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Online Trading's Agony & Ecstasy
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Look Faq |THE LOVE AFFAIR between American investors and their online brokers
is growing deeper and more intense. In the first six months of this year,
3.8 million new accounts were opened, and online
trading surged 87% compared
with a year ago.
But are the lovers happy? Introduce some stress into the relationship--such
as a 25% plunge in the Nasdaq composite in one week's time last spring--and
tensions build, rifts emerge and spats break out. Then calls go unanswered
and e-mails don't get the courtesy of a reply. Trigger-happy brokers dump
stocks of leveraged clients without notification. Orders don't get executed
because computer systems crash. In a nutshell, that's the state of online-brokerage
service these days--great when the going is good, quarrelsome and bittersweet
when it isn't.
In our annual survey of online brokerages, we've sought to take the
emotion out of your task of deciding which firm merits your affection.
Fifteen brokerages are ranked on eight key measures, ranging from commissions
to the quality of research they offer to the savvy of their telephone reps
(not to mention the time it takes to reach one of them). And guess what?
After all our poking and prodding, the unmistakable conclusion is that
they are, on the whole, more reliable and offer you a better deal than
they did just a year ago.
The good and bad
MOREOVER, Kiplinger's exclusive execution data, based on information
provided by brokerages as well as on actual trades, shows that online brokers
aren't marking up the prices of stocks to investors nearly as much as they
were a year ago. Most Web sites are richer and offer more research.
Keynote Systems, which measures Web-site performance, uses high-speed
Internet connections to log on to each online-brokerage site automatically
40 times an hour, get a quote, and take every step but the final one of
making a trade. Keynote reports that the average time to complete these
operations is about half what it was a year ago--14 seconds versus 26 seconds.
Web sites are more reliable, too. Keynote successfully completes its brokerage
tests 96% of the time, versus 88% a year ago.
But the sad fact is that too often when you need it most--when the stock
market is roiled and indexes start to tumble--your online brokerage still
fails you. Last spring, for example, a stock owned by Paul Bedoe fell so
low that he worried he would violate TD Waterhouse's margin requirement
for investors who borrow money. So on a Monday he mailed Waterhouse a check
to provide additional collateral. He needn't have bothered. Without so
much as a courtesy call beforehand, Waterhouse sold $26,000 of the stock
that Monday and another $16,000 on Wednesday. "If I were a less stable
person, I would have started up one of my tractors and driven right through
their window," says Bedoe, 43, who owns a security-alarm firm in Big Bear,
Cal.
Bedoe is hardly alone in his rage at his online broker. Nor was the
handling of margin accounts during that abrupt market plunge the only thing
that drove customers through the roof. Many investors had difficulty making
trades because Web sites crashed or were glacially slow. Clients with problems
or questions were kept on perpetual hold. E-mails weren't answered. Fidelity
Investments, Charles Schwab and Waterhouse sent apologies for the delays.
Fidelity wrote: "You may not have experienced the standard of service you've
come to expect from us."
Although last spring was particularly bad, many investors continue to
experience problems getting brokers to pick up a phone. "I have had to
wait 30 minutes just to get someone on the phone" at Waterhouse, says William
Aston, 51, who works in Saudi Arabia and pays $2.70 for every minute he's
kept on hold.
"The customer-service departments of many firms are pathetic," says
Mark Maddox, an Indianapolis lawyer who specializes in broker-arbitration
cases. In volatile trading periods, you may wait all evening for a voice
to come on the other end of the telephone.
Even NASD Regulation, the brokerage industry's self-policing arm, can't
get some brokers' attention. It fined E*Trade $20,000 last May for failing
to respond "in a timely fashion" to 17 separate requests for information
stemming from customer complaints a year earlier.
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Online trading: Paperless and convenient
Have you wanted to buy or sell a stock urgently, but could not reach
your broker? Or, has your well-meaning broker disregarded a buy/sell order
because he felt it was against your best interests, and you ended up losing?
Such instances can really frustrate your efforts to make money in a bullish
market. There is a way out, though — online
trading.
Trading via the Internet is not new, but poor connectivity and security
issues have often acted as deterrents for those considering the option.
You do need to be comfortable with Internet transactions if you want
to trade online. You will have to live with the possibility of a security
breach. But you can minimise this risk by not placing orders online at
an Internet café or even at office, for that matter. As for poor
connectivity, the growing use of broadband could substantially improve
the experience of trading online.
Why trade online?
Several broking houses now offer online
trading facilities. You can
trade online with e-brokerages such as ICICIDirect, kotakstreet, IndiaBulls,
India Infoline's 5paisa.com and HDFC Securities.
