Internet Share TradingPosted on August 29th, 2010 William No comments
With traditional stock trading, the average investor would tell his broker what he wanted and the broker would place the actual trade. As you can imagine, this was slow, inconvenient, and expensive. Internet share trading is a great advancement because it allows you to arrange your own trades quickly, easily, and cheaply. It can also be dangerous for that same reason: the ease of trading can tempt people to make too many trades for their own good. While there are certainly people who get rich off of day trading, many more lose money - so be careful!
It's important to realize that being able to place your own trades does not put you on an equal footing with professionals. The pros have super-fast, dedicated computer systems that can make decisions almost instantaneously and are located close to, and in some cases even in the same room as, the market computers that actually process the trades. Additionally, the professionals probably spend more time studying the market and have access to more information than you do.
That said, if you're an expert on one particular segment of the market, internet share trading can be a great way to leverage that knowledge into a few extra dollars. Additionally, even if you just want to buy and hold a few stocks, skipping the broker can save you a significant amount in fees; while going through a stockbroker will cost you can average of $45-$60 per trade in fees, internet share trading drops that to $3-$10, with many places even offering a fixed number of free trades each month. While we discourage you from trying to time the market, it can also be very frustrating to place an order and then wait several days for it to go through while you watch your profit evaporate; with internet share trading, your order is placed within seconds. You also can trade at any time, rather than just during your broker's business hours.
If you want to get started. what we recommend is becoming familiar with one segment of the market, if you're not already, and looking for companies that are undervalued within that space. A doctor, for instance, might believe that a new medical device that will soon come to market is going to revolutionize the industry in ways that have not been properly priced into the current share price of the device manufacturer; this gives him a chance to invest in an undervalued company. It may be worth playing an online stock market game just to get a feel for how the whole thing works, but if you want to jump right in, there are a number of companies that make it easy for you. Just remember that you can lose your entire investment if the stock tanks; when you're just starting, we recommend placing no more than 5% of your portfolio into individual stocks. Naturally, this percentage can grow as you become more experienced.
Picking the right stock can be an extremely profitable experience, increasing your investment many times over within a matter of months. If you're interested in doing internet share trading, take your time to do it right and reap the rewards.
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