Online Trading Tips

Online Trading Tips for Online Stock Market Investing

I have just discovered the excellent site created by the US Securities and Exchange Commission - http://www.sec.gov/investor/online.shtml - on which, amongst other things they have very helpfully given their tips for online trading.

I will preface these tips by the SEC by my own tip - if you are considering trading stocks online, avoid TDWaterhouse - IMHO neither they nor their software is reliable - TDWaterhouse Problems

Tips for Online Internet Stock Trading from the SEC

The following online trading tips were drafted by the North American Securities Administrators Association, Inc. They are designed to inform investors and help them carefully consider what they are doing before online investing.

• It is important to understand that you are probably not linked directly to the stock market through your PC and that when you click on your mouse your order is not instantaneously executes or cancelled. (Very true particularly if your online brokers software is up the creek ! I know from bitter experience - believe me get yourself a reliable broker).
• Check that the online quotes and updates to your account that are displayed on your screen are genuinely real-time or delayed. (Once again a reliable broker with reliable software is absolutely essential - if your broker's system clock is inaccurate by 1 minute and 37 seconds then you will discover that the stock market has in fact closed by the time you try to cancel your order when you thought it was still open - this has already happened to me so it is not just a theoretical possibility)
• Check that your online broker is able to get you the best price. (Difficult to find out by asking, as they are obviously going to tell you whatever they want in order to get your business. Best to check with other people who are already involved in online trading first).
• Get information from the broker which will substantiate advertised claims concerning the ease of online trading and the accuracy of their system. (Particularly their timing system - it is essential that their clocks are accurate - you can test this yourself by visiting the Greenwich meantime site where they have an accurate clock).
• Make sure you have all the information you need concerning entering and cancelling orders (market price, limit price, and stop loss), and the details and risks involved with any margin accounts (trading on margin means you borrow money to buy stocks in the hope that the share price will go up and you can get out at a profit).
• Ask the firm about website outages, and other interruptions that may negatively affect your trading. (If you expect them to own up to this you are dreaming !)
• Make sure the brokers you choose have an alternative way to execute your orders if there are problems with the online trading system.
• Read the firm’s policy regarding privacy and security. Make sure your name and address will not be put on mailing lists for promotional activities from the firm or third parties.
• Make sure you get clear information about commissions, fees, and conditions governing advertised discounts.
• Make sure you know where to contact customer service if problems occur (they will).
• Ask for prompt fair consideration (you may get it if you're lucky it all depends on which broker you sign up with of course - try and get some personal recommendations beforehand).
• Be sure you keep your own records to back up any problems that may occur. (The problem with this is that if you choose an unscrupulous broker then your records will simply be ignored).
• Check the registration status and disciplinary history of any online brokerage firm, and where you should go to file complaints.

So that's the SEC's tips for which we are truly thankful, with my comments, personally I think you can't beat personal recommendation - you can see which online brokers I don't recommend at the top of the page. With regard to 'disciplinary history' you may like to read this article from the New York Times - TDWaterhouse Fined for Online Trading Problems online trading online stock trading internet stock trading