Online Stock Trading for Neophytes

Online Stock Trading for Beginners

After the Crash - is Online Stock Trading a Viable Way of Making Money Online?

Back at the end of the 1990s and in 2000 we all thought that online stock trading had changed the world, that making money online on the stock market was easy and that things were different this time. Remember the days when stocks went up 20% in a day then 25% the next day ! Crazy times. Well, we all know what happened with that. Everything crashed, some stocks as much as 99% or 100% but lots of stock fell 90% - that's a lot of money to lose ! And online stock trading was seen to be the work of the devil.

All the way down from the highs in 2000 we were told by many many many so-called experts (although not all) I could name names because I still remember them, that prices were now soooooo much cheaper and therefore we should be buying more not selling !

Stocks that cost 800p now cost 400p - what a bargain ! "Buy them quick" the experts said, "they are really cheap, in a few months time you will be retiring to Clacton-onSea !" Except that those very same stocks started at 800p and didn't stop falling till they got to 2p i.e. to all intents and purposes they became worthless and somebody had made off with your money ! Did you get his number?

One unfortunate lady gave her fortune of £20 million to an expert to invest for her, and one year later he gave her back £60,000 - a loss of almost £20 million on £20 million in one year, that's some going even for an expert !

LOGICA - A software company 12 year chart - one of the survivors



After that we were all told by the experts that we had been very very silly and should be ashamed. That online stock trading was only for the experts and that dotcom companies were always ridiculously overpriced and overhyped and we should never ever ever EVER have touched them with a long stinky barge pole. What we should really have been investing in was good old bricks and mortar and solid blue chip companies that had sound balance sheets and that were making good profits and paying healthy dividends. Yes blue chip companies - mmmmmmmmmm.

And from March 2000 onwards this seemed good advice the boring blue chip companies which had gone nowhere or had fallen dramatically during the dotcom bubble now started steadily rising and in a lot of cases tripled in 4 years (all times are approximate). So the intelligent thing to have done would have been to have bought dotcom rubbish at the end of the nineties and sold it before the end of March 2000. Then taken all those nice fat profits and invested them using a nice cheap online broker in solid blue chip companies, banks and insurance companies and the like and bought a pile of houses too. Then to have sold everything in the Summer of 2007. If I had done that I would be a multi-millionaire by now, how many people actually did do that I wonder ? Somebody must have got all the money that disappeared surely ? One guy did in fact do just that - Andrew Lahde, he made his money sold everything and said goodbye - his Letter to the Idiots is an eye-opener.-

Barclays 20 Year Chart - there are worse !



In reality what happened is that people lost of a pile of money when the dotcom bubble burst. Then people (maybe the same maybe different) lost another pile of money when the economy went belly up, starting in 2007. Those nice houses and solid blue chip companies that the experts were telling us to invest in actually fell as much as the dotcom hot air waste of space companies that went bust and that they said nobody in their right mind should have bought in the first place.

So what of online stock trading ? Is it a thing of the past is everybody sick and tired of the sight of screens of figures going blinkety blink kaboom ? A lot of people are, but there are people still standing who believe there is money to be made via your computer screen an Internet connection and an online trading account.

We might actually be nearing a bottom. There have been people saying, ever since the S&P was at 1500 that it would crash to below 700 - people laughed at the time ha ha ! - the precise figure I heard mentioned was 688 on the S&P and as I type the S&P is at 705.14 (Monday March 2 2009) and is still falling. So 688 is looking very close.

What will happen next of course is still up for debate. Goldman Sachs says to expect 6000 on the DOW. So are Goldman Sachs to be believed, as they are virtually the only big brokerage firm left standing on Wall Street? Did they engineer this whole debacle from the start just to eliminate all their competitors? Or are Goldman Sachs just guesssing like most of the other experts seem to be.

Some experts have of course been right. They were predicting Armageddon and they have just about got it.

We here at sharescity believe that there will be a bounce and it should come soon but just how long-lived it will be is very difficult to tell.

So is this the time to be getting back into online stock trading. We would say give it a couple of days and very cautiously. If you haven't got a cheap online broker I recommend you steer clear of TDWaterhouse, use anyone but TDWaterhouse.

That was a gratuitous anti-advert of course, but if I can save somebody money then I consider it was worth it.

At the moment the DOW is at 6810 - down 254 - the NASDAQ is at 1329 - down 48 and the S&P is at 704 - down 30.

Another point to bear in mind is that all these indexes all tend to follow one other index that leads them down by the nose - namely the DOW Jones Transportation index, check it out you will see that where it goes the others follow. So watch out for if and when it turns before dipping your toes into online stock trading.

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