How to Trade Securities Online

Online trading depends on the same principles and skills as off-line trading, so use them to guide your thinking and actions.

Difficulty: Moderate

Instructions

Things You'll Need:

• Internet Access
• Brokerage Accounts
• Personal Organizers
• Computers

1. Have a long, serious and brutally honest talk with yourself (and perhaps a trusted friend) about the kind of personality you have, making sure that you are disciplined and goal-oriented.

2. Be sure you have at least $5,000 in easily available funds.

3. Set limits to your trading activity, such as number of trades and/or dollar amount of commission, for an initial three-month period.

4. Research at least three online brokerage services and read all of the 'terms and conditions' statements concerning trading accounts.

5. Open an account with the brokerage service you choose for the minimum amount necessary to trade.

6. Write down all of your trading (buys and sells) immediately after execution: date, time and price per share of the actual purchase; quantity; all security or position identification (symbol, CUSIP number). Use these records for tax preparation and save them in case you are audited.

7. Evaluate your performance at the end of the three months. What were your gains and losses? Emotional reaction to the process? Did you stick to your goals?

Tips & Warnings

• Free research online is available from many of the big investment firms. Avoid fee-for-service features of your account unless they will directly improve your ability to trade intelligently.
• All laws regarding securities trading apply to trading online.
• Technical service calls and broker advice over the phone are probably not free - check first.
• Never trade on advice from chat rooms, message boards or any other questionable sources.
• Trade only with your savings until you are experienced. Only then consider borrowing on margin.

on 11/22/2005 Some online brokers don't furnish you with records of past purchases and sales and expect you to keep track of your own records. That's why it's important for you to be organized and file your records as you get them. This is really important at tax time.

on 11/22/2005 Since trading online can be so easy, it's possible to take risks you wouldn't normally take or even become addicted. Keeping records so you know where you stand at all times can help you be realistic and help prevent this.