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A Guide To Online Investing - Part 3

Thinking of online stock market investment? Before jumping on the web and signing up for an online trading account, you need to review the TOP EIGHT HOT TIPS in this guide to online investing. Follow this guide to online investing, it will ensure you minimize risks in your online stock market investing.

Hot Tip # 1: Online doesn't mean on Time!

No matter how quick your internet connection is, you need to understand that your home PC is not linked directly to the stock market. You are not on the trading floor in real time. When you buy and sell, it takes time for the online broker to execute your commands and delays can happen due to volume of trade, speed of connection and other unforeseen technical factors.

Hot Tip # 2: Work out Real Time vs. Delayed Information.

When you research information to make an online stock market investment decision, you need to distinguish between real time vs. old delayed information. If you are constantly trading in a volatile market, information that was made available a few hours ago could be considered redundant. Make sure your information sites are real time (or close to real time) if you are playing the short term trading game.

Hot Tip # 3: Know your Online Broker - Intimately!

Fees, guaranteed benefits, ease and speed of online trading, reputation and reliability are all vital knowledge you need to know about your online broker. Do a complete due diligence on your potential brokers. Start by contacting your local securities division to check that the online broker is registered and read up on their operating history which may reveal complaints and major issues. Blogs, e-zines and forums could also be useful in checking the history of brokers according to past/current online traders.

Hot Tip # 4: Have it in Writing.

Once you've chosen a reputable online broker, ask for confirmation of fees/commission by writing (email, fax or snail mail) on a company letter head. There may be terms and conditions on their website - make sure you read through the fine print. Print off the T&C and keep the paper copy safe somewhere. Do not be afraid of asking questions of the broker if you do not understand or have an issue over any T&C.

Hot Tip # 5: Learn the Order System.

Once you have chosen a broker - learn the order system intimately. You can place orders on simple market orders (buy/sell immediately at market price) or limit orders (buy/sell at set prices). To minimize risks, you will want to set a stop loss (also called a stop order) which instructs an online broker to sell (or buy) a stock once the price reaches a set point. It reduces the need for you to keep monitoring the stock market movements all the time. Once you get more advanced, there are many other specific conditional orders you can set - sell stop order, buy stop order, stock limit order, trailing stop order and others. Your online broker should have a platform on their website where you can sign in and place these orders easily. There should be also electronic tutorials to help you through the process.

Hot Tip # 6: Know how to pull out of Trading.

Even if you set stop loss orders, there are times when you need to cancel orders quickly and pull out of trading all together. Know whether you can do this quickly online as it could mean a different of a big profit or loss. It is absolutely vital that you can reach your online broker in different ways - i.e. if your internet connection fails or the broker website crashes which means you can't sign in to cancel, you need to know what other ways you can reach the broker to execute a cancellation order. Know the customer service points - telephone, fax, alternative email or even a retail point.

Hot Tip # 7: Understand Margin Account Trading.

When you sign up to an online broker, you maybe offered a margin account where you can borrow money to invest in the stock market. Know that this account is like a bank loan in every way and you need to be able to return the money if the account is in deficit. If the stocks you buy on a margin account drops in value - you are in deficit and liable for the amount that you owe. Before you sign up to a margin account - understand the risks!

Hot Tip # 8: Your Privacy at Risk?

Know your online broker's privacy policy. Ideally you should have researched this before signing up but beware privacy policies (and other terms and conditions) are subject to change if the broker provides notice. Signing up to an online stock market investment account means handing over a lot of personal information (including address, credit card, bank account information) and you need to ensure that the online broker will not pass your information to marketers or that they have a good privacy record.

Follow these top eight top tips to online stock market investing and you will minimize any potential risks in your online investing. Good trading to you!