Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you dont take a hard look at risk, it will take you. Larry Hite
Online share or financial market trading has a fascinating history. According to Stock-Trading-Warrior.com, “the history of online stock trading is a… revolutionary story about the power of two worlds colliding and changing the industry of stock trading forever.”
Essentially, before the public had easy access to the Internet and World Wide Web, investors used to have to call a live broker to buy and sell shares on the stock exchange. The modern Internet has changed all of this and made it much simpler for people to trade on any one of the global financial markets.
The World Wide Web: Improved access to financial market trading
Additionally, with advanced global communication networks and the speed with which we can travel around the globe, it seems as though the world has been reduced in size. Furthermore, the 21st century also brought about the rapid increase of online retail trading brokers.
Thus, making online trading more attractive to greater numbers of people, both professional traders as well as people wishing to supplement their monthly wages. As an aside, statistics show that the number of online trading companies increased from 12 in 1994 to 140 firms by 2001.
Moreover, with advanced global communication networks and the speed with which we can travel around the globe, it seems as though the physical world has been reduced in size. It is easier and quicker to get from point A to B, and it is simpler to communicate with businesses on the other side of the world.
Furthermore, the 21st century also brought about the rapid increase of online retail trading brokers. Thus; making online trading more attractive to greater numbers of people, both professional traders as well as people wishing to supplement their monthly wages. As an aside, statistics show that the number of online trading companies increased from 12 in 1994 to 140 firms by 2001.
This, in turn, increased the competition among brokers to see who can draw the most clients. The benefits this increased competition brought about more user-friendly platforms, faster trading, as well as lower transaction fees and a host of other features. However, the main drawback of an open, unregulated Internet is the rise in the number of fraudulent or scam brokers.
Reducing risk; increasing success
Fernando Joseph, a financial analyst at Weiss Finance, emphasised the importance of reducing exposure to risk by trading with a bona fide online trading partner. He is of the opinion that the salient takeaway point of any discussion on financial market trading is that, with the increase in the numbers of fraudulent brokers, it is vital that traders ensure that they do not get caught in in a fraudulent broker’s trap.
Unfortunately (or unfortunately), the onus is on investors to ensure that they open a trading account with a reputable online trading company. The biggest reason for this is that the World Wide Web is mostly unregulated or self-regulated. There is not one single global watchdog body that monitors and regulates the online financial industry.
It is paramount to draw attention to the need to respect RISK (capital letters intended). Larry Hite, in his quotation stated above, makes particular mention of the fact that in his career he has witnessed countless people ruined by the failure to give the risk of losing their investments the attention it deserves.
Limiting exposure to risk is a vital part of every stage of the online trading process, from choosing a reliable broker to deciding how much money to invest in a single trade, as well as what trading strategy to follow.
As advancements in financial and mobile technologies continue, and the ongoing ease with which people will be able to access the internet, there is every chance that the number of (reputable and fraudulent) online trading brokerage firms will increase.
Finally, as more and more people come online, the more liquidity there is likely to be in the financial markets. Therefore, it is critical that traders remain vigilant and take cognisance of mitigating their exposure to the risk of losing their working capital or life savings.