The ability to buy and sell stocks online and avoid expensive brokers is a luxury that today’s traders enjoy. However, the task of searching and comparing stock market services online can seem overwhelming. InfoFAQ has compiled some important frequently asked questions to help simplify your online stock trading experience or find the right brokerage firm.
Frequently Asked Questions About Buying Stock Market Services Online
What are the advantages of using an online stock brokerage service?
The main advantage that online brokers provide is that they will execute stock trades for you at a lower price than a traditional broker will.
Besides price for trades, how else do the online brokers benefit consumers?
The good online brokerage services will have websites that provide lots of information about trading stocks and how to use their systems. Many will also publish research online, and let you look up stock quotes in real time.
Are there any hidden fees that I need to look out for in online brokerages?
Most online brokerages will attract your business with the promise of low trade fees. But some have an ‘inactivity fee’ that they will charge to your account if you have not traded in 3 months or so. This fee is usually only $25 every 3 months. Just be aware that traditional brokerages do not have inactivity fees.
I want to get into a good stock I like. Is it easier to place a market order or a limit order?
A market order means that you are telling the stock traders who handle that stock to buy you a certain amount of that stock, no matter what the price. These stock middle men are called market makers and the stock brokerage company you use has no control over what these outsiders do. What they do is to run your trade in little pieces, and move up the price after each trade, so that you usually pay more than the price you have been watching the stock trade at. A market order is like sending out an invitation to them to take some of your money. Always use a limit order where you set the maximum price you want to buy at. You can also sell using a limit order.
If I use an online trading system, will my trade be made immediately?
Online trading systems are not entirely automatic, and there are typically delays in getting your trades executed, especially on busy days. In cases where you need to get into or out of a stock fast, you may be better off in calling the brokerage. Most online brokerages will still let you do phone trades, although the fees may be slightly higher on those trades.
What are the best online brokerages to use?
While most all federally licensed online stock brokerages will be safe to use, one thing to consider is the company’s proximity to your own location. If you can find an online broker that is also located in your area, you can save time if you need to drop off or pick up a check, since you should be able to visit their location. Many online brokerages also operate regular office operations as well.
Can I make a lot of money trading stocks online?
Certainly it is possible to make a lot of money trading online, since you can more actively see what is happening in the markets and place your own orders online. But be aware that many people are lured into this area by the prospects of making a good profit fast, only to wind up losing money. It can be a little like going to Las Vegas and betting on horses. You really need to educate yourself and use some advanced methodology to manage your own online portfolio.
What is day trading of stocks online?
Day Trading is where you buy and sell the same stock on the same day. The theory is that you track a trading pattern in a certain stock or type of stock, and you attempt to buy and sell the stock to profit on these short term price fluctuations. Many online brokerages will promote Day Trading as a means to make a lot of money fast, but beware. You can also lose a lot of money very fast.
Are my stock market investments made online also insured against loss like my bank account?
Unlike USA bank accounts, stock market accounts are not guaranteed by the FDIC. These are high-risk investments and should not be used to hold your life savings. Typically an investor would put certain percentages of their money into stocks, bonds, savings, real estate, etc. A diversified portfolio is the rule for both growth and security.
If I have a dispute with an online stock brokerage, who is the governing authority if I need to report them?
All stock brokerages are licensed by the SEC, the Securities and Exchange Commission. Most companies will not want to be investigated by the SEC, and so you can use this knowledge to press your case with them if you have a dispute. But stock market losses are usually yours to keep.
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