Financial Definitions: Real Time Trades

Financial Definitions: Real Time Trades

MomVesting continues our path to imparting financial knowledge in our definitions series, and today’s post is about real time trades. This definition is actually one of the simpler stock definitions. However, despite its simplicity, there are a few things about real time trading to keep in mind. For that reason, we’ll cover real time trades in depth.

What’s the Real Time 411?

Here’s the skinny on real time trades, beginning with the basics. In any given day, the stock market goes up and down multiple times, and individually, each stock that makes up the totality of the stock market increases and decreases in value. That means that your stock can vary significantly in value from one time period to the next during the day.

In real time trades, when you purchase stock, you are quoted the actual price for the stock at the actual time. In other trades, this may not be the case; you could purchase stock for the price from five or ten minutes ago (or longer).

Let’s Get Personal

For you, as a trader, a real time trade can mean the difference between making money and losing money. Buying a stock at the price from five minutes ago really could cost you.

Let’s look at an example. Let’s say you want to purchase Apple stock at 9:00 a.m. The stock at that time is $420. Great, you think. Your research showed that buying at that price would be ideal. You’re about to click buy on the site when your baby cries, so you wait on your purchase to tend to the baby. When you get back, you click buy…but in that five minutes, the stock skyrocketed to $450. Now you can’t purchase as many shares as you’d planned.

Well, the same thing can happen in trading. If you’re not trading in real time, you won’t have the most up-to-date stock prices, and it could affect your bottom line. In non-real time trading, you might be using old information – and it wouldn’t take a baby’s cries to make you lose potential dollars.

What Else Should I Know

Many investment firms now use real time trading, but not all do so. If working with a firm in person, it’s important to establish that the trade is real time. Also, it’s a good idea to communicate with your broker well to know how much your actual stock purchase or sales price will be.

Online investment firms also may not work in real time, so before you buy, check the time stamp on the stock’s price. Additionally, other online sources (like sites you may use for research) might not quote in real time; being aware of the site’s policies about real time could save or make you moolah.

That’s it: the essence of real time trades! Checking your stock sources and broker’s real time policy can help you in the long run, so be sure to keep real time in mind when navigating the stock world.

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Kris @ Everyday Tiups's picture

Kris @ Everyday Tiups wrote:

Tue, 02/14/2012 - 02:16 Comment #: 1

Some investment firms charge more for real time trades to. For instance, I use 'buy and hold' for my stock purchases. For 6.99 a month, I get two free trades that month, which can be done at 3 different points in the day. I can also choose real time trading, which is a totally different pricing policy. However, as you stated, the trade is executed instantaneously, but it is a lot more expensive.

I have been fine with 'block trades' as opposed to 'real time' since I do not trade short term. However, I can totally see how important it would be to a day trader!

Christa Palm's picture

Christa Palm wrote:

Tue, 02/14/2012 - 16:11 Comment #: 2

Kris, thanks for the great info! I also buy and hold, so real-time has not affected me as of yet. But it's good to know how some investment firms work!