Utilizing Online Stock Trading Services
Advances in computers and communication technology have liberated traders from the traditional broker/investor relationship, with advantages and disadvantages. Online stock trading services allow unprecedented access and ease of use, with historically low cost per trade. What is absent, however, is the personal touch of a live broker with investment recommendations and experience.
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Instructions
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Open an account. Compare the offers of several online brokers and choose one to utilize. See Resources below for several examples. Opening an account usually involves completing a contract, and, as most online stock trading services offer individual, joint, corporate, trust and club accounts, filling out the correct contract is crucial. Online and over-the-phone assistance is usually available.
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Fund the account. Once the account is applied for and approved, it must be funded. This is usually done with a check or wire transfer, although cash deposits may be possible at some branch locations. Be aware that all investing and stock trading involves risk of loss, so only use funds that can be lost.
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Learn the platform and trade actively. Almost all online brokers offer tutorials for using their trading platforms, though, if preferred, trades can be placed over the phone with a live broker, usually at additional cost. Most also offer special services or pricing for accounts that reach a certain activity threshold.
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Meet the branch manager. Occasionally, trades will be executed incorrectly--don't hesitate to bring these and other customer service issues to the attention of the branch manager as soon as possible. Fostering a personal relationship will help ensure the highest level of service. On the other hand, avoid placing trades in person or over the phone, as this usually incurs an additional charge.
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Use charts. Most online stock trading service provide their own charting services, but if not, many private charting platforms are available. Charts give a unique visual perspective on price action over time and, using special techniques of analysis, can yield useful trading entry and exits points.
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Request additional permissions. Special requests and contracts are required for trading options, shorting stocks and trading on margin. Shorting is a high-risk trade where the broker permits the sale of stock that's not in the account under the assumption it will eventually be purchased, ideally at a lower price. Such a transaction requires a margin agreement outlining the terms of what is essentially a loan from the broker backed by collateral in the account.
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Tips & Warnings
Details to consider when comparing stock trading services include account minimums and other opening requirements, execution of trades, interest rate on cash, FDIC coverage, and branch locations.
When completing a contract, a social security number or tax ID is usually required, as well as verification of a bank account and physical address, so have these handy.
It may be helpful to practice trading with simulators before deploying real capital with a stock trading service.
Do not depend on stock trading for short-term income. While making money is obviously the goal, needing profits to meet near-term commitments tends to produce bad investment decisions.
Access to an online broker is subject to Internet conditions. High-volume trading days can lead to delayed quotes or partial execution of orders.
Sensitive personal information is at greater risk of theft when recorded online.
Using an online broker involves significant risk and the possibility of financial loss. Whenever possible, contact an investment professional before acting on any advice.
