Your career as an online stock trader is fraught with danger that is easy to avoid once you know how. Apart from the risk associated with every trade, you have to guard against a few hazards that crop up every week, and I’m not referring to reading the data or charts wrongly.
There are the little matters of your broker and your trading platform, and the tendency of traders to take them for granted. If you’re new to trading then to you these are usually simply “brokerage services”, i.e. the means by which you exercise your skills to make profits. They’re represented by nothing more than an inter-active web site you use to make and amend your trades, and perhaps to have access to reports, charts, and other information to help you make trading decisions.
Remember, though, that your broker is often on the opposite side of the equation to you as a trader. A regular broker, as opposed to a spread betting or fixed odds bookmaker, makes his money by charging commissions on your trades. These are frequently on a fixed price basis per trade. For example, when you purchase a covered warrant, it will be a contract that expires at some point in the future , usually the next few months. A commission will be payable when you first buy it, and also later on if you wish to “roll it over”, i.e. renew it for another period.
These warrants are issued at regular intervals on a huge range of stocks, indices, foreign exchange pairings and commodities. If it’s September and you consider, for example, that soy beans are set to increase sharply in price by March then you might want to purchase a call warrant that expires in March or April. Societe Generale, or some such finance house, may well have issued such a warrant, but your broker may not necessarily be offering it.
When you check your broker’s site, or even telephone him, he may offer you a contract that expires in, say, December. If you take that then in December he’ll give you the option to roll it over to March, giving rise to another commission charge that you have to pay him. So be prepared in such a case to ask specifically for the expiry date you want so as to avoid unnecessary charges.
The trading platform provided by most online brokers is invariably a minor miracle of technology and should normally present no problems for you as a trader. You should be able to see the prices in real time and to make your trade in just a few clicks of the mouse. The distinction between buying and selling should be clear, and you should be able to see your cash balance and portfolio value on the same screen, or at most with just one click.
As to the stock trading charts and indicators provided by brokers, these are usually basic and not sufficiently adaptable or wide-ranging for the serious trader. One of the new generation of software programs for traders to help them trade profitably is a must.
Philip Gegan
