Online trading guidance
With a few keystrokes and a click of the mouse, investors today can buy or sell stocks through on-line trading accounts with the same ease as they search the Internet or play computer games.
Investors need to bear in mind that while the mechanics of on-line trading are relatively easy— investing is not. It is digital vs pfg best binary options not to confuse the procedure for entering an order—which can be executed with the push of a button—with making thoughtful investment decisions.
Investors should exercise the same degree of care when trading on-line that they do when making any other investment decision.
Below is a brief discussion of the areas that may be affected during such periods. Also, please see Notice to Memberswhich suggests disclosures firms should make to retail customers to online trading guidance them about the risks of price and volume volatility, and Notice online trading guidance Memberswhich provides FINRA members with guidance concerning the operation of their order execution systems and procedures during extreme market conditions.
During these periods of increased price volatility and record trading volume, customers eager to trade Internet stocks have flooded their brokers with large numbers of orders, leading to large order imbalances, system queues, and backlogs.
For example, some Market Maker firms temporarily discontinued normal online trading guidance order executions and handled orders manually. Firms also reduced their size guarantees on individual stocks or groups of stocks i.
It is important that investors educate themselves about how securities transactions are executed, particularly during times of volatile prices and high volume. Before opening an online online trading guidance or placing the first trade, investors should online trading guidance on-line firms a number of questions so they can make appropriate investment decisions.
High volumes of trading at the market opening or intra-day may cause delays in execution and executions online trading guidance prices significantly away from the market price quoted at the time the order was entered.
Investors should ask firms to explain how order executions are handled by Market Makers, particularly when the market is volatile. It is particularly important for online investors to make this inquiry, since most have come to expect quick executions at prices at or near the quotes displayed on their computer screens. Investors should ask the firm they are working with to explain in detail the difference between market and limit orders and online trading guidance benefits and risks of each.
In particular, firms online trading guidance required to execute online trading guidance market order fully and promptly without regard to price. In some market conditions, execution may be at a price significantly different from the current quoted online trading guidance of that security.
Limit orders will be executed only at a specified price or better. Customers using limit orders online trading guidance price protection, but there is the possibility that the order will not be executed.
As a related matter, if you are investing in initial public offerings trading in the secondary market, particularly those that trade at a much higher price than their offering price, or in "hot stocks" those that have recently traded for a period of time under what is known as "fast market conditions," in which the price of the security changes so quickly that quotes do not keep pace with the trading price of the stockyou should be aware that your risk of receiving an execution substantially away from the market price at the time you place your order may be significantly reduced if you place a limit order.
You should be aware that you may suffer market losses during online trading guidance of volatility in the price and volume of a particular stock if online trading guidance are delays in effecting buy or sell orders. You may have difficulty executing your trades due to limitations on system capacity. In addition, if you are trading on-line, you may have difficulty accessing your account due to high Internet traffic.
Customers trading through brokers at full-service online trading guidance discount brokerage firms or through representatives of on-line firms when on-line trading has been disabled or is not available may have difficulty reaching account representatives on the telephone during periods of high volume.
You should ask your online trading guidance to explain its procedures for responding to these access online trading guidance. Investors may see a firm using advertisements or sales literature to make claims about the speed and reliability of their trading services. These communications with the public must not exaggerate the broker-dealer's capabilities or omit material information about the risks of trading online trading guidance the possibilities of delayed executions.
Moreover, broker-dealers should have the systems capacity to support any claims they make about their trading services. You should ask your firm whether it has adequate systems capacity to handle high volume or high volatility days. The market is an ever-changing environment, making it more important than ever for investors to use investing tools they understand.
Get to know the firm you are dealing with, and make sure that online trading guidance you choose to trade online, you do so commensurate with your investment objectives and ability to tolerate investment risks.
What Investors Should Ask Their Brokers It is important that investors educate themselves about how securities transactions are executed, particularly during times of volatile prices and high volume.
Delays High volumes online trading guidance trading at the market opening or intra-day may cause delays in execution and executions at prices significantly away from the market price quoted at the time the order was entered. Types of Orders Investors should ask the firm they are working with to explain in detail the difference between market and limit orders and the benefits and risks of each.
Access You should be aware that you may suffer market losses during periods of volatility in the price and volume of a particular stock if there are delays in effecting buy or sell orders. Communications with the Public Investors may see a firm using advertisements or sales literature to make claims about the speed and reliability of their trading services.