1. . Is the system safe? You will want to make sure that the only possible person with access to your account is you! Ask the company if there have been any instances of hackers who broke into the system. (One could just picture the joy on a hackers face as he sees how much Intel he could short in a screaming bull market before anyone finds out. ) Make sure there are ample passwords, phone numbers, or access codes that will ensure your safety and peace of mind.
2. What services does it offer? This will be one of the greatest factors when determining which system to use. Ask yourself what is most important to your trading and see which system best fits your needs. There will probably be some tradeoffs. If you want the fastest speed, then you may have to give up charting, as this requires vast memory and slows the system down. If news is important, then you may end up paying an expensive monthly fee. Some systems are designed strictly for trading NASDAQ stocks, while others will let you trade anything from pork bellies to Japanese bonds. We found that systems designed to do a lot tended not to do anyone thing all too well. On the other hand, systems that were designed to just trade one market tended to serve their purpose well.
When evaluating Internet and Online systems, you must also decide what features or services are most important to you. News, charts, technical analysis, and market summaries are some features of interest. Systems that provide an abundance of these features may demand a greater commission in return for these services. Many traders are satisfied with the news available through CNBC. Anything more informative is likely to be costly and perhaps not worth the added expense. Market summaries are important and can be used to help determine relative strength and the overall trend. Information such as the change in key indexes could prove useful, but it is available on CNBC. Charting packages and technical analysis are nice if they don't lead you to overanalyze each trade. Many good traders review this information outside of the market hours; others won't make a trade without reviewing it first.
3. How much does it cost? All people like to feel as if they are saving money or getting a good deal. The real question here is, Are you really saving money if you trade with a super-low-cost provider? The answer lies somewhere between the old adages “You get what you pay for" and “Less is more. " While it is true that some of the fastest systems may cost a little more than others, the benefits of getting to stock fast far outweigh the extra cost of the trade. We would much rather pay $0.02 per share (or $20 per thousand) and be able to get executions when we want than $0.01 (or $10 per thousand), using a system that did not provide direct access to the market. On the other hand, if you are extremely active and you can save a couple of bucks by using a comparable system that may not have quite as many features, then you might be better off. Other things to consider are whether the firm is billing you by the share or by the trade. You will have to crunch the numbers and look at your average trade size to see which is better for you. The good news is that with increasing competition for customer accounts, the recent price trend has been on a downslide and some services will even let you trade for $10 a trade or cheaper. If they charge per ticket, ask them how they define a ticket. A market order could get filled at more than one price or in NASDAQ by more than one market maker. Some firms may consider this trade more than one ticket. If they charge per share, ask them if there is a minimum charge per trade. Ask if there is a charge for canceling an order. Also, ask if there are any additional charges, such as monthly fees or a minimum number of trades, before reaching a conclusion on this issue.
4. What types of hardware and software are needed? Some systems require that you have a computer equipped with the latest chips and expanded memory, while others may see your computer as a “dummy" terminal that simply sends your keyboard messages to a “real" computer that does the processing at another location. Most Internet trading systems are designed for use with regular computers and do not require a turbocharger to handle the workload. You will also want to check the baud rate of your connection. Remember that speed is a critical aspect for profitable trading. Fast high-quality modems and big high-resolution monitors are generally necessities with most systems.
You will also want to check if the firm charges you for use or installation of software. Most systems are free, and you should negotiate if you choose a system that intends to charge you.
Robert Daniels is an author for the website Daytrading Gapping Swingtrading:
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