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Online Stock Trading

Online Stock Trading

Online stock trading: potential problems

Online stock trading is the latest bug to bite traders, investors and ordinary Internet surfers around the globe. These days it seems that every Tom , Dick and Harry is out to get their hands on an e-trade account of some size and class. What most trading websites and books fail to mention however, is that every high has its low. Outlined below are a few of the pitfalls of online stock trading and how best to avoid them.

Electronic meltdowns

It doesn't happen often, but when bugs do get into the electronic system, they send private investors into an absolute panic. ISPs let you down at the most inopportune moments and worms their way onto Internet trading sites and wreak havoc with market charts and figures such as when technological glitches brought the entire London Stock Exchange came to a halt on the 5 April 2000. In the event that you are greeted by share prices that you know are not just improbable but literally impossible, take a deep breath and keep your wits about you. Instead of making any rash decisions, leave things exactly as they are and check the figures at a later stage. Chances are good that correct figures will be posted relatively quickly.

Ticks!


Solving the ISP problem is also not as difficult as it may seem. If you are serious about trading, sign up with a minimum of two ISPs. If one service is experiencing glitches, you can always use another. The same goes for e-brokers. Opening an account with more than one online broker will ensure that if you cannot log onto the site of one for whatever reason, you can always buy shares through another.

Security

Trusting someone else to handle your hard-earned cash can be difficult and risky at the best of times and handing your money over via the Internet can be even more perilous. Individual traders lose hundreds of thousands unnecessarily through security scams every year by failing to take a few simple precautions. Some of the best ways to protect yourself from security scams include the following:

•  Use different passwords to access each account you have and never give out your password details to anyone. Also refrain from using obvious passwords such as your birthday or your middle name.

•  Thoroughly investigate the credentials of any online broker before opening up an account with them. Make sure that communication can be established with them via more than one channel. Call them up and ask questions about where they are based and which regulatory bodies they are registered with. Keep their phone numbers safe so that if you cannot reach them via electronic means you can still give them instructions by phone.

•  Once you are sure of the credentials of an e-broker, move on to ask them questions about which firewalls, encryption systems and types of data protection they use on their websites and whether or not they are insured. Forty bit standard encryption has now been replaced by 128 encryption which offers far more protection. Insist that your online broker provide you with proof of the lengths that he will go to protect your money. At the end of the day he should sell his services to you and not the other way round.

•  Set up restrictions on the type of transactions that can be made using your trading account. Limit possible transfers to the account of your online broker only. This will prevent your cash from being sent anywhere else in the unlikely event that someone manages to get into your Internet trading account.

•  Finally, always make sure that you log off every time that you access your trading account. It may sound like the most basic of things to remember, but you will be surprised at how many people take extensive security precautions and then leave their account details on screen while they go and make a cup of coffee. It is also advisable to ensure that your log in details are not stored in your Internet history files where anyone and everyone could locate them.