(FIRST PART OF A 5 PART SERIES) NOTE: FOR LACK OF SPACE, THE AUTHOR IS PUBLISHING THIS ARTICLE IN A 5-PART SERIES.
- 1. Thou must first know thy self and thy market well.
Trading stocks, currencies gold, or commodity futures, or any other
securities(fast moving markets) via the internet can be terribly
taxing! Before you decide to plunge into it you must know offhand if
you are ready to lose a lot of good night sleep for just monitoring the
markets; or if you have the stomach to take frequent roller coaster
rides during peak market activities (like watching your investment
tremendously grow within seconds just to see it melt down in the next)!
You must know first if you have the discipline to be able to maintain
your cool during wild and wide price swings and still be able to call
the shots objectively according to your pre-determined trading
objectives. This means you should not to let fear overshadow you when
the market moves against your position, nor allow greed to take the
better of you when the market is in your favor. Remember always that
markets are frequently unpredictable and that you must learn to adapt
to its peculiarities fast otherwise it will eat you up alive.
- 2.Thou must deal only with registered brokers.
Make
sure the broker is registered! If the broker is based in the U.S.,
contact the Securities and Exchange Commission (SEC) and also check
with your state securities regulator as well. You can research the
investment online using the SEC's EDGAR database at
http://www.sec.gov/edgar.shtml. To contact your state regulator call
the North American Securities Administrator's Association (NASAA) at
(202) 737-0900 or online at http://www.nasaa.org/home/index.cfm . You may also contact the Commodity Futures Trading Association (CFTC) at http://www.cftc.gov/ and the Financial Industry Regulatory Authority (FINRA) at http://www.finra.org/index.htm. The rule of the thumb you must use here is “avoid the unregistered and junk the brokers with recorded complaints.”
For
non-US based brokers, you must demand verifiable documentations from
the broker regarding their affiliations and representations. Some
online brokers are merely introducing brokers (IB), meaning they act as
marketing representatives for a bigger broker, in which case you must
demand to see the IB contracts and investigate the affiliation of the
principal broker. Other brokers “white label” for
their principals. Their websites may appear and have the looks of a big
broker when in fact they are mere affiliates of other brokers. Don’t
deal with white labelers if they don’t publish their principals. White
labelers make money through an additional spread of a pip or two built
in into their price quotes.While I don’t have
anything against white labelers who are affiliated with established
brokers of good standings, I would advise you to avoid them unless they
have incorporated more add-on features or services other than those
offered by their principals to justify the additional cost to you.
Big
Daddy's suggestion that you deal only with registered brokers is not
being biased against overseas brokers. It's just that online investors
must always be provided with a forum or a venue to file any claims they
may have against their online brokers in the future. And at this point
in time,only U.S. based brokers can provide us with this safety net. |