Online Stock Trading Essential Tips, Tricks & Strategies. Congratulations On Getting This Book! Disclaimers

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1 Congratulations On Getting This Book! Disclaimers This book is supplied for information purposes only and the content inside does not constitute professional business advice. It is sold with the understanding that the authors/publishers/resellers are not engaged in giving any accounting, legal or other professional advice. If legal/accounting or any other professional assistance is required, the services of a professional should be used. The authors and publishers of this book have used every effort to ensure that it has been prepared in the best possible way however the authors & publisher make no representation or warranties with respect to the accuracy, applicability or completeness of this book s contents. They disclaim any warranties, merchantabilities or fitness for any particular purpose. The authors/publishers/resellers do not accept any responsibility for any liabilities resulting from the business decisions made by the purchasers of this book. Under no circumstances is this book responsible for any loss incurred by the reader at any time. Please remember that investing & trading is risky in nature. You should always seek professional help before taking any course of action or using any of the services/products listed here. 1

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4 INDEX The Basics Of Online Stock Trading 6 Types Of Online Stock Traders.7 How To Open Online Trading Accounts. 8 Understanding Online Trading..10 How Online Trading Education Can Make A Difference.12 The Basics Of Online Day Trading..14 How To Get Free Online Trading.16 How To Be A Successful Online Trader With A Trading System 18 What Do You Need From Your Online Trading Software System? 20 The Benefits Of Online Stock Market Trading.22 The Best Way To Learn Online 24 5 Tips On How To Find The Best Online Broker For You.26 What Basic Online Trading Service Do I Need?.28 All About Day Trading 30 The Three Types Of Online Trading Accounts Hour Online Trading (Canada) 34 Trading Penny Stocks Online..36 Some Myths Of Discount Online Stock Trading.38 Tips On Online Trading Comparison.40 The Value Of An Online Trading Course..42 The Real Cost Of Online Trading 44 4

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6 The Basics Of Online Stock Trading The wonder of the Internet is the opportunities it provides to people where previously there were none, or where the opportunity was severely restricted. Nowhere can this be exemplified more than in the world of stock trading with easy access to online stock trading, everyone now has the ability to make (or lose) vast sums of money from trading stock listed on one of the many stock exchanges around the world. What do you need to get started? In order to get started in the world of online stock trading you will need: access to a computer Internet connection money to invest to open an account with an online stock broker Aside from these, however, two additional vital elements that you ll need include (i) the discipline to know when to buy and sell stock, and (ii) an investment plan that matches your chosen stock purchases. Your investment strategy Unlike most stock brokers, online stock brokers rarely provide clients with advice on which stocks are buy/sell/hold recommendations. That said, some do offer off-line services for this. Consequently, if you are new to stock trading, you may wish to avail yourself of this service, otherwise you will need to research your stock buying/selling options yourself. If you are looking to research which stock to buy yourself, you should look at purchasing online stock trading software programs to help provide you with all the technical information - such as charts, real time prices, information sharing that you are going to need in order to make an informed investment decision. 6

7 Types of online stock traders Basically there are four types of online stock traders: (1) long-term traders who hold their shares for one or more years (2) medium-term traders who hold their stock anywhere from 1 month to six months (3) short-term traders who ordinarily hold stock for a week, but this can be up to one month (4) day traders who buy and sell stock in the same day. To start trading online Once you have opened your account with an online stock broker, deposited your money with them, picked the stock you want to buy, and the method of trading you are going to conduct, all you then need to do is to press your mouse a few times and the buy/sell order for that stock is complete. 7

8 How To Open An Online Trading Account With all the ease the Internet brings to the Information Age, opening an online trading account could not be made any easier than it already is. All you need to do is: Pick an online stock broker Essentially, online stock brokers come in two forms discount stock brokers, and discounted discount stock brokers. The primary difference between these two different types of online stock brokers is the commission they charge. While, in most cases, discount stock brokers charge commissions of between $7 and $10 per trade, it is possible to trade with discounted discount online stock brokers for commissions as low as $0.01 on the value of the trade (i.e. for a $100 trade, your commission is $1). Nonetheless, as most online stock brokers do not provide their clients with research information about which stock to buy and sell (which is one reason why their commissions can be so low), one of the most important aspects you have to consider before opening an online trading account is to find out whether or not they have instant real time access to stock trading prices. If not, and there is a time-lag between the quoted price and your buy/sell price, you could find that this ends up costing you far more than the commission would otherwise have cost. Therefore, be prepared to pay a higher commission for a more instantaneous stock quote price. Completing the online application Having decided on which online stock broker to open your trading account with, you then need to complete the online application form. In some cases, you will need to print off the online application form and send the hard copy to the broker as confirmation before you ll be allowed to trade online. 8

