Online Trading Warnings
Plan to deal with volatile markets
Sometimes stock prices move so fast that orders to buy or sell lag behind the fluctuations in price. This can create volatility in the market, and the prices you see on your computer screen may not accurately reflect the prices at which shares currently are trading.
Whether conducting simple transactions or actively trading a portfolio, online investors should exercise caution. Online investors also should understand how a brokerage firm executes trade orders and should be familiar with the distinctions between market orders, limit orders and stop orders.
Anticipate technical difficulties
When conducting securities trades on a brokerage firm's online website, technical problems may arise that prevent you from accessing the site or that cause significant delays. Discuss with your firm in advance what alternatives are available to you during those times. Always be prepared to use a live broker or a touch-tone telephone system to place orders and get quotes.
Consider the source of information
Some investors use the Internet to conduct relatively simple transactions such as buying and selling stocks, bonds and mutual funds. Others use the Internet to monitor the market, research companies, trade information with other investors and actively trade their portfolios. It can offer simple access to a wealth of reliable information including business and financial publications, annual reports, SEC filings and securities regulators.
However, not all online information is reliable. Online con artists make claims about visiting companies, inspecting mining operations and having personal conversations with company officials.
Keep in mind that you may not be able to verify who is making these claims, much less whether the information is true. Also, it is extremely unlikely that genuine "insider information" would be broadcast online. Make sure your information comes from a reliable source, and when in doubt, confirm it with a source you know is trustworthy. Don't forget to first make sure that an investment opportunity and the person promoting it are properly registered with the Montana Securities Department in the State Auditor's Office.