5 Do’s and Dont’s of Online Stock Trading

Posted on: November 21st, 2012 by

Interest in online stock trading surged recently. It’s inevitable. The Internet has enabled people to trade from the comforts of their homes and offices. Companies invest on a variety of tools that facilitate investment transactions real-time, while more and more investors are attracted to using the web as their main financial tool, from gathering trading information to making investment decisions.

The ease and convenience of buying and selling shares through the Internet lead many to consider online stock trading as an option. Before you know it, everyone’s pointing their mouse button to complete a transaction.

True, you only need a trading account to get started but it’s going to led you nowhere if you don’t know how the basics of online trading works. Below are some of the do’s and dont’s of online stock trading that you must know.

(1) Do buy stocks only when you can afford the number of shares at the price you want to buy.

You’re tempted to buy more stocks overnight just because the web makes trading somewhat inexpensive and accessible. You buy even if you can’t afford it. Other traders often do the same thing. They borrow money just to buy more than they can pay for. If this practice is risky for experienced traders, it’s especially risky for newbies. Use only the money you have first before trying out riskier margin account options.

(2) Do research online brokers before entrusting them your money.

Trust is crucial when trading online since there’s no in-person communication involved. Your trust must be grounded on facts. Do research the best offers available before opening an account. There’s more than a dozen of them, many of which can cost you between $5 and $10 for fees per trade. If you’re always on the go, ask the company if there’s a mobile app available for stock buying.

(3) Don’t buy stock without first researching the company and its stock’s performance.

Find out more about the company behind the shares of that stock you wish to buy. When everybody’s eager to have a piece of the hottest stocks available, do better by confirming if these stocks are really worth your money. How does the company operate? How are their stocks performing? Don’t buy a single share if you can’t understand the company and its products.

(4)Don’t rely on message boards and online forums for making stock buying decisions.

There’s a deluge of information on what stocks to buy online. While there are those who only want to share information to benefit everyone, there’s no shortage of traders who post misleading data online. You have to consider the authority or reliability of your sources before taking their word for it.

(5) Do consider buying international stocks.

Online trading goes beyond borders. Being able to research companies outside the country and buy international stocks is one of its perks. Buying non-American stocks will increase your earning opportunities through global profits and limit your risks.

(6) Do keep information related to your trading account secure.

Even though Companies provide a secure platform for online traders, it’s best to take personal measures that will protect your identity and information against theft. Safeguard your login credentials, the email account through which you receive sensitive trading information, and other digital documents that thieves may use against you.

Winning the online trading game requires more than just money and cunning. Successful online traders invest time for research and decision-making and are able to work through their emotions regarding risks and losses. Start building your portfolio today while keeping in mind the do’s and dont’s of online stock trading.

  • Joseph Gordon

    Informational, especially to the naive. Keep going!