9 Joining Fees In addition to a per trade commission fee, some online stock brokers will charge you an introductory new member fee when opening your online trading account. However, with competition among online stock brokers to get your business being intense these days, others offer very attractive joining promotions. Given that you could one day possibly be trading large numbers of shares through the broker, while you should always consider the value of joining fees, it is advisable that you do not base your whole decision on whether to open an online trading account on this aspect alone. Deposit your money When opening the online trading account, you ll be instructed as to how to deposit your money with the broker. In some cases you can make your deposit via credit card, in others you ll need to make a physical payment into a bank account. Once you have completed the online application form and deposited your money, you ll be free to start trading. 9

10 Understanding Online Trading Recent changes in Internet technology affords regular people the opportunity to trade online without having to necessarily give their broker minimum buy/sell orders, nor do they have to pay large amounts of their trade profits to the broker in commission fees. However, with evidence showing that approximately 80 per. cent. of new online traders losing money from the offset, making sure you understand the fundamentals of online trading is essential. Trading strategy Put simply, your career online trading is going to be made or broken depending upon the trading strategy that you select. Chose wisely, your strategy will take advantage of the most opportune moments of when to buy and sell stock and, thus, will protect your profits. On the other hand, chose poorly and you could find yourself losing thousands, if not tens of thousands, of dollars in a few minutes. Here, your trading strategy is going to be dependent on which one (or even all) of the four types of online stock traders you are going to be, namely a: (1) long-term trader who keeps hold of his stock for one or more years (2) medium-term trader who keeps hold of his stock anywhere from 1 month to six months (3) a short-term trader who keeps hold of his stock anywhere from a week to a month (4) a day trader who buys and sells stock in the same day. Without over emphasising it, in most cases the longer you keep hold of the stock, the more chance there is that you will make a profit from your online trading. However, there are very real possibilities that you can make lots of profits day trading online if you know what you are doing. 10

11 Online trading software If nothing else, the Information Age should have shown you that having access to information at the right time will mean the difference between making a profit and making a loss. To assist you with all your online trading information needs, you should give serious consideration to purchasing an online stock trading software program, which can provide you with technical charts, real time stock prices and historical data about stock that you can then use to analyse whether or not to buy/sell the stock in question. Click Here For A Very Good Online Trading System Software! 11

12 How Online Trading Education Can Make A Difference Each online trader will trade in their own style, depending on whether they are going to be long-term, medium term, short-term or day traders. Making a decision on the type of trader you want to be, however, means you need to be aware of the trading education available to assist you. Stock charts Stock charts are used and analysed by an online trader in order to help him determine when to buy and sell stock. The main types of stock charts in use include: Line charts: which, as the name suggests, is a line on a chart connecting stock price over a period of time (can be minutes, hours, days, weeks, months, or even years). Bar charts: similar to line chart, however the information contained is the open, high, low and close price of the stock for one particular day. Reference chart charts the stocks price and trading volume and is used to plot where the stock price may go to. Candlestick charts the information contained in candlestick charts is the same as that you can find in bar charts; however, the display format is slightly different. Technical indicators As there name suggests, technical indicators are used by stock traders to track a stock s previous performance in the hope that it may forecast where the stock is going to go. This is done by making use of the stock charts previously mentioned, plus additional analytical indicators which might have a part to play. It should be noted that technical indicators can be very confusing if you are new to this type of information analysis. However, basic use is made of a: 12

13 Bollinger band: which was invented by John Bollinger and uses 3 band lines to track stock price fluctuations: an upper, centre and lower. The centreline is the moving average, while the upper and lower lines are twice the plus and minus standard deviations, respectively. Moving average: is a stock price/time series technical indicator. These can then be calculated over short, medium and long term periods, as the need requires, to determine where the stock may go and whether you should be looking to maintain a short, medium or longer term position. Candle stick trend reversal: using a candle stick chart, a candle stick trend reversal technical indicator will use the information in the chart to determine when to buy in and sell out of a stock. Keep in mind that there are other types of technical indicators in use, but the above are the primarily the types used by new online stock traders. Analysing the information Assuming you have correctly analysed the stock chart and technical indicator data, you should then be able to chart a stock s movements thereby hopefully ensuring that you remain one of the 20 per. cent. who make a profit from online trading from Day One. 13

