Online Trading Wisdom

Educate Yourself
The best way to avoid the pitfalls of online investing is to learn all you can about the process and take responsibility for your own results. The online environment offers excellent tools for investing and often lowers the costs of an investment program. In exchange, it requires that you take an active role in managing your investments and in protecting yourself and your money from scam artists. If you are ready for that challenge, online investing might be an option for you.

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Avoid Risky Techniques
Online trading gives you many of the advantages previously enjoyed by professional investors, including unprecedented access to information, analytical tools and other execution capabilities. These enhanced resources may appeal to people who want to trade on short-term movements in stock prices. This strategy is extremely risky and requires a serious, ongoing time commitment. Day trading, in particular, requires constant monitoring of the markets, often to the exclusion of other activities. Investors are wise to stay away from thinly traded, little-known stocks sold strictly on the basis of online hype.

Unlike blue chips or stocks with a substantial number of shares available, the price of low-volume stocks can be moved through relatively small strategic trades. Even if the hyped stock starts to edge upward, it may simply be part of the manipulation scheme.

If you did not already employ strategies such as market timing or momentum investing, do not start now merely because you have started investing electronically. Online capabilities might simplify - but should not fundamentally change - the way you invest.