If you are already comfortable trading with your regular broker, here
are a few reasons why you may consider switching to trading online, or
at least as another avenue of trading.
An obvious advantage of online trading is that your transactions
would be virtually paperless. Your onilne
trading account would be linked to your demat
and bank accounts, ensuring a smooth transaction process. This is especially
helpful in the extant T+2 settlement system, where you have just two days
to settle your transaction.
The normal process of issuing a delivery note, in the case of a sale,
or arranging for payment in the case of a purchase of shares, is all taken
care of the minute your order is executed online.
The absence of manual intervention ensures that you are completely in
control of all transactions.
There is also little room for error, as your order is always confirmed
before it is executed. You can also make better decisions as you have a
clear record of all your previous transactions. When you trade offline,
a demat statement is normally sent to you only on a quarterly basis. Keeping
track of your portfolio can be a hassle in such a case.
Convenience is probably the greatest advantage online
trading offers
an investor. If you do not have time to trade during market hours, when
perhaps you are at work, you can log on to the web-trading site and place
your orders offline, during off-market hours.
Your order would join the queue and be executed the next day. You would
need to enjoy a good relationship with your broker, for you to be able
to reach him in the late hours.
For Non-Resident Indians (NRI), trading online is perhaps their easiest
option to invest in the Indian stock markets.
What is more, the time difference, in some cases, can work to their
advantage. Antony, an NRI-based in New York, places his orders in the evenings
after work, when it is day time in India and the markets are open.
You also have access to considerable information online. Log onto ICICIDirect,
for instance, and you get the latest news, market information and company
research. Do not, however, go by tips that you read online and off message
boards. Invest in a company only if you have a fair understanding of its
business and are convinced of its growth prospects.
If you are still deterred by the connection problems that you might
have while placing an order, do not be.
If your connection is maddeningly slow and you want to get your order
executed immediately, most e-brokerages also provide a facility to trade
offline by placing your order via the phone.
What's on offer
If you do decide to trade online, you have a number of portals to choose
from, as many brokers now provide this facility. But the features offered
by the various brokerages vary, not to mention the brokerage fee.
Some tend to be more restrictive than others in terms of exposure limits
on margins, short selling, squaring off positions and so on. Given these
differences, it would be best to look up several sites and then choose
the trading portal that is suits your needs best.
Most e-brokers have tailor-made products for different kinds of investors.
For instance, kotakstreet offers the Kotak gateway for those investors
whose initial margin is less than Rs 5 lakh. If you achieve a higher volume
of trading any month, you get upgraded to a superior product, where you
get benefits of higher exposure on your margin, research reports and lower
brokerage fee. There are also options for traders who are just interested
in squaring off their positions within the day.
For instance, with Kotak High Trader, you can do only intra-day trading
and your positions are automatically squared off at 2-55 p.m. ICICIDirect
offers Margin Trading and Margin Plus products where all transactions are
squared off within a settlement cycle, unless converted for delivery.
Continue to learn more about online trading, please visit BlonNet.
You may have found the best sourced advice concerning online trading.
When you're trying to find top info on online
trading, you'll find it's
complex seperating quality info from unadvised online trading suggestions
and help so it is important to know how to judge the information you are
offered.
Scottrade: Online Brokerage
Online discount brokerage firm that serves individual investors who are
comfortable making investment decisions through the Internet.
Now we'd like to give you a few tips which we advise you to use when
you're searching for information about online trading. You need to realize
the help we tender is only pertinent to web based information about online
trading. We don't offer any advice or guidance if you are receiving info
offline.
QCharts: Online Trading Charts and Analysis
Try QCharts now. 30 day free trial. Real time quotes, breaking news,
advanced charting and more. Trade Smarter.
A great tip to follow when offered information and suggestions on a
online trading website is to check out who owns the site Doing this could
reveal the owners online trading authority The quickest way to work out
who owns the online trading website is to look on the about page or contact
page.
Any reputable site providing information on online trading, will almost
certainly provide an about webpage which will list the site owner details
The info should make known a number of indications on the owners credentials.
You can then make a judgement about the webmasters training, to offer advice
about online trading.
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Online trading of TV episodes grows
Missed the final episode of Frasier or Friends? Many
college kids aren't waiting for the reruns. They're downloading the shows
instead.
With millions of unauthorized media files being traded on the Internet,
it's impossible to put an exact number on how many TV episodes are out
there.
But Jorge Gonzalez, who runs Zeropaid.com, a file-sharing guide, says
he's seen "a big increase in the last six months for new sites that specialize
in trading TV shows."