14 The Basics To Online Day Trading Access to the Internet has brought with it a whole new group of interests and fads that previously simply were not available to most people. In the world of online stock trading, this has been the explosion in popularity of online day trading. So, what is online day trading all about? The basics of online day trading In almost all cases, online day trading means that you buy and sell the same stock on the same day. As a result, it is a fairly intense form of online trading and possibly the most risky type of stock trading for new traders to be involved in. The rules of online day trading Because of the nature of day trading there are basically three rules that all day traders need to follow if they want to stand any chance of making any money from online day trading: # 1: never keep a stock overnight: because of the high risks involved, day traders should never keep a position after markets have closed. Unless the day trader is absolutely convinced he has a breakout stock, he has to close all his positions at the end of the day. # 2: don t be afraid to cut and run: to stay in the game and stand any chance of making any money, day trader have to accept they may need to cut and run quickly if a stock is falling. Keep in mind, when you are day trading every minute makes a difference. # 3: never day trade penny stock: by nature the margins between bid/ask spreads in day trading are small. If you day trade stock worth less than $10- $15, you are not going to be making a profit. Trading strategy As with long, medium and short term online stock trading, online day trading requires the trader to makes use of stock trading charts and analytical indicators if they want to make sure they stay ahead of the game. Indeed, with online day trading a day trader needs to ensure that they make use of 14

15 every additional leverage they can if they wish to have any chance of making a profit at the end of the day. 15

16 How To Undertake Free Online Trading In most cases, as in the real world, trading stocks via the Internet using a broker will incur commission costs. Having said this, unlike trading through a broker in the real world, trading online usually incurs much smaller broker commission and, indeed, in some cases, you can even manage free online trading. Free trading using a broker The world of online stock trading is now extremely competitive. Consequently there are a large number of businesses that advertise their online Internet brokerage capabilities, but there are still only a limited amount of customers. To try and entice your business away from other online brokers, some brokers now offer a period of free trading online if you subscribe to their service. Thus, one way you can cut out brokerage charges, and trade free of brokers commissions, is to sign up for one of these services. Monthly trades Not strictly speaking a free trading services, but if you think you are going to do a large amount of online trades in any one given month, you may want to consider signing up for a brokerage house that offers you x amount of trades per month in return for you paying a monthly subscription fee to the brokerage. This way, if you calculate your monthly trades carefully, you can make sure that you get a certain number of trades each month for free. However, you do need to be careful, because if you then only exercise a small number of trades in any one given month, the monthly commission fee structure could back-fire on you and you ll end up paying a higher premium commission for your online trades. And finally 16

17 The world of online stock trading is growing rapidly every day. As such, very good benefit packages are available to new customers. You may find brokers sites that do not offer commission free trades, but do offer free use of their stock trading software. Conversely, you may find brokers sites that offer trial periods with no commission, but then charge for use of their stock trading software. What you then need to determine is which service will better meet your long-term needs. Finally, to find the best overall package to suit your needs, you need to do your homework and research the services being offered. In other words, you should not be picking the first brokerage service you see. 17

18 How To Be A Successful Online Stock Trader With An Online Trading System Whether you are trading stock using a stock broker in the real world or on the Internet, the difference a couple of seconds makes really can be the difference between you making vast sums of money, or losing all you have! As a result, if you really want to be a successful online stock trader, you ll need to ensure you not only have an online trading system, but that you also stick to it. Type of investor Before you can decide upon your trading system, you need to decide what kind of stock investor you wish to be. By and large, the longer you decide to invest in a stock, the easier your trading system should be. That s not to say, however, that you don t need to keep a careful eye on your investments, merely that you may not need to adapt technical analytical investment systems that short-term and day traders may incorporate into their trading strategy. Analytical indicators Having decided which type of investor you wish to be, the next important step is to understand analytical indicators (also known as technical indicators). If you are new to online stock trading, a first look at an explanation of analytical indicators may be scary. However, keep in mind that these systems have been tried and tested by professional investors over many years, so it is worth learning how to use them. To assist you, the main types of analytical indicators in use today are: Bollinger band: named after its inventor (John Bollinger), this system uses 3 band-lines to track stock price fluctuations: an upper, centre and lower, which should help you to determine whether the stock price is rising, falling, or staying flat. 18

