Welcome to company site
Top 10 Online Investing Tips
When You Invest
Online, Be Sure To:
1. Receive full disclosure, prior to opening your account, about the
alternatives for buying and selling securities and how to obtain
account information if you cannot access the firm’s Web site.
2. Understand that most
likely you are not linked directly to the market, and that the click
of your mouse does not instantly execute the trade.
3. Receive information from the firm to substantiate any advertised
claims concerning the ease and speed of online trading.
4. Receive information from the firm about significant Web site
outages, delays and other interruptions to securities trading and
account access.
5. Obtain information before trading about entering and canceling
orders (market, limit and stop loss), and the details and risks of
margin accounts (borrowing to buy stocks).
6. Determine whether you are receiving delayed or real-time stock
quotes and when your account information was last updated.
7. Review the firm’s privacy and Web site security policies and
whether your name may be used for mailing lists or other promotional
activities by the firm or any other party.
8. Receive clear information about sales commissions and fees and
conditions that apply to any advertised discount on commissions.
9. Know how to, and if necessary, contact a customer service
representative with your concerns and request prompt attention and
fair consideration.
10. Contact your state or provincial securities agency to (1) verify
the registration/licensing status and disciplinary history of the
online brokerage firm, or
(2) file a complaint, if appropriate.
Day Trading
awareness and risks
Here are some of the
facts that every investor should know about day trading:
Be prepared to suffer severe financial losses
Day
traders typically suffer severe financial losses in their first
months of trading, and many never graduate to profit-making
status.
Given
these outcomes, it's clear: day traders should only risk money they
can afford to lose. They should never use money they will need for
daily living expenses, retirement, take out a second mortgage, or
use their student loan money for day trading.
Day traders do not "invest"
Day traders sit in
front of computer screens and look for a stock that is either
moving up or down in value. They want to ride the momentum of
the stock and get out of the stock before it changes course.
They do not know for certain how the stock will move, they are
hoping that it will move in one direction, either up or down in
value. True day traders do not own any stocks overnight because
of the extreme risk that prices will change radically from one
day to the next, leading to large losses.
Day trading is an extremely stressful and expensive
full-time job
Day traders must watch the market continuously during the day
at their computer terminals. It's extremely difficult and
demands great concentration to watch dozens of ticker quotes and
price fluctuations to spot market trends. Day traders also have
high expenses, paying their firms large amounts in commissions,
for training, and for computers. Any day trader should know up
front how much they need to make to cover expenses and break
even.
Day traders depend heavily on borrowing money or buying
stocks on margin
Borrowing money to trade in stocks is always a risky
business. Day trading strategies demand using the leverage of
borrowed money to make profits. This is why many day traders
lose all their money and may end up in debt as well. Day traders
should understand how margin works, how much time they'll have
to meet a margin call, and the potential for getting in over
their heads.
Don't believe claims of easy profits
Don't believe
advertising claims that promise quick and sure profits from day
trading. Before you start trading with a firm, make sure you
know how many clients have lost money and how many have made
profits. If the firm does not know, or will not tell you, think
twice about the risks you take in the face of ignorance.
Watch out for "hot tips" and "expert advice" from
newsletters and websites catering to day traders
Some
websites have sought to profit from day traders by offering them
hot tips and stock picks for a fee. Once again, don't believe
any claims that trumpet the easy profits of day trading. Check
out these sources thoroughly and ask them if they have been paid
to make their recommendations.
Remember that "educational" seminars, classes, and books
about day trading may not be objective
Find out whether a
seminar speaker, an instructor teaching a class, or an author of
a publication about day trading stands to profit if you start
day trading.
Check out day trading firms with your state securities
regulator
Like all broker-dealers, day trading firms must
register with the SEC and the states in which they do business.
Confirm registration by calling your state securities regulator
and at the same time ask if the firm has a record of problems
with regulators or their customers. You can find the telephone
number for your state securities regulator in the government
section of your phone book or by calling the North American
Securities Administrators Association at (202) 737-0900. NASAA
also provides this information on its website at
www.nasaa.org/nasaa/abtnasaa/find_regulator.asp.
The Gambling Factor
SOME
INVESTORS MAY BE AT RISK FOR GAMBLING OUT OF CONTROL IN THE STOCK
MARKET AND OTHER FINANCIAL MARKETS :
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When people
gamble excessively, and their behavior negatively affects other
areas of their lives, gambling becomes a problem. Problem gambling
may occur in the traditional recreational forms of gambling, such
as sports betting, casinos, or the lottery. It can also be a
problem in any financial transaction, including the financial
markets, when money is risked in an attempt to gain more money.
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Most investors
clarify specific, long-term goals, such as college tuition for
their children, or economic security in retirement and choose
investment products that match their goals.
Trading in Fast
Moving Markets
The
price of some stocks, especially recent "hot" IPOs and
high tech stocks, can soar and drop suddenly. In these fast
markets when many investors want to trade at the same time and
prices change quickly, delays can develop across the board.
Executions and confirmations slow down, while reports of prices
lag behind actual prices. In these markets, investors can suffer
unexpected losses very quickly
Investors trading over the Internet
or online, who are used to instant access to their accounts
and near instantaneous executions of their trades,
especially need to understand how they can protect
themselves in fast-moving markets.
You can limit your losses in fast-moving
markets if you
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know what you are buying and
the risks of your investment; and
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know how trading changes during fast
markets and take additional steps to guard against the typical
problems investors face in these markets.
