The Lifecycle of Online Trading: 5 Key Stages


Trading is a process of transaction between two parties for many. We think that trading is a simple process of earning money, which is lucrative and easy to do.

However, the concept is not up to the mark, as there is a huge difference between trading and gambling. Well, many people do not go for trading because of the risk related to it, and some of them are not eager to enter the market due to gambling concepts.

Yes! Risk is there, but trading is neither a simple transaction between two parties nor gambling. While trading, you may think it is a transaction process through cash in return to the bonds or between two currencies. However, a lifecycle depicts the situations and process of trading beyond your knowledge and primary understanding of it.

When you are on the go, you will need to take care of the investment opportunities of the market. For instance, while trading with forex, you may need to understand the current international market situation before investing. RoboForex executes efficient trading with the latest trading news and confirmations.

However, the online trading lifecycle is beyond transactions and indicates the importance of the two parties.

  • Investors who engage in trading.
  • Institutions such as brokers and banks facilitate trading.

The Life Stages Of Online Trading

Life stages of trading come forward with different activities and management. It starts before the trade occurs and does not have any end but goes on.


The pre-trade stage is a condition when an institution tries to onboard new clients. Trading is only possible when investors agree to the terms and conditions.

So, when the trading is not made, the initial stage plays a crucial role for the investors and brokers. It’s about trust and authenticity. People will only trust an institution when they are capable of providing appreciated information regarding risk management, controls, and relevant laws and regulatory requirements.

Trade Execution

Once the client is in the trading system, the execution cycle starts performing. Well, here, the performance is the duty of the brokers. They need to determine which particular investment option the client should choose and in which ways.

For instance, the need for cash, hedge a position, and diversification all come on stage to determine the portfolio of the client.

Trade Cleaning

Trade cleaning is a stage where the counterparties of trading and the agent both determine the trading proof, including the exact transaction details.

However, this comes forward with three main steps.

  • Trade Date.
  • Value date.
  • Settlement date.

While trade date determines the agreement of both parties, value data indicates the exact transaction agreements with detailed currencies and indications of particular investments. After that, at the settlement date, they mainly execute the transaction and complete the trading process on stage.

Trade Settlement

This stage refers to the completion of the transaction and settlement fully. Well, it’s a risky stage and vital for both parties. Therefore, you must be prepared for it with safeguards, protocols, and careful management.

  • Delivery-versus-Payment (DVP).
  • Free-of-Payment (FOP).

DVP is a considerably safe process as you will get the securities on stage with the transactions. On the other hand, FOP does not happen at one time, making it risky for future traders.

Ongoing Position & Risk Management

The position and risk management requirement is undeniable in the whole trading lifecycle. It directly indicates the positions an institution holds in the current market and also ensures the opportunities of the market.

  • Managing corporate actions.
  • Trade reconciliation.
  • Managing counterparty credit risk.
  • Measuring risk and sensitivity.
  • Measuring profit and loss.
  • Preparing internal and external reports.

These are the prime activities of the market that you may like to include in your trading knowledge.

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