19 Candle stick trend reversal: uses a chart by the same name to help you determine whether you should be buying, selling or holding stock. Moving average: uses a stock price/time series technical indicator to determine whether to buy or sell a stock. Finally Regardless of whether you are going to be a day trader, short-term investor, medium term investor, or long-term investor, each of these different types of trading systems can help you decide what the best online stock investment strategy is for you. 19

20 What Do You Need From Your Online Trading Software? If you are new to online stock trading then the thought of what you need, and should expect, from your online trading software can be very scary. To help you, the following are some pointers you should be looking out for: Stock Charts If you are going to stand any chance of having a successful career as an online stock trader, you ll need to make sure that your software has the capability of producing stock charts. The most common types of stock charts in use are: Line charts: This is simply a line connecting stock price over a period of time. Bar charts: a little more complex in that the information not only consists of stock price movements over a period of time, but will also include the opening, high, low and closing price of the stock for one particular day, from which you can construct a bar chart. Reference chart: which track both the stock price and trading volume, which is then used to plot where the stock price should go. Candlestick charts: uses the same information that bar charts do, but displays the information differently. Technical indicators Along with your stock chart, your software should also have the capability to use the information you input to produce what are known as technical indicators. In short, there are currently 8 different types of basic technical indicators that traders use each of them having their own good points, as well as bad. The type of technical indicator you incorporate into your trading strategy will depend on the type of online stock trader you wish to be. Nonetheless, it is best practice to ensure that you have all, or as many, of the different types of technical indicators made available as part of your software package. 20

21 Real time stock ticker-tape price The importance of making sure you have real time stock ticker-tape prices made available to you as part of your trading software cannot be over emphasised. Suffice to say that if you have a delayed stock price showing on your screen, you may well have missed your window of opportunity to sell at maximum profit. This is so even if the delay is only a matter of a couple of minutes. As a result, always make sure that any trading software package you have, whether free or purchased, relays the stock trading price in real time. 21

22 The Benefits Of Online Stock Market Trading Regardless of whether you re an experienced stock trader or new to trading stock, you may never have experienced the joy of stock trading online. If that s the case, and you are currently thinking of trading online, you may want to know what all the fuss is about! To help you understand, the following are just some of the benefits of online stock market trading: Commissions One of the biggest, if not the biggest, benefit of trading stocks online is the reduced stock broker commissions you ll be expected to pay. In most cases, when trading stock online, brokers will charge you a commission of between $7 and $10 per trade. However, if you trade in sufficiently large enough volume, it is possible for you to negotiate with your broker so that these brokers fees can be as low as $0.01 of the transaction value. Control When you use a broker in the real world you may find that your broker will not agree to execute a trade, believing your decision to buy or sell the stock in question is flawed. When you trade stock online this is no longer a problem, your broker has no input as to when you buy and sell stock you do! Portfolio In the real world some brokers will not buy certain stock for example, some penny stocks. This may limit the stock you are able to have as part of your investment portfolio. However, when you trade online, subject to availability, you can trade in any stock - on any stock exchange - you want! Information With the use of computer software programs, you can use stock charts, technical indicators and real time stock prices to help you make the investment decision you want to make, when you want to make it. Time One of the essential elements about trading stock is the time it takes to execute the trade, as this can mean the difference between making a profit and making a loss. In the real world you have to phone your broker and ask 22

23 him to sell/buy the stock. The broker then phones the trader, who gives the broker the price. The broker than tells you the price and you either agree to buy/sell or not to. If you agree to buy/sell, the trader then phones the order through to the trader. Online you push your mouse over a cursor and press buy/sell. A much quicker sell! Volume Assuming you are happy paying the commission, you can trade as large or small as you want over the Internet. In the real world, most brokers require a minimum buy/sell that is out of the reach of most individual traders. Finally All in all, online stock trading is about you. It provides you with the opportunity to trade in stocks without having to pay large commissions while keeping control over your investment decisions. 23

