In response to the number of complaints regarding online trading, the Securities and Exchange Commission offers these tips for online investors. (Visit www.sec.gov/consumer/onlitips.htm for more.)
- Online trading is quick and easy, but online investing takes time. Before you trade, know why you are buying or selling, and the risk of your investment.
- Set a price limit on fast-moving stocks: To avoid buying or selling a stock at a price higher or lower than you wanted, place a limit order (an order to buy or sell at or below a specific price) rather than a market order.
- Know your options if you are unable to access your account online. Most online trading firms offer alternatives for placing trades. These options may include touch-tone telephone trades, faxing your order or doing it the low-tech way - talking to a broker over the phone.
- If you place an order, don't assume it didn't go through. Some investors have mistakenly assumed that their orders have not been executed and place another order, ending up with twice as much stock as they wanted, or with sell orders, selling stock they did not own. Ask how you should handle a situation in which you are unsure if your original order was executed.
- If you cancel an order, confirm the cancellation before placing another trade. Ask how you should verify that a cancellation order was properly processed.
- If you trade on margin, your broker can sell your securities without giving you a margin call. Pay attention to the fine print in your margin agreement. If you fall below the firm's maintenance margin requirement, your broker has the right to sell your securities without consulting you first.
- No regulations require a trade to be executed within a certain time. But if firms advertise their speed of execution, they must not exaggerate or fail to tell investors about the possibility of significant delays.
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