WHILE many investors are using the Internet to buy and sell shares, too many do not understand how it really works.
Australian Securities and Investments Commission Office of Consumer Protection director Delia Rickard said the relatively low brokerage costs for electronic share trading coupled with a real-time market monitoring capacity meant Internet-based trading comprised 20 per cent of all retail share trading.
“Before you trade, find out how your Internet broker places your share orders, the difference between ‘limit’ and ‘at market’ orders, how you will get confirmation your order has been placed and if your privacy has been protected,” Ms Rickard said.
Online brokers trade shares using either ‘manual’ or ‘direct’ placement.
With manual placement the broker receives an electronic order from a client and manually places it on the market.
With direct placement, also known as automated client processing, the order goes straight to the market and takes its place in the queue with all other buyers and sellers.
Ms Rickard said whichever way the serviced worked, share prices could change between when the order was sent and when it was filled.
“You can protect against a change in share price by using limit orders that specify an acceptable upper or lower price limit rather than ‘at market’ orders that can be filled at whatever price is current when the order reaches the market,” she said.
“Confirm each stage of the order. Check it has been received, that it has been placed on the market and that it has been filled. Orders can be changed or cancelled up to the time they are filled.”
“Wait for confirmation of an order and don’t just place the same order again otherwise you could end up buying or selling twice as much as you wanted,” she said.