24 The Best Way To Learn Online Trading If you are new to the world of online trading, you no doubt want to learn the best way to trade before you commence your online trading career. So if, here are some easy tips on the best way to learn online trading. Simulation trading Before losing any of your hard earned money in the real world of online trading, possibly the best thing that you can do is to spend some time shadowing the market by way of trading online using simulation program. Online simulation stock trading programs allow you all the thrills and excitement of trading in the real world, only no real stocks are being trade thus, no real money can be lost. Learning in the artificial world of simulation online stock trading still allows use full or limited access to online trading software programs, so you can get use to the look and feel of the program before you have to venture out into the real world of trading online. Small trading If you crave the excitement and thrill of a real stock trade, but do not feel that you are sufficiently proficient in stock trading to bet the house on a trade, then your best bet is to do some small trading first. Fortunately, one of the main benefits of online trading is the fact that no buy or sell order is too small. As such, you can learn to stock trade by giving small orders until the day comes when you feel sufficiently well trained at online stock trading to move on to bigger trades. Shadow trade Another great way to learn how to stock trade online to shadow what other are doing in the market. You can do this by learning to use stock charts, such as the bar chart, which provide you information about the opening price, closing price, high and low trade prices, and volume of stock traded. Keep in mind, however, that unless you know what you are doing shadow trading can lose 24

25 you money as easily as it can make you money so start small. That said, this is a fantastic way to learn the value of stock charts and stock indicators. 25

26 5 Tips On How To Find The Best Online Trading Broker Unfortunately, the recent boom in popularity of trading via the Internet has led to a vast increase in the number of web-sites offering online brokerage services. Therefore, to make sure you find the best online trading broker, you need to be asking yourself the following 5 questions: 1. Does the broker charge commission? Before you even ask the question, the answer to this question is likely going to be yes. However, two things you should keep in mind: (1) not all brokers structure their commission fees in the same way; and (2) because a broker advertises the cheapest commission does not necessarily mean that they are the right broker for you. What you need to make sure happens is that you get a good combination between finding a broker who will offer you a service tailored for your needs and one that charges you a fair commission. For example, if you are not experienced in online stock trading, you may wish to consult with brokers in the real world get their advice on where the market is going. If that s the case, expect to be paying more in commissions. 2. Does your broker offer real time stock prices? This is crucial, if the broker is not offering real time stock price quotes than it is probably better that you look elsewhere. Knowing what price stock are trading at, at the exact moment you exercise a buy/sell order is a fundamental need if you want to stay ahead in the game of online trading. So either make sure you have access to real trading prices some other way, or make sure your broker gives you this. 3. Does your broker provide you with online trading software? Nearly all online brokers offer their customers access to some form of online trading software these days. The big question is: do you have to pay for it? In some cases you do not, but the commission charged in a trade is higher. In most cases you will have to pay for the software program, but the monthly subscription should be less than a single trade commission and easily worth the money. 26

27 4. What s the web-site layout like? An online broker s window to the world is his web-site. As such, if the website looks professional, there s a good chance that the broker s service is going to be professional. On the other hand, if the web-site looks clustered and messy, the chances are that this is the service you ll be getting. 5. Is there a helpline/support service? As with nearly every service being offered on the Internet these days, you need to ensure that any online broker you use provides you with access to a helpline/support service. Indeed, the support offered should really be twofold: (1) technical support, in case you have any problems with your hardware and/or software program that you need to be fixed asap; and (2) commercial support, in case you want to know whether or not your broker has ever heard of a particular stock and what the chances are of it earning you some money. 27

28 What Basic Online Trading Service Do I Need? When you use the services of a stock trader in the real world, you usually find you have to pay high commissions in return for investment advice. With online trading, however, the services you need your stock trader to provide are different. To this end, the following are some of the basic online trading services you need in order to have some chance at a successful trading career: Immediate access to market Before you sign any service agreement with your online stock broker, you need to make sure that the services being provided includes an immediate access to market. One of the greatest benefits of Internet stock trading is the fact that a trade can be executed instantaneously. If, however, you find that once you instruct your broker to buy/sell a stock, there is a time-lag while your broker instructs a third party to buy/sell the stock, this facet is lost. Technical support The very nature of trading via the Internet necessitates technical equipment, such as hardware and software programs. It could, potentially, be a major disaster to you if not having access to the Internet (because your Internet server was down) meant you could not make a trade. As such, you should ensure that your online broker offers you some form of technical support in the case of a major problem. Moreover, where possible, you should be able to instruct your broker to make a trade via the telephone, using a secure password if need be. Analytical support Many Internet stock brokers do not offer their clients access to analytical support. By this, we mean that it is up to you to research which stock you wish to invest in and how you wish your investment portfolio to look. However, some online borders do offer this type of service, so if you are new to Internet stock trading, or if you do not have access to an independent financial advisor, you may well benefit from the provision of this additional service. 28