Online trading is quick and easy,
online investing takes time
With a click of mouse, you can buy
and sell stocks from more than 100 online brokers offering
executions as low as $5 per transaction. Although online trading
saves investors time and money, it does not take the homework
out of making investment decisions. You may be able to make a trade
in a nanosecond, but making wise investment decisions takes time.
Before you trade, know why you are buying or selling, and the risk
of your investment.
Set your price limits on
fast-moving stocks: market orders vs. limit orders
To avoid buying or selling a stock at a
price higher or lower than you wanted, you need to place a limit
order rather than a market order. A limit order is an
order to buy or sell a security at a specific price. A buy limit
order can only be executed at the limit price or lower, and a sell
limit order can only be executed at the limit price or higher. When
you place a market order, you can't control the price at which your
order will be filled.
For example, if you want to buy the stock
of a "hot" IPO that was initially offered at $9, but don't want to
end up paying more than $20 for the stock, you can place a limit
order to buy the stock at any price up to $20. By entering a limit
order rather than a market order, you will not be caught buying the
stock at $90 and then suffering immediate losses as the stock drops
later in the day or the weeks ahead.
Remember that your limit order may never be
executed because the market price may quickly surpass your limit
before your order can be filled. But by using a limit order you also
protect yourself from buying the stock at too high a price.
Online trading is not always
instantaneous
Investors may find that
technological "choke points" can slow or prevent their orders from
reaching an online firm. For example, problems can occur where:
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an investor's modem, computer,
or Internet Service Provider is slow or faulty;
a broker-dealer has inadequate
hardware or its Internet Service Provider is slow or delayed; or
traffic on the Internet is heavy,
slowing down overall usage.
A capacity problem or limitation at any of
these choke points can cause a delay or failure in an investor's
attempt to access an online firm's automated trading system.
Know your options for placing a
trade if you are unable to access your account online
Most online trading firms offer
alternatives for placing trades. These alternatives may include
touch-tone telephone trades, faxing your order, or doing it the
low-tech way--talking to a broker over the phone. Make sure you know
whether using these different options may increase your costs. And
remember, if you experience delays getting online, you may
experience similar delays when you turn to one of these
alternatives.
If you place an order, don't
assume it didn't go through
Some investors have mistakenly
assumed that their orders have not been executed and place another
order. They end up either owning twice as much stock as they could
afford or wanted, or with sell orders, selling stock they do not
own. Talk with your firm about how you should handle a situation
where you are unsure if your original order was executed.
If you cancel an order, make sure
the cancellation worked before placing another trade
When you cancel an online trade,
it is important to make sure that your original transaction was not
executed. Although you may receive an electronic receipt for the
cancellation, don't assume that that means the trade was canceled.
Orders can only be canceled if they have not been executed. Ask your
firm about how you should check to see if a cancellation order
actually worked.
If you purchase a security in a
cash account, you must pay for it before you can sell it
In a cash account, you must pay for the
purchase of a stock before you sell it. If you buy and sell a stock
before paying for it, you are freeriding, which violates the
credit extension provisions of the Federal Reserve Board. If you freeride, your broker must "freeze" your account for 90 days.
You can still trade during the freeze, but you must fully pay for
any purchase on the date you trade while the freeze is in effect.
You can avoid the freeze if you fully pay
for the stock within five days from the date of the purchase with
funds that do not come from the sale of the stock. You can always
ask your broker for an extension or waiver, but you may not get it.
If you trade on margin, your
broker can sell your securities without giving you a margin call
Now is the time to reread your margin
agreement and pay attention to the fine print. If your account has
fallen below the firm's maintenance margin requirement, your broker
has the legal right to sell your securities at any time without
consulting you first.
Some investors have been rudely surprised
that "margin calls" are a courtesy, not a requirement. Brokers are
not required to make margin calls to their customers.
Even when your broker offers you time to
put more cash or securities into your account to meet a margin call,
the broker can act without waiting for you to meet the call. In a
rapidly declining market your broker can sell your entire margin
account at a substantial loss to you, because the securities in the
account have declined in value.
No regulations require a trade to
be executed within a certain time
There are no Securities and Exchange Commission regulations that
require a trade to be executed within a set period of time. But if
firms advertise their speed of execution, they must not exaggerate
or fail to tell investors about the possibility of significant
delays.
More Information
For more information on online trading
problems, read former SEC Chairman Arthur Levitt's
message to investors,
and the National Association of Securities Dealers'
Notice to Members 99-11,
dealing with online trading.
Are you gambling? Or Investing?
The Connecticut Council on Problem Gambling
has a quiz you can take to help you decide if you have a problem,
and suggests where you can go for help.
What To Do If You Have a
Complaint
Act promptly. By law, you only have a limited time to take legal
action. Follow these steps to solve your problem:
1. Talk to your broker or online firm and
ask for an explanation. Take notes of the answers you receive.
2. If you are dissatisfied with the
response and believe that you have been treated unfairly, ask to
talk with the broker's branch manager. In the case of an online
firm, go directly to step number three.
3. If your are still dissatisfied, write to
the compliance department at the firm's main office. Explain your
problem clearly, and tell the firm how you want it resolved. Ask the
compliance office to respond to you in writing within 30 days.
4. If you're still dissatisfied, then send
a letter of complaint to the National Association of Securities
Dealers, your state securities administrator, or to the
Office of Investor Education and Assistance
at the SEC along with copies of the letters you've sent already to
the firm. |
