Jul 06

Online Trading Online trading is a high risk business. However the risk is commensurate with the eventual monetary gains. Risks associated with online trading are relevant to those you can control, the economic climate and the specific business that you have invested in. If the business you have invested in suddenly announces record losses then there is a good chance your money will have halved (or worse). The current economic climate is a good indicator of how stocks fluctuate based upon the financial situation of the planet. Whilst trading online may be an easy way to buy stocks – it is this simplicity that can land you in hot water.

Because it is so easy to purchase stocks online; it is too easy to over commit. If you think a stock is at the right price to buy then you might get carried away and spend a lot more money than you would have otherwise. This is another thing that is a disadvantage when trading online – you don’t have a support network or advisors letting you know when to buy or sell. You are alone (for the most part). It is too easy to make a poor decision which leads to an eventual loss rather than gain. If a business that you have invested in has no chance of recovering fiscally then you have no chance of making back your money.

You are also at the whim of your broker. Some brokers require a minimum purchase before they will enable you to purchase stocks. They are also expensive to employ. Their pay is not based on how well the stocks are performing – they get paid either way. This is why they are more than happy to allow you to make decisions for yourself rather than giving you proper guidance. Some brokers even go as far as charging you for not trading enough.

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