Fast Facts: Trading Stocks In A Fast Moving Market

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

Just because you can access your account online, doesn’t necessarily mean that your trades are instantaneous. Limit your losses in these fast-moving high tech markets by:

· knowing what you are buying

· understanding the risks involved in your trade

· know the trading process for fast-moving markets

Guard against some of the most common problems investors encounter in fast-moving markets.

Market Orders vs. Limit Orders

When stocks drop or soar suddenly, being stuck in the process of trading can mean the difference between making a sizable profit, and losing a bundle. Delays can develop in fast-moving markets, slowing down executions and trade confirmations. What you thought you were selling at one price, may be end up selling for quite another. Avoid buying and selling at prices higher or lower than you expected by placing limit order instead of a market order. Limit orders are executed automatically when they reach a set upon price, unlike a market order which is filled at the price that second, not necessarily the price set at purchase time.

For example, when you place an order for a $10 stock, placing a limit order will ensure that you don’t end up paying $35. The same is true for selling. The stock will sell when it hits the target limit, eliminating sudden losses. The risk here is a loss of control to hold certain stock just a little longer in the hopes that it will continue to rise. Once it hits the selling target, it is sold.

Remember, Online Trading Isn’t Instantaneous

Trading online can feature its own dangers. Problems with modems, servers, or delayed broker-dealer hardware can all cause a delay or failure in an immediate stock trade. Know what trading alternatives your firm offers (telephone, fax, etc), in the event a technological problem interrupts your transaction.

Avoid Double Buying/Selling

Too often investors mistakenly think that their order did not go through and place another order. This can cause them to buy stock they did not want, or even sell stock they did not own in the first place. Be sure to check with your broker on what to do if you aren’t sure if your trade has gone through.

Choose the Best Broker

Buying and selling in a fast-paced market takes a broker who’s capable of handling transactions quickly. There are no Securities and Exchange Commission rules that require any trade to be executed in a specific amount of time. Finding a broker that doesn’t delay is up to you, the investor. Take your time and research brokers carefully in order to avoid losing important assets unexpectedly.