29 Exchanges You may well find that your chosen stock investment portfolio includes stocks listed on several different bourses. However, some online brokers only offer access to one specific stock exchange. In such a case, unless you want to complicate your stock trading by having accounts with several different brokers, you may wish to opt for an online broker that offers you access to a number of stock exchanges around the world. In any event, before you sign any service agreement with an online stock broker, make sure you read the agreement carefully to determine exactly what services you are going to be offered and how much it is going to cost you. 29

30 All About Day Trading: An Online Trading Review If you are interested in new phenomenon of day trading, the following is a brief online trading review: Overview Basically you can day trade online in one (or both) of two ways: 1. over the Internet using an online broker s web-site; 2. using a special piece of software known as Direct Access Trading. Online broker s web-site As with all forms of online stock trading, day trading by way of using an online broker s web-site provides you access, via the Internet, to day trade. In order to execute a buy/sell trade, you need to have access to the broker s web-site and you need to be logged-in to your account. Provided this is done, you are free to trade. Direct Access Trading Unlike day trading with an online stock broker, when you day trade using a direct access trading program you are making use of a special piece of software that instructs a trader on the floor of your chosen exchange to execute the trade. As no broker is used, the system is known as direct access trading. Online broker vs. Direct Access Trading Before you can decide whether or not you should be day trading using an online broker or the Direct Access Trading system, you need to think about how much (in money and volume) day trading you expect to do. The reason why is because there are certain benefits to both systems. For example, Direct Access Trading is faster than using the services of an online broker. However, using an online broker is considerably cheaper and, provided you are always logged-in to your account, is not particularly slow. That said, with day trading, the difference between making a profit and loss on the day can come down to a matter of seconds. 30

31 The second aspect you need to give careful consideration to when making your decision as to whether you should be day trading using an online broker or the Direct Access Trading system is the level of commissions you ll be paying. If you are intending to be a large trader, typically the commissions using the Direct Access Trading system are cheaper. However, as the provision of Direct Access Trading software also comes with a monthly subscription fee, for those not intending to exercise large volumes of trades, this can be an expensive way to day trade. Finally Whether you decide to use the services of an online broker or a Direct Access Trading system provider, with the speed in which day trades need to be executed either is more preferable than using the services of a conventional broker. 31

32 The Three Types Of Online Trading Accounts (UK) In the UK today, both specialist online stock brokers and conventional stock brokers offer customers the chance to open online accounts. However, before you can start trading shares in the UK, you need to make sure you have selected the right type of account from the three types of online trading accounts available: 1. The nominee stock account Without doubt, the nominee account is the most common type of online stock trading account used in the UK. The structure of a nominee account is such that once you buy stock no stock certificate is issued to you in person. Rather, your online stock broker will hold the stock in a nominee account on your behalf. As such, assuming you use a normal nominee account structure, the company register in whose stock you hold will not show you as owning any stock, but, rather, will show the name of your broker as being the stockholder. He then holds the stock on your behalf, in a trust relationship, until such time as you instruct him to sell the stock. If this type of structure does not suit you, you can arrange for your broker to open a ring-fenced nominee account. In such a case, the company will be informed of the name of the person who owns the stock and your name will show in the share register. If you intend being a long-term investor, the latter of these two types of structure may suit you better. On the other hand, if you intend to only day trade, the former would more likely suit your needs. Either way, you will not receive a stock certificate with this type of account. 2. The certified stock account If you open a certified stock account, then your online stock broker is required to send you the stock certificate for your safe-keeping, once you have bought shares. Likewise, once you decide to sell the stock, you must send the stock certificate to your stock broker. 32

