Peak IT, Pitfalls Of Internet Trading

william romsay williamromsay at
Fri Jan 25 05:52:43 PST 2008

Peak IT,  Pitfalls Of Internet Trading

The Vast Internet Trading Market

"Pitfalls Of Internet Trading" The internet has brought the speed, power,
and wealth of possibilities of internet trading right into our living rooms.
The online trading craze has brought the power of day trading to a whole new
level and never before has so much access and opportunity been possible.

The trend caught on like wildfire and spread throughout fledgling internet
communities and grew into a basic of acceptable trading strategy within a
few short years. The protocol for day trading had changed, and while there
was a small percentage of die hard brokerage buyers, most people grew to
love the advancements. They loved the advancements so much that a lot of
people never slowed down to discover the pitfalls of internet trading until
after they had lost large sums of money.

Internet trading had developed wealth for some people in a very short amount
of time while for others who leaped before looking it proved to be their
greatest downfall. Just like everything else in history, should you choose
to not learn from it then you are condemned to repeat it. Learning the
"pitfalls of internet trading" from the mistake of others is like paying
attention in history class.

Fast Trades "Pitfalls Of Internet Trading"

The internet has brought about an era of lightening fast trades. The speed
of which trades can be executed is actually misleading. Some people believe
that because the speed of executed trades has dramatically increased that
there is a magical formula that means your mouse cursor now has the power to
buy and sell stocks on an immediate basis. This is not an accurate overview
of the speed of executed trades.

Your mouse clicks to an order that is still connected to a broker. The speed
of executed trades hasn?t really increased, it?s the speed in which we
communicate with brokers that has increased. The broker receives you order
immediately and then he runs about doing his job which is finding you the
absolute best price for your order in the shortest amount of time possible.
There is still time for the market to fluctuate during this time, sometimes
even drastically depending on what you?re trading.

To help prevent error related to the speed of executed trades, it is
recommended that you use a limit order to protect yourself from loss while
your broker is running about doing his job. A limit order limits the cost
that your broker is permitted to buy your stock so that any fluctuations on
the market can not compensate for your original decision.

Low Commissions "Pitfalls Of Internet Trading"

The internet revolution has also changed how much we compensate our brokers.
We have ultimately made their jobs easier and thus an internet broker can
expect his commissions to decline. At the same time he is capable of
executing more trades on his clients? behalf so he has the opportunity to
make more money than before.

What some people fail to realize is that there is still a commission. Since
you are still requesting a broker fulfill your needs he still gets his
share. The low commission structure of online brokering does contribute to
the benefits of online trading, but beware when choosing a broker that the
low commission structure doesn?t interfere with the broker?s ability to
provide a good service for you.

Not all brokers were happy with the notion of a lowered commission structure
for online trades. Just like anyone else trying to make a living, brokers
are busy chasing the big fish and often leave the little fish hanging out to
dry. While it is human nature to attempt to earn the most money possible for
your time, the lower commission structure of internet trading has led to
poorer service for the small investor in some firms.

Other firms however, seem to understand there is great potential for
remarkable profits even with the lower commission structure. Where else can
you pause once an hour, gather up several small investor trades, spend ten
minutes executing the trades and then return to the larger investors? needs.
These small commissions can add thousand of dollars to a weekly commission

Specialty Brokers "Pitfalls Of Internet Trading"

Once upon a time, a brokerage firm could choose its specialty and sometimes
even land higher commissions based on their trading specialty. Online
trading has led to remarkable competition among firms and no longer do day
traders really utilize a specialty. Most investors are looking for the
convenience of executing all their trades with one broker instead of
carrying different accounts with various brokers for various trades.

Now there are numerous commodities brokers executing forex trades and forex
traders who are trying to trade penny stocks. In the beginning of the
internet revolution of online trading, specialty brokers who were trading in
everything without being properly equipped were costing their clients quite
a bit of money. Over the years training has become much more intensive and
most brokers are no longer interested in carrying a specialty. Use caution
when finding an internet broker. While a specialty broker may very well come
in handy if the only thing you are interested in trading are penny stocks,
however over time most investors want at least a little diversity in their

Specialty brokers still have their place among internet trading. They can be
a wonderful asset to a company who want their clients? special needs
addressed by an expert. Most trading firms do not restrict their specialty
brokers to just their specialty.

There are a few firms who carry only specialty brokers. In these firms, the
specialty brokers are restricted to their specialty and any orders that come
in are divided up among the specialty brokers in order to maximize their
talents. This idea is quite effective although these firms lose time in
their rate of execution.

Brokerage Firms "Pitfalls Of Internet Trading"

Choosing a brokerage firm does not have to be an insurmountable achievement.
A little bit of homework can determine whether an online brokerage firm can
handle your needs. Asking a few basic questions can go a long way in
determining whether an online brokerage firm is what you are looking for.

We already covered the pros and cons of specialty brokers. Understanding
your own financial goals will help to determine whether you are interested
in trading with a specialty broker or not. If the only stock that interests
you is commodities then you may want to choose a specialty broker. If you
want something more diversified then you probably want to go with a firm
that requires a more rounded education from their brokers.

When comparing commission rates remember that the lowest is not always the
best. While there is something to be said for you get what you pay for, find
out what it is you are getting when you are paying. Are the commissions flat
rates or are they based on the size of your trade? A struggling firm may
suddenly have a commission ?sale? and drop their commissions to nothing for
a period of time. Use your own discretion before deciding this is a good
opportunity. Look at their trading history. Is this just a promotion to get
them over a hump or have they been continuously struggling?

Read the fine print when it comes to the firm?s policy on executing enter
and cancel orders. A bad policy is bound to cost you money. Read the fine
print on the firm?s policies on broker mistakes, web site crashes, and of
course, margin accounts.

How accurate is the information you are receiving either via e-mail or
ticker bar? Are the stocks quotes in real time or do they have a delay? Does
the broker send blanket e-mail notifications (most do) or are they tailored
to the type of investments you are interested in?

The basic answers to these questions can determine whether a firm is right
for you. Remember that you will most likely never talk to an actual person
so all of this information should be readily available right on the website.
Online trading does not offer the personal touch of a traditional brokerage
firm. Don?t expect phone calls from your broker to discuss your portfolio.
If you are uncomfortable being a faceless number instead of a unique
investor, online trading is not something you are likely to be satisfied

Online trading has its distinct advantages and disadvantages. Most people
who transition from a tradition broker to the convenience and speed of
online trading are quite happy with the principle even if they find
themselves dissatisfied with the firm. You can eliminate the disappointing
firm experience by doing your share of due diligence before proceeding.

If you are still hunting more in depth information regarding online trading
I recommend the website for unbiased reporting on online investing.
Onlinetradingideas provides accurate and unsolicited information regarding
online trading and navigating the world of online finance. The website is
dedicated to educating the beginning and average investor in order to create
personal success and financial health. Onlinetradingideas is a valuable
resource in your journey towards personal investing independence. Be aware
of the "Pitfalls Of Internet Trading"and avoide them if you can AT ANY COST.

 Bobby Ryatt, If you enjoyed reading this articles, then go to my website
where I have lots more on the subject. You will have free to use material
and tips, No more guessing or taking risks after this.

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