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- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
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- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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NEWSLETTERS & ALERTS
4 Myths About Online Trading – FINRA Investor Alert
These days many investors are trading online, whether through the Internet or other electronic means, such as a mobile app. In most cases, that means accessing a brokerage firm's website or mobile device app and entering an order to buy or sell, rather than speaking directly with a broker in person or by phone.
This may sound pretty straight forward, but there continues to be some common misconceptions about online trading. Here are four myths in need of busting.
MYTH #1: When you make a trade online, you bypass the brokerage firm completely. All trades involve a brokerage firm even if, as is generally the case these days, a stockbroker is not used to help directly with the trade. Although customers may enter orders online through an app or the firm's website, they generally do not have direct access to the securities markets, so it is still up to a brokerage firm to execute their trades.
MYTH #2: You can’t speak to a live person when you have an online trading account. Though services may vary, most online trading firms have phone centers or live chat features where customers can speak directly to a customer service representative, or receive a call back. A phone number is often provided in the event customers enter an incorrect trade or have questions about activity in their accounts, including questions about margin requirements. That said, brokerage firms that offer online services only may not provide investor advice or recommendations over the phone or face-to-face, which is why it is important to do your homework before you invest, and decide what type of financial services provider is right for you.
MYTH #3: Online orders are always executed immediately. Orders entered electronically are usually executed quickly. However, there is no assurance that will always be the case, particularly if you place an order with a price limit or time restriction. Investors should be aware that high trading volumes can cause delays in executions. For investors placing market orders, you should be aware that market volatility and delays in executions due to trading volume can result in trade executions at prices significantly different from the quoted price of the security at the time the order was entered.
Moreover, all online trading firms aren’t created equal: different firms offer different levels of access and system sophistication. One more thing—the speed of your Wi-Fi or Internet connection may also effect order transmittal and execution.
MYTH #4: Online trading is less risky than trading through a full-service broker. There is risk of loss associated with investing in securities regardless of the method used. New investors need to understand key investment concepts, their own risk tolerance and their investment goals before venturing into the market. Online investors should do their own research, and be skeptical of stock advice and tips provided in chat rooms or bulletin boards. Also, for some online investors, there is a temptation to "overtrade" by trading too frequently or impulsively without considering their investment goals or risk tolerance. Overtrading can effect investment performance, raise trading costs, and complicate your tax situation.