General Tips for Online Trading
Online trading can usually be done in a split second with the click of a mouse. But in times of great volatility it is vital to understand that there could be delays even for online trading, due to overload of the system, or one or both computers - e.g. at each end of the transaction - having a slow server.
Even with online trading, in times of overload it is possible to get incorrect information about prices due to delays in information getting through. What this amounts to is that you could easily end up selling for a great deal less than you anticipated, or you may find out that what you paid for stock was way too high.
To avoid this crippling scenario, when online trading you must place your order as a limit order rather than a market order. This will limit the damage of buying or selling too high or low. By using a limit order you can buy and sell within a specific price frame. It gives you the security of being able to control the price of your online trading at least to some extent. While your limit order may not be executed due to the market rising or falling past your limit too quickly, at least you will protect yourself from purchasing too high and selling at a loss.
If you sell with a market order while trading online or by any other means, you have to take the price of the market, and that can skyrocket or tumble dramatically within a few minutes. And it could be that a delay in your order going through will cost you a great deal. Even if you choose an alternative method of trading such as fax or phone, rather than online trading, it doesn't mean that your order will necessarily go through any faster.
But before you even start thinking about online trading, contact your stockbroker and ask him for a preferred quick way of trading should the market news make you want to buy or sell in a hurry. Find out if it will cost you any more to do it another way besides online trading. When trading online you need to make sure that your order really did go through before you send out another one.
Some traders have ended up with more stock than they could afford because they assumed their first online trading order didn't go through for some reason and placed another one. Others have found that they sold more than they wanted to. Likewise when you cancel an online trading action, make sure it was actually cancelled. An electronic receipt is not proof that the job was done in real time. Ask your firm how to go about checking these points, otherwise you find yourself in hot water.
Online trading enables investors to manage, track and build their own stock market investment portfolio online.
