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Online Stock Trading: Freedom of Trade
I recall the first time I began to trade online. It was just prior to the tech bubble of the
late 1990’s and the Internet was still something new for most people. I easily purchased some now forgotten
company, and made a few dollars on the trade. It was so excitingly simple.
Flash forward a couple of years, during which, I made and lost my share of money. While still
ahead of the
game, that time was period of due dilegence as I learned about online stock trading. The freedom to trade online is great, but
it comes at a
cost. Let's take a look at the benefits and the trade offs of online stock trading.
The Benefits of Online Stock Trading
Low Commissions Rates - For most people, this is the number one benefit of investing online. For $9.99 or
less, you can buy and sell your favorite stock. Full service brokerage fees are normally over $100 per trade. If you
are an active trader, that starts to eat into your profits very rapidly. For every $10,000 you invest, for example,
you have to net 2% ($200 - $100 to buy and $100 to sell) just to break even.
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Quickly Act On Price Moves - Another great advantage of online stock trading is the ability
to quickly act on price moves. With the click of a couple of buttons, you are able to make your trade and lock in the price.
With a
full service brokerage, you’ll have to call first, use time explaining what and why you want to trade
that stock
and then wait to see what price your order was filled at. Odds are, you have missed the best entry point,
and paid 10x the commission for that privilege.
No Middle Men - You don't have to talk to anyone! There's no justifying why you want to
Make the trade, no having to have someone suggest that a stock might be too risky and try this one instead.
You call the shots. (You can always call your broker for advice, of course.)
Information At Your Fingertips - Online stock trading can bring valuable and real time
data that can help you decide when to buy and when to sell. Technical charts, real time prices and company
information can be easily accessed online.
The Drawbacks of Online Stock Trading
No Middle Men - While this is listed as a benefit, it is also a drawback. The majority of my losses
were from stocks that did not meet the parameters of my investment plan. Instead they were simply stocks
that were being pumped and hyped up which caught my attention. Too often, you end up buying such a stock that is
moving higher, and end up
having to sell at a loss. When you trade through a discount broker, there is no stopping you from making a
mistake. With a full service brokerage, your financial planner can help filter out the bad plays from the
smart ones. This advice alone can more than make up for commission fees.
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News About Online Stock Trading
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Investment Plans - Online stock trading doesn’t automatically come with an Investment Plan.
Why are you buying a particular stock? What is your exit plan if things don’t go right? Will you use
margin? And what about penny stocks? Will you buy them and if so, what percentage of your portfolio will be
at risk? A full service broker can help you create an investment plan. Trading outside of your risk
tolerance is one of the biggest risks your portfolio will face.
The best suggestion I can offer you is to look at a combination of both methods. Trade stocks
online, but talk to an investment planner, develop an investment and trading strategy first. While you may
have to pay for his time, your trading plan will help you to avoid unnecessary risk and loss of profit
when you are
online stock trading.
About the Author: Source for this article includes
1source4stocks.com. Providing traders with online
trading and investment startegies and tips.
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