The Simpsons , Friends , The Sopranos and other
shows are readily available at both Kazaa, the world's most-used file-sharing
program, and new sites like eDonkey, TVTorrents.com and Bucktv.net.
BayTSP, a Silicon Valley company that tracks unauthorized Internet file
trading, found nearly 20,000 files of popular TV shows like The Simpsons and Alias being
offered for free on Wednesday.
The TV industry fears being Napsterized. Record labels blame a three-year
25% decline in sales on Internet music swapping. Movie studios are fighting
online film traders. Now, TV downloading has become "a very serious and
growing problem," says Ron Wheeler, senior vice president of Fox Entertainment
Group, producer of The Simpsons. The situation is of greater
concern, he says, because TV files are smaller than movie files - so easier
to download.
Still, unlike music MP3 files, which take minutes to acquire, TV shows
can take more than an hour to get.
The TV- and movie-trading programs work with free BitTorrent software.
To speed downloading, BitTorrent connects users to many different fragments
of the show. They are then pieced together seamlessly on arrival.
The process is more cumbersome than music downloads. But students don't
mind. "It's not that much of a bother," says Boston University student
Ethan Clay. "You type The Simpsons on your PC, choose an
episode, go out to dinner, and come back and watch it."
Some TV shows hit the Internet days before they actually air, says BayTSP
CEO Mark Ishikawa. They are coming from people with access at post-production
houses or TV affiliates, he says.
But it's not just those with connections. Hewlett-Packard, Gateway and
Dell make Media Center PCs with built-in TV tuners to record shows onto
hard drives for personal use. Also, $50 TV "capture cards" can be inserted
into any desktop for similar results. Once the shows are digitized, they
can easily be transferred to the Internet.
As with sharing songs or movies, it is illegal to swap TV shows online.
But unlike the music industry, which has sued more than 2,500 people for
trading songs, no one's been sued for putting TV shows online. Industry
executives say that's under consideration. The industry also is pushing
legislation that would scramble TV content, making swapping impossible.
Continue to learn more about online trading, please visit USA Today.
Introduction to Online Trading
The Internet revolution has been changing the fundamentals of our society.
It shapes the way we communicate and the way we do business. It brings
us closer and closer to vital sources of information. It provides us with
means to directly interact with service-oriented computer systems tailored
to our specific needs; therefore, we can serve ourselves better by making
our own decisions. This prevailing shift of the business paradigm is reshaping
the financial industry and transforming the way people invest.
In the following discussion, we will briefly explain how the Internet
has been changing the way people trade stocks, and we will introduce some
of the pros and cons of using online brokerage companies. Then we will
look at some of the trading styles people practice and introduce an important
trading technique that a lot of professional traders have been using with
great success. Finally, you will learn how Tradetrek.com can help you apply
these trading techniques online with trading tools that make online
trading easy, fun, profitable, and understandable!
In the old days, because of the limitations of communications technology,
Wall Street was the center for most of the Stock Exchange and Brokerage
firms. Today, at this millennial transition, investors can use revolutionary
Internet Client-Server technology to trade stocks nearly anywhere, anytime,
independent of brokers' fees and service limitations.
This new access by the trading public to low-cost transactions and cutting-edge,
real-time market information that formerly belonged only to brokers has
opened up extraordinary new investment opportunities as well as a crucial
need for state-of- the-art information. It is exactly these new-market
investment services that Tradetrek.com specializes in satisfying.
Jumping In
Learning to use the new online
trading tools provided by brokerage houses
may take very little time. In only a couple of mouse clicks, you can make
thousand-dollar transactions in a matter of seconds. Modern technology
in hand, you have total control over the money you are investing, which
really gives you the tools and confidence to beat the S&P Index!
There are a number of brokerage.coms out there, such as Ameritrade,
DLJdirect, SureTrade, Datek, Charles Schwab, E-Trade, just to name a few.
As a result of a price war between these companies, the commissions that
these companies charge per trade have dropped significantly. For example,
Datek charges $9.99 per trade, Ameritrade $8, and SureTrade only $7.95.
But you need to keep in mind that price is not the only factor in choosing
a service. You also have to consider how frequently you trade, what other
services you might be interested in, how reliable the trading system is,
whether it is hard to log on when the market is active, and quite a few
other variables.
In order to attract more users, many online brokers continually upgrade
their systems to allow more log-ons simultaneously; they may also offer
new value-added services such as company news releases, earning reports,
and market commentary.
The Market Moment of Truth
Okay, then. Imagine that now you know exactly what to do: Buy a computer.
