The ability to invest online using the speed and power of the Internet is a great feature for stock investors. However, you need to be aware of certain aspects that solely relate to trading on the Internet. Here are a few things that you need to know which are extra important when you buy and sell stocks online.
1. Although online transactions can be made in a split-second, you need to invest a lot of time in making your investment decisions. Split-second transactions are great, but split-second decisions can be very dangerous., even when you buy funds that seem safe.
You could lose a lot of money by making hasty decisions and misusing the speed of the Internet. So take time to do your home work, and then use the speed of the Internet to your advantage.
2. Technology is not infallible, and there can be times when you may not be able to access your account over the Internet. You need to be aware of the other ways through which you can place a trade. Y
ou might be able to use fax, touch-tone phone, or by simply call your broker on the phone. You also need to know whether these alternate modes of trading will incur extra charges.
3. You should not assume that online trading is always instantaneous. There could be time delays in transactions, and they may not happen at the amount that you had assumed when you made the trade. In order to avoid buying stocks at higher prices than intended or selling them at lower prices than what you wish to sell them for, you should place a limit order on your transactions.
When you place a limit order, you are instructing the broker that they should buy or sell a stock only at your specified price. Even when the prices shoot up or drop rapidly, your securities will be bought or sold only at the price that you had fixed. This will prevent you from incurring huge losses due to delays in transactions. The same is valid when you buy ETF funds.
4. Learn how to check if your order has gone through. Many investors assume that the order has not gone through and make a subsequent order, only to find out later that they had ordered twice.
Learn from your brokerage on how to know when you have successfully placed and executed an order. Keep this in mind as well when you buy mutual funds.
5. Likewise, when you cancel a trade online, learn how to check if the cancel order really worked. You need to understand that a cancellation will be successful only if the original trade had not been executed yet.
So, check with your firm on how these aspects work in your trading platform.
These are some of the crucial aspects you need to be aware of which are extra important when you buy and sell stocks online.