33 3. A Crest sponsored stock account The governing regulatory authority of the stock exchange in the UK is the London Stock Exchange (LSE). The Crest sponsored stock account is the system promoted by the LSE. Crest is the stock dealing system used by LSE and it is possible to open an account with Crest to hold your stock certificates on your behalf. Once you instruct Crest to buy or sell stock, your account details in the Crest system are automatically updated. As such, the upside is that you do not have to use the services of an online stock broker. The downside, however, is that you will be charged an annual fee for this service and, depending on the type of investor you see yourself as being, it may not be worth your while as this annual fee could easily eat away at any profit you make on your share dealings during the course of the year. Once you have decided on what type of online stock broking account you want to open in the UK, provided you have access to the Internet you are free to set out trading. 33

34 24-Hour Online Trading (Canada) One of the greatest assets the Internet has is the fact that it never closes. In short, access to the Internet is immediate, it s available 24-hours a day, and it s available 7 days a week. Why, then, would you want to limit the you re your money can be working for you by opening an Internet stock trading account that only gives you access to a stock market that is open for a mere 7 or 8 hours day? With a 24-hour online trading Canada account, this need not be a concern. Overview Stock trading 24-hours a day in Canada can be achieved by use of an account that literally follows the markets as the open around the world, allowing you to trade online in each geographic area during the time the stock exchanges are open there. Asia-Pacific Unlike other online brokers, most Canadian brokers provider their clients with access to the markets in Japan, Hong Kong, Singapore and Australia. Europe Markets normally accessible to Canadian online traders include the markets in London, Paris and the DAX. Additional markets, in Rome and Scandinavia for example, may also be accessible. Americas Fortunately, nearly all providers of online stock brokerage services in Canada offer clients access to both Canadian and US markets. 34

35 Make Your Money Work For You Even While You Sleep! Because of the vast range of markets that Canadian online stock brokers make available to their clients, it is quite easy to make sure that your money is working for you even when your are asleep by diversifying your investment portfolio across a numbers of different stock markets. Moreover, in most cases buy/sell instructions for markets outside of Canada will not incur any higher commissions and/or fees than instructions to buy/sell stock listed on Canada s stock exchanges. Be careful though Finally, a number of stock markets around the world may trade slightly different to the manner in which markets in North America do. This is especially the case if you decide to trade in emerging markets in Asia or Eastern Europe. As such, if you decide to use your Canadian online stock brokerage account to trade in these emerging and/or different types of stock markets, please make sure that you have researched these markets at least as well as you did when you were doing your homework on your domestic markets. 35

36 Trading Penny Stocks Online The growth of online stock trading has, in part, been due to a growth in the number of people who wish to trade in penny stock; but, as the margin for profit is small, they also do not want to pay high brokerage commissions. In such a case, the investor has found the exact service s/he is looking for with a penny stock online stock trading company. What are penny stock? Generally, penny stock is stock in companies: (1) where the value of the stock being traded is less than $5 per share; and (2) the value of the company whose stock is being traded is less than $4 million. Having said this, a true definition of penny stock does not exist and so some investors/brokers believe the value of a penny stock should not exceed $1 per share. Why would you want to trade in penny stock? Although there are a number of inherent problems with trading stock with a face value as low as that of penny stock, one of the principal reasons why they are so popular is because, in most cases, the penny stock being traded is in a new company. As a result, although you could be trading a penny stock today, you may well be a stockholder in the Microsoft of tomorrow. Keep in mind that less than 20 per. cent. of the Fortune 100 companies today were Fortune 100 companies 50 years ago! How do you open a penny stock account? If you are interested in trading penny stock you need to find an online broker who is willing to provide this service. As all penny stock are traded at Over The Counter service centres (OTCs), not all online brokers are willing to do this. Once you have found an Internet broker willing to take your buy/sell order for penny stock, all you need to do then is to open your online stock broking account in exactly the same way as you do with any other trading account by completing the online application form. 36

