Thanks to the Internet, consumers can choose a discount, or do-it-yourself, online broker rather than a more-costly full-service broker. Indeed, online brokerages are quicker and cheaper. There are, however, certain challenges when it comes to DIY trading. With a few tips in mind, you can be a more successful trader without the need for a full-service broker.
Choose Your Online Discount Broker
Discount online brokers allow you to set up your own accounts and trade without help or guidance from another human. There are online tools and resources such as articles to help you along, but you will be on your own when it comes to hitting the "buy" and "sell" buttons. Keep this in mind when choosing a site. Compare fees and platforms, choosing the one that offers you the most comfort for the cost. E*Trade, TD Ameritrade, Fidelity and Schwab are among the most popular online brokers. Others that specialize in stock-options trading include OptionsXpress and thinkorswim.
Set Your Strategy
Employing a strategy is important for any investor, but it is especially crucial for investors who cannot rely on the guidance of a full-service broker. Your strategy should revolve around specific investment objectives and you should stick to them. Think about what your goals are, how aggressive you can afford to be, and whether you plan to invest for the long term or the short term. Investors often lose money when they constantly switch strategies and make erratic decisions.
Do Your Homework
DIY investing forces you to do your own homework -- something you should always do anyway, even with hot tips from brokers and stock "experts." Read recent news on each company, research the industry and decide for yourself whether you think a stock has potential. The same goes for selling stocks. Research variables that may be causing stock prices to fluctuate and don't stick around to try to recover your losses if you suspect the stock may be a sinking ship. By the same token, quitting while you're ahead isn't always smart, so don't sell a stock solely because you are satisfied with its growth to date.