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A Guide To Online Investing - Part 2

Online stock market investing promises the world! Access to 24/7 trading from all around the world, means you have the world's stocks at your finger tips. There is also online information aplenty - company reports, stock analysis, free charting services, software to pick hot stocks are just a mouse click away. Not to mention informative blogs and forums to lend an invisible hand to your online stock market investment. You would think with all these benefits, everyone with access to a computer connected online would be investing money online - and living off it! Throw caution to the online investment wind. Online stock market investing is NOT a get rich scheme. There are negative consequences to the online investing revolution. Information overload is rife. How to decide between hundreds of brokers, thousands of trading software platforms and tens of thousands of company reports and financial data is a BIG question. As with any popular internet revolution, there are plenty of scams online to rip off unwary online investors. From unregistered brokers, overpriced online investing education programs to false stock tips charged at high prices - it is easy to get scammed. What more, once you start online stock market investing, the ease and quickness trading can make people susceptible to greed and fear - otherwise known as throwing good trading principles out of the window!

Be Principled!

Just because you are online doesn't mean losses become virtual reality too. It is important to remember that good stock market investing principle (on or offline) means you should follow these four investment principles

  • 1. Be in it for the long haul. Good companies with sound management will keep growing so their stocks should be kept for capital appreciation. Think 5 to 10 years, not 5 to 10 days. Use online investing resources to find out about companies performance and records.
  • 2. Dividends and income. If you want to make regular dividend and income from online investing - pick stocks that have a record of providing good dividends consistently. Read up online about company profit forecasts.
  • 3. Capital preservation. If you are investing money online or making an online stock market investment, you still need to budget for cash flow. Regulation on stock market trading means that stocks bought must be paid for in full in cash before you can sell it. NO free-riding allowed! Make sure you have the cash flow to meet your online investment style. This may mean keep some money in a liquid account which you can access quickly and efficiently.
  • 4. Speculation. If you are going to play the short-term game, be ready and informed. Short selling, margin trades and options could be lucrative short term strategies for a quick profit. But remember the risks are higher and ask yourself - can you meet the obligations if things go pear shaped?

Online Trading System

Once you are firm about your online investing principles, it's time to establish your own trading system. Now if you have picked a reliable online brokerage with a good e-trading platform, you should be able to set online trading conditions with electronic tools provided. This includes entry/exit conditions (what prices you are prepared to buy and sell stocks at) and risk control (limits where you stop online and no longer participate in the market). It is VITAL that you establish these online trading rules to minimize risk and not let your trading be consumed by greed and fear.

Trading Software

Finding good trading software will help you greatly in setting your online trading system. Any decent trading software allows you to input data and generate information including trading trends for certain time frames, help you forecast stock price peaks and lows with accuracy, generate buy/sell signals according to your level of risk aversion and control your cash flow by determining cash requirements according to your online investing strategy. Read up on popular blogs, forums and editorials to determine the pros and cons of any trading software. Most will allow you to try the software for free. Also take advantage of money back guarantees if you find that your choice doesn't live up to it its promise. Most of all, remember that good trading software is like a good horse - it needs a good jockey to run a good race! You are the jockey who is inputting data and setting your online trading goals. So be informed and well researched. And all the online investment experts will tell you - expect the unexpected and be prepared for the unexpected.