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38 Some Myths Of Discount Online Stock Trading If you are currently looking to invest in stocks via the Internet, one reoccurring theme you ll no doubt have come across is the number of discount online stock trading services being offered. If so, be careful: some of these discount offers may not be as good as you were led to believe: Set-up fees Previously a more common way of charging you extra in return for offering discounted commission fees, the charging of set-up fees for opening your online stock brokering account is now a less common trait. However, do keep in mind that previously this was a very common method used by Internet brokers of getting extra money out of their customers. Annual fees Still fairly commonly used today, a number of discounted Internet brokers provide discounted commissions to their customers while at the same time charging them an annual fee for operating their account. However, add the annual fee charge to the commissions they pay over the year, and suddenly the customer is not getting quiet the discounted service they originally thought they were for stock trading online. Third party costs Some internet brokers use the services of third party traders to execute online stock trade orders. In some cases, the third party will take a fee from the trade before passing on the balance to the requesting broker. However, as a customer of the broker, and not the trader, you may not be made aware of the fact that there has been a third party fee levied against your trade. It is, therefore, vital that you ensure your discounted brokerage fee is the only fee being imposed on the trade and that there will not be any additional fees. Interest on balance Let s say you exercise a sell order without exercising any corresponding buy order. The net result of this may be that you have excess cash on your account. Rather than depositing this to a bank account you may elect to keep 38

39 this on the account until you next decide to buy stock. The question is, are you being paid interest while the money sits on deposit with the broker? If not, has the broker offered to sweep the balance to a money market account so that you can be earning something during this time?...and finally Keep in mind that although you may be getting discounted commission fees: if you are also losing the opportunity to make money, is it really worth it? 39

40 Tips On Online Trading Comparison Today there are literally thousands of brokerage companies around the world offering Internet stock trading services. With such a maze of service providers, how do you navigate the minefield to ensure you pick the best? The answer is to keep the following tips on online trading comparison in mind: What is it you want? Before you can set your mind to the task of selecting a broker you first need to ask yourself what kind of services you want or expect from your designated broker. For example, do you only want to have the ability to trade via the Internet, or would you also like to be able to trade over the phone? Likewise, are you looking for a broker that will provide you with tips on which stocks to buy, or are you happy doing the research by yourself? Keep in mind that one very important question you need to be asking yourself is what you expect to get from your online stock trading software. Once you have made a list of what you consider your bare minimum requirements you then need to make a second list which sets out what your additional needs are, but which you may be willing to be more lenient on. For example, is the commission you are going to pay extremely important to you, or are you willing to pay a higher commission in exchange for more facilities being made available to you? Comparison table Having determined what your basic needs are and what your preference are, you can then draw up a table with the issues along the top and the names of online brokers down the side. Square these off into a chart and then start to visit the websites of each of the brokers on your chart. Once you reach a new website, review the terms and conditions of service and see how may of the services being offered by that broker meet with your needs. Once you have visited all of the brokers on your chart you ll have a nice comparison table of the services being offered by Internet stock brokers. 40

41 Making a decision If, having collected all the information you need in your comparison chart, you still find that there are several brokers offering services that meet some, but not all, of your needs; then your decision may well need to come down to a weighted index chart. To this you know need to decide the exact priority of your online brokerage needs. Once you have done that you should then be able to see how many of your most important needs each of the brokers meet. Once that is complete you should have some idea of which online stock broker is going to be the best at meeting all of your Internet trading requirements. 41

42 The Value Of An Online Trading Course Ask yourself a question: what is a bid price? If you do not know the answer to this question, then it is highly advisable that you consider taking an online trading course before you start your career as a stock trader. Moreover, even if you do know the answer to the question, with the amount of jargon and technical analysis involved in online stock trading, and with rapid developments in this area resulting in changes all the time, you may still want to consider either taking a course for newbies or, even, a refresher course. What to expect the basics Stock trading is full of jargon. There s the bid price, the ask price, the spread, stock charts, candle stick charts, a Bollinger band, moving averages, and even Candle stick trend reversals. And that s just some of the jargon you ll come across. Taking a course means you ll learn what all of these basic terms mean so that you ll not be thrown off balance if someone mentions some obscure phrase to you. Technical training Most stock traders today make use of very highly evolved technical indicators to help them determine whether or not they should be buying, selling or holding their stock. At first glance these technical indicators can be very offputting. However, with only a small amount of technical training it won't be too long before you know how to make the most of this extremely useful information. Reading charts Having access to information is crucial if you are going to be a successful trader/investor. However, there is a vast difference between having data and having information. In the case of latter, not only do you have the data you need, but you also know how to apply that data so that it becomes useful information. One way to do this is to have the ability/skill to read stock charts. Nevertheless, without adequate training, you ll not be able to develop these skills and, in all likelihood, you ll not be maximising your profit potential. 42

43 How to become a successful investor Finally, if you select the right online training course, you should also receive some very helpful hints, from people with lots of previous experience, on how to become a successful Internet stock trader. 43