| Seven
Important Points to Note When Trading Online
1.
Know the companyThe
fundamentals of investing in the stock market, whether the
trade orders are executed electronically or via the telephone,
remain very important. Facts about the company, its net earnings,
its P/E ratios, and the products or services offered by the
company cannot be ignored when choosing which shares to buy
or sell.In
addition to obtaining the company's annual report, the reader
will also find a useful repository of all corporate announcements
of companies listed on KLSE at the KLSE website at http://www.klse.com.my/website/listing/lcphome.htm.
Likewise, MESDAQ's website provides similar information as
well as research reports and plenty of other detailed information
on all the companies listed on that exchange.
Ask
yourself:
| a) |
What
do I know about this company? |
| b) |
What
are the risks involved? |
| c)
|
Do
I need expert investment advice before clicking the button
with an order to buy or sell? |
Don't
let your guard down in being the wise and careful investor.
With the ease in placing orders via Internet, statistics in
developed countries show that many investors are buying and
selling earlier than they should.<<back
to top>>
2.
Consider buying on limit orders, not market orders during
a fast moving marketA
limit order gives the limit in which a share is to be sold
or bought. For example, if you wish to buy a share priced
at RM5 per share and would not want to end up paying more
than RM6 for it, then execute your limit order at RM6, meaning
you would buy it only at RM6 or lower. During a fast moving
market, when share prices move up or down rapidly, the price
can change quickly from the time the order is given to executing
the trade. Limit orders protect you from selling at a price
too low and buying at a price too high.
A
market order means the share is to be bought at the prevailing
market price which may move faster than you realise and your
order may be executed at a price above your expectation.<<back
to top>>
3.
Online trading is not instantaneous
While the click of the mouse is effortless on your part, and
happens in a split second, there might be delays in the system
due to several factors. The speed at which your order reaches
your remisier is dependent on the speed of transmitting data
by your Internet provider, among other possible factors. Your
modem, or computer could be faulty or the hardware at the broker's
could be inadequate.
Traffic
on the Internet could be heavy, slowing down overall usage
or there could be a queue of orders waiting at the BFE and
it may take a little while before your order is attended to.
There is no law requiring a trade to be executed within a
set period of time once it reaches the broker's terminal.
Heavy
Internet traffic may result in outages and failed trades if
the broker's online trading system does not have the capacity
to cope with unusually large numbers of trades. It is important
to be aware of your broker's policy in dealing with losses
arising from such outages, should they occur. It would also
be prudent to be aware of alternative means of placing trades
(e.g. telephone) when brokers online trading systems are down.<<back
to top>>
4.
Confirm your order or cancellation before proceeding with
another
Some investors assume that once they have clicked their mouse,
the order is executed at the other end. Or if they had instructed
for an earlier order to be cancelled, that it had not yet
been executed. Care must be taken to avoid ending up owning
twice as many shares as you intended or selling shares that
you no longer own.<<back
to top>>
5.
Do not reveal your password and PIN to anyone elseEverything
happens so fast electronically. Chances are high that orders
placed by unauthorised persons to buy or sell stocks will
get executed before a victim realises that someone else is
trading on his account. Just as you would not reveal your
ATM personal identification number (PIN) to anyone, you should
also guard your password and PIN for trading online. Make
sure that your broker has an adequate system in place with
all the security measures to ensure the sanctity of your trade
orders.<<back
to top>>
6.
Investment advice: Distinguish fact from rumour
There
is a wealth of investment advice and corporate information available
on the Web. The prudent investor however, will be careful to
distinguish factual information (whether from primary sources
such as corporate announcements or annual reports obtained from
the official websites of exchanges or the company itself or
secondary sources, such as analyst reports and recommendations
available from financial portals) from purely speculative rumours.
Speculative rumours which are found in chat rooms and bulletin
boards are not provided by persons who are licensed by the SC
and the investor who relies on such information will do so at
his or her own risk.
The
investors eyes should also be open to the fact that even investment
advice provided by licensed investment advisors or brokers
on their websites may often be extremely general (eg., based
on general market and conditions or trends) and may not constitute
recommendations relevant to the investors own specific needs,
investment objectives or financial situation.
As
a general rule of thumb, the investor should therefore double-check
the validity of any investment advice procured from the Internet,
particularly those obtainable from less reputable sources.
<<back
to top>>
7.
Be wary of scams fraud and market manipulation
Fraudsters and other unscrupulous people ply their trade everywhere,
not least on the Internet. Over the Internet, market manipulation
may occur through chat rooms and bulletin boards. In unmediated
chat rooms and bulletin boards, fraudsters may try to affect
the prices of securities (which they already own) by spreading
false rumours about the company.
Be
wary also of spoofs sites create to replicate real sites,
the URL of which would be registered to closely approximate
the real site. These exist for the sole purpose of obtaining
the users personal user-names, passwords and other personal
details.
The
Internet provides a conducive environment for the creation
of web sites or the mass dissemination of emails which offer
and sell bogus, off-exchange or unapproved investments which,
while carrying on a veneer of legitimary, are completely fraudulent
and which exist for the sole purpose of fleecing the unwary
investor. As a guise, fruadulent sites may even incorporate
hypertext links to well-regarded reports, articles or even
the websites of regulators to boost their own credibility.
Our
advice: Never believe any emails or web sites promising "Get
Rich Quick" and "Make Money Fast" schemes.
All brokers and investment advisors must be licensed by the
SC. Therefore, besides double-checking all investment advice
obtain from the Internet and ensuring that they are from reliable
sources, be sure to check if your online broker or investment
advisor is one that is licensed by the SC. (Click here
to go to SCs list of licensed intermediaries) Where offers
are made for the purchase of any securities, check too with
the SC to see if the offer has been approved by the SC, as
is required under securities regulation. (The reader who is
interested in further background information should refer
to the SC policy statement titled "Primary Offers of
Securities via the Internet", dated 18, August 1999 and
is available at the following link: http://www.sc.com.my/html/resources/fr_resource.html.
While
a list of approved offers of securities are still as yet unavailable
from the SC website, the reader may call the SC Corporate
Affairs Department should there be any quieries on the matter
at: 03 6204 8510). Should you come across any websites or
receive any emails which offer fraudulent securities investments,
you should inform the SC Complaints Unit at once by either
email (http://www.sc.com.my/html/feedback.html)
or by phone (03 6204 8999)
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