How To Trade Stocks Online Safely

How To Trade Stocks Online Safely

With the massive rise of Internet usage and the higher speed network access, a whole new range of services are now available on-line. Whether you are looking to rent a car, book a hotel or buy flights all of these are now easily available over the Internet. In fact for low cost airlines, internet ticket buying has become the major way to buy tickets. Now that a vast number of users are buying and selling services on-line, the question is, if you trade in stocks and shares then should you be using on-line trading for your investments and if so how do you do so safely?

In years gone by if you wanted to trade shares, you spoke to a broker, you told him what shares you wanted to buy or sell and at what price range. The broker would then go into the market, carry out the trade and send you a contract note confirming the deal you have completed. Some time later, you would then receive a share certificate for the shares you have bought and then it is your responsibility to keep your physical share certificate safe and secure.

With the rise of online trading it is now incredibly easy to buy and sell shares online, however just because it is easy does not mean that you should give up the good practices that you used for buying selling offline.

You still need to carry out good research on the companies whose shares you are looking to buy, you should put aside a specific budget for your purchase and you should set your limits on share movements. By limits what I mean is that you should know when you are going to sell your shares. You can set a loss of say -30%, this means that if your shares drop by this amount then you will sell the shares as soon as they drop 30%. You should also set a gain limit, you may decide that of your shares increase by 30% then you may sell 50% of them and take the gain. You need to set your own
limits, however you need to set these limits and adhere to them. It is a complete waste of your investment if you watch your share value disappear down to zero.

With on-line trading it is very easy to buy and that is why it is imperative that you set a budget. Shares are not a straightforward investment, there are risks associated with trading shares so you need to set your budget according to the level of risk you are willing to take. The worst thing
that can happen to you is to max out a credit card on buying a share that then plummets. Not only have you lost your money but you will also need to service the credit card debt that you incurred in making the investment, not a good place to be.

One of the big benefits of on-line trading is that you have access to an on-line trading account. This on-line account gives you the ability buy and sell shares on-line, removes the need for holding physical share certificates and you can view the value of your shares holdings on-line so that at any time you can see how your investments are doing.

You need to do your homework before you set up an on-line trading account. Check out the company you are going to trade on-line with. Where are they geographically based? If you live in America or the UK do you want to use an on-line trading company based outside of your country? What are the charges you will have to pay for either buying or selling shares? Another cost that is often overlooked is the quarterly charge for keeping your account open. If you are dealing in penny shares or low value investments then these costs can take quite a tranche of your investment, so do your homework before you open the account. Another area to be aware of is what happens if your selected on-line broker decides to move out of your investment area or sells their business to a new company? You may have selected an online broker who has low costs to buy and sell shares and no ongoing account quarterly charges. The new owner may have high charges for low value investments and a high ongoing quarterly charge maintaining the account. Before your account can be transferred to another company they must inform you and give you the opportunity to take your investments to another on-line broker. If you are notified of a change of ownership of your on-line trading company then do your due diligence on the new organisation. If you are not happy then move your account to a new on-line trading company of your choosing.

To trade on-line successfully, follow the guidelines above and you will not go wrong. On-line trading can be a very enjoyable pastime for amateur investors (or even professional investors) you just need to ensure you have a plan for your investments, monitor your plan, amend your plan as market conditions change and hopefully make successful investments that will generate great returns for you and your family over the long term.