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Stories of Interest
- Inside Scaramucci’s Extreme Loyalty to Trump – William Cohan
- Who President Trump Can Pardon, and Who He Can’t
- Ex-UBS Compliance Officer, Day Trader Deny Insider Trading
- Private Equity’s Big Bets on Financial Tech
- Trump Reportedly Floats Making Rudy Giuliani Attorney General
- Mastercard Wins Dismissal of $18 Billion Class Action Suit
- Jailed Schroders Trader Also to Pay $456K for His 'Criminal Lifestyle'
- Raymond Lucia, Ex-Radio Host Asks U.S. Top Court to Rule On Administrative Law Judges
- As Trump Administration Circles the Drain, Anthony Scaramucci Finally Lands West Wing Job
- Internal Power Struggle Rattles Guggenheim Partners
- Why Most People Will Never Be Successful
- Top Deutsche Bank Trader Leaves After Risky Bets Led to $60Mn Loss
- Bank of America Picks Dublin as EU Hub Post Brexit
- E*Trade Rises 4% as Q2 Earnings Beat Estimates
- I Scream, You Scream, FINRA Screams For Ice Cream ... or ... FINRA Deep-Freezes Broker
- Senate Panel OK's David Kautter, Trump Pick for Top Treasury Tax Job
- OJ Simpson Granted Parole After 9 Years in Prison
- PayPal to Partner with JPMorgan
- BNY Mellon Beats on Q2 Earnings as Revenues Improve
- I Scream, You Scream, FINRA Screams for Ice Cream ... or ... FINRA Deep-Freezes a Broker
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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.