Sign up with AOL. Find an online broker. Deposit an initial sum of money.
Now you're in! And at the brink of your first trading moment, your hands
sweating, heart racing, you hear yourself asking, "Am I really ready?"
The Need to Know
Wait, then: you might not be quite ready. Not yet! Estimates show that
more than 80% of all online investors lose money at the outset. While you
know that a great number of portfolio holders have realized great profit--for
some of them, even fortunes--you realize that to be a winner you first
need to exercise prudent judgment to join that 20% who really are successful.
Perhaps you haven't yet realized quite what you are facing now that you've
gotten rid of the commission-swallowing middlemen (Wall Street brokers
and expensive financial advisers). You are on your own. And sorting through
hundreds of websites for stock tips, market updates, and company profiles,
who wouldn't feel overwhelmed! Perhaps in this vast universe of digital
feed, you realize more sharply than ever that you lack clear strategies
for evaluating market possibilities of the thousands of stocks out there.
You constantly hear stories of stocks that break the trading range, reach
an all-time high, and then, before you have time to act, slide 30 points
in two days. By the time you get the news you are too late to capitalize!
Continue to learn more about online trading, please visit Trade
Trek. |
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Wells Fargo slashes some fees for online trading
In a bid to keep its brokerage unit competitive with industry discounters,
Wells Fargo & Co. has sliced online
trading costs in half for customers
with combined balances of $25,000 or more.
Online trading commissions will drop to $9.95 from $19.95.
Customers with more than $100,000 in total balances from various accounts
-- including checking and savings investment accounts and 10 percent of
a mortgage balance -- will pay $2.95 for their first 50 trades each year.
And those with more than $250,000 in qualifying accounts will be able
to make their first 50 trades for free.
The fee reductions apply to stock trading and no-load mutual fund trades,
which are distributed directly by the investment company without sales
charges. Wells Fargo is the first company offering online trading services
to give price reductions for mutual funds.
Greg Bronstein, executive vice president of Wells Fargo Investments,
said the San Francisco-based bank is trying to differentiate itself from
the competitors by accommodating long-term investors as well as less-active
or small-volume traders.
"Over half of online investors are more inclined to buy mutual funds
than stocks," Bronstein said.
The company wants to reward its 1 million customers who qualify for
the reductions while encouraging another million customers to consolidate
their accounts to become eligible, he said.
But Dick Bove, bank analyst for Punk, Ziegel & Co., said Wells Fargo's
fee reduction will have little impact on the online
trading industry.
"Wells Fargo is a full-service bank, and it wants to provide a wide
array of services to its customers," Bove said. "All they're doing is to
keep this particular service competitive."
Joe Morford, a banking analyst for RBC Capital Markets, said Wells Fargo's
decision to cut commissions was a "defensive measure" in response to the
intensifying price competition.
"They're not betting their company on this offer," he said. "But it's
an important part of their product offering."
Morford said it was unlikely that traders who do not already do business
with Wells Fargo will start trading through the firm. Major online
trading firms such as E-Trade Financial Corp. and Scottrade Inc. charge
as little as $6.99 and $7, respectively.
"[Wells Fargo is] big on cross-selling within their existing base," said
Brian Shullaw, senior research analyst for SNL Financial. "They're trying
to get more of their existing customers to use their brokerage program."
Jim Bruene, editor of Online Banking Report, said the idea of integrating
investments and banking is a growing trend among banks. He noted that E-Trade
recently acquired a bank and offers banking and brokerage services hand
in hand. But he said the progress has been slow.
"It's hard to stick the two things together," Bruene said. "They work
on different systems and are run by different people. It's easy to say
on paper, but nothing's that simple."
Bruene also said the process was low on the list of priorities at first
because there was a relatively small market at first and the banks could
not justify the costs. But he said firms are beginning to allocate more
resources to the integration.
According to the January Online Banking Report, 36 million U.S. households,
or 33 percent of all U.S. households, were using some form of online banking
or bill payment services. The report forecast that by 2010, 52 million
households, or 46 percent, will be using such services.
"Now that you have more people, there's a bigger potential audience," Bruene
said, adding that the integrated services and lower commissions will help
banks like Wells Fargo retain the less-aggressive investors or encourage
existing banking customers to begin investing through them.
Bronstein said 6.5 million account holders, or 53 percent of all Wells
Fargo customers, use some form of the bank's online services. The bank
expects the number to grow steadily.
"It would make more sense for them to trade out of their bank," Bruene
said. "They're already comfortable with [the bank], so why not trade through
them?"
Continue to learn more about online trading, please visit StarTribune. |
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