Many of us assume that when we trade online we have a direct connection to the securities markets. But this is not true. The real fact is when we push the trade key it goes to our broker who in turn decides which market to send it to for execution. A similar process occurs when you call your broker to place a trade.

However, the trade execution is usually seamless and quick, it does take time.

The volatile market prices can change quickly, thats why investors may not always receive the price they saw on their screen or the price their broker quoted over the phone.

When you place an order to buy or sell stock, you might not think about where or how your broker will execute the trade. But where and how your order is executed can impact the overall costs of the transaction, including the price you pay for the stock.

As you have a choice of brokers, your broker generally has a choice of markets to execute your trade:

For a stock that is listed on an exchange, such as the New York Stock Exchange (NYSE), your broker may direct the order the exchange, to another exchange or to a firm called a "third market maker." A "third market maker" is a institute that stands ready to buy or sell a stock listed on an exchange at publicly quoted prices. Brokers have real advantages with theses institutes as they also pay some amount per share to the brokers for your Order. This amount is called Payment for Order Flow. So Brokers get brokerage from you as well Payment for Order Flow from them.

For a stock that trades in an over-the-counter market, which is also called as OTC market such as the NASDAQ, your broker may send the order to a "NASDAQ market maker" in the stock. Many NASDAQ market makers also pay brokers for order flow.

Brokers also have the facility as limit order where broker routes your order to an electronic communications network that automatically matches buy and sell orders at specified prices. A "limit order" is an order to buy or sell a stock at a specific price. Your broker may decide to send your order to another division of your broker's firm to be filled out of the firm's own inventory. This is called "internalization." This way is not suitable as your order is spread which may cause the delay, which can result into the price gap.

For any reason you want to direct your trade to a particular exchange, market maker, or ECN you can contact your broker and ask him or her to do this. But some brokers may charge for that service.

There are some security rules defined called as SEC rules which aimed at improving public disclosure of order execution and routing practices require all market centers that trade national market system securities to make monthly, electronic disclosures of basic information concerning their quality of executions on a stock-by-stock basis, including how market orders of various sizes are executed relative to the public quotes. In addition, market centers must disclose the extent to which they provide executions at prices better than the public quotes to investors using limit orders. In addition brokers must respond to the requests of customers interested in learning where their individual orders were routed for execution during the previous six months.

If you have all these information readily available, you can learn where and how your firm executes its customers' orders and what steps it takes to assure best execution. You have the right to ask about the firm's policies on payment for order flow, internalization, or other routing practices also read your new account agreement. You can also write to your broker to find out the nature and source of any payment for order flow it may have received for a particular order.

We have so many firms available in the market. You can compare firms; ask for price improvement on customers' orders. And then consider that information in deciding with which firm you will do business.

We need to have faster Internet connection along with the ubiquity of personal computers allows us to be in touch with the market every time during the trading hours.

New Investors recommended to trade securities online as part of a long-term investment plan. Investors should research securities and then place trades. Whether you manage your investments on your own via the Internet or by working in person with a broker or investment adviser, it is essential that you know what types of securities you are purchasing, how they meet your investment goals, and the risks associated with each investment.

Some investors use the Internet to trade frequently for profiting from a rapidly changing market. Although the possibility of quick profits may be alluring but this strategy is very risky. Market volatility, inaccurate information about anticipated changes in stock prices, and delays in the execution of online trades may lead to financial losses.

You should analyze order price, limit, and stop loss for every order you process. Make sure that the firm has an alternative way to execute trades in case of technical problems. Receive clear information about sales commissions, transaction fees, and conditions that apply to any advertised discount on commissions. Note down the customer service contact number so that if problems occur you can get in touch with them. Get information from the firm about significant website outages, delays, and other interruptions that may affect your ability to execute trades. Make sure that the firm has an alternative way to execute trades. Review the firms privacy and security policies. Determine if your name will be used for mailing lists or other promotional activities by the firm or any other party. Contact your local securities division to verify the registration status and disciplinary history of the online brokerage firm and if you face any major problem you may file a complaint.