Further, it gives the flexibility to companies to trade with one another easily, no matter where they are located because of its online features. The spread on the instrument is the difference between best buying and selling prices being quoted. Moreover, the spread represent the profit earned by market makers. The increased liquidity, competition and transparency signify that spreads have tightened, especially for commoditized, exchange-traded instruments. Further, electronic trading is preferable as it is faster because there is less labor involved in it. This is fast process as the transaction goes through immediately the broker gets around to it. Thousand of transactions are done with e-trading quickly when a broker is still busy with a single transaction. E- Trading is self-directed investment, it allows users to direct their own investment buy and sell whenever they please without taking the help of middlemen.
Another term involved in e-trading is a back-testing. It plays a vital role in your technical stock trading technique and in the development of an effective trading system. Back-testing lets you test pre built trading strategies under past market conditions in order to know whether certain scenarios would have worked well in the past. This strategy works on the principle that what worked in past is likely to work in future and if it failed in past than most probably it will fail in future also. One can say that this strategy says that move towards an existing trend when it is beneficial and get rid of it as soon as the trend reverses. In order to have a successful back-test, you must assemble your data in an organized manner. A successful back-test will definitely make your future investment fruitful. You can never go wrong with back-testing as it is the one solution that will always bring profitable results for you.
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