Sorting the Wheat From the Chaff - How to Invest
Whether or not you're a
day trader, your best protection as an investor is to know what
you're buying, what the ground rules are when you buy and sell,
and what level of risk you're assuming.
If you decide to do business with a company offering
day trading systems or advisory services, it's important to check
it out before putting your money on the line.
If the trading system involves stocks, call your
state securities regulator to find out whether the company has ever
been disciplined or has complaints against it. Look in the government
section of your phone book or visit the North American Securities
Administrators Association's website at www.nasaa.org.
You also can get a firm's disciplinary history by calling the National
Association of Securities Dealers-Regulation Public Disclosure Program
at 1-800-289-9999 or by visiting its website at www.nasdr.com/2000.htm.
If the trading system involves commodity futures or options, call
the National Futures Association toll-free at 1-800-621-3570 or
Free online trading is a popular
phrase these days. All over the Internet there are sites
that promise free trading and high profits. Unfortunately, there
are few things in life that are ever really free and online trading
is no exception.
Another thing to look out for is companies that offer commission
free online trading. While their motives may initially appear gallant,
the truth of the matter is that no company can remain afloat without
making a profit. They may offer 0% commission, but the chances are
very good that there will be other hidden costs involved such as
an exorbitant monthly fee for using their trading software. Alternatively,
the free commission may only apply if you make a certain amount
of deals every month without fail. Read the terms and conditions
very carefully and do not hesitate to give brokers a call should
you have any questions. Honest companies will have no problem explaining
their policies to you in great detail, while fraudulent individuals
are likely to be more tight lipped.
Promises of free trading are not the only trading
scams that are popping up on the Internet. Sadly, there are a number
of dishonest companies out there who make their profits by exploiting
the naivety of less knowledgeable individuals all over the world.
There are hundreds of online stock trading scams floating around.
Some can be spotted from a mile off, while others are slightly more
difficult to identify. Some of the more common Internet trading
Hype and dump stocks
Spam stock offers
The simplest and most effective way to avoid getting roped in by
a scam is to always keep in mind the old saying: when something
looks too good to be true, it probably is. Any promises that you
will make instant profits, suffer no losses and encounter no risks
when buying a particular stock are more than likely a lie. Research
independent companies carefully and always double check offers that
you think may be suspicious. Look for trading companies that have
been approved by registered bodies such as the Securities and Exchange
In the event that you do fall prey to a free online trading scam
or other type of unscrupulous trading scheme, your best option is
to report the culprit to the Securities Exchange Commission. Their
complaints division can be accessed online at http://www.sec.gov/complaint.shtml
. They will investigate the company or individual in question and
take the necessary steps to ensure that they are stopped.
Look carefully at the basis for any claims
the company makes.
Talk to other traders who have used the company.
Check out the company with the Better Business Bureau and the local
consumer protection agency.