“It has been estimated that almost 95 percent of today’s online traders do not really know how to trade” (Abell, Koppel, and Johnson, The Sixth Market, 30). With the digitalization of almost every aspect of money markets today, first time and ignorant investors have practically an unlimited ability to drain their savings accounts in mere seconds. With the advent on online securities trading as a result of the Internet becoming so advanced, investors no longer have to place stock market orders through licensed brokers. They themselves, rather, now wield the power to manage every facet of investing their own assets. With this added control, however, comes greatly increased risk, and lacking ability. Competency in the field of investing has become imperative for online investors, and the government should implement a testing system by which to certify potential Internet investors as being proficient in equity management, before they are allowed to partake in such activity. Since online investors are not constantly monitored, their investment decisions cannot be assessed on an individual basis for suitability. As a result, and without this close regulation, it is very easy for someone to make a bad investment decision and lose vast amounts of money. This happens predominantly to those investors who do not have any training in, or experience with, monetary instruments used in the online money markets of today. Additionally, the ready availability of vast amounts of information online regarding investing has become wildly speculative and highly unregulated. The Internet, as a result, has created the act of online investing such that it is a hazardous and precarious undertaking that should not be attempted by any person uneducated in the field.
Today the majority of Americans have access to the Internet. In most cases, the speed of their connection is significantly higher than 56 kbp/s. When this verity is combined with the notion that America was founded on the basis of capitalism, and that money is a vice that the majority of Americans desire more of, it makes sense that securities trading would eventually transition into an online environment. During the last ten years, the digitalization of every aspect of the securities markets has greatly increased the efficiency and speed with which professionals in the business operate. Traditionally, when an investor wanted to place an order for a security , he or she would have to contact their registered broker, usually by phone, and place the specific order with that person. The broker would then send the order, either by person or by phone, to the floor of the stock exchange. This could only be done, however, after the broker received his or her, oftentimes several hundred dollar, commission. At the floor of the exchange, a representative would “cry out” the order at the booth where that particular security was being traded, in hope of finding a matching bidder or seller for the same amount of that security. Clearly, such a process contains an excessive number of middlemen, and requires the use of far too many resources, both monetary and physical. Over one hundred years after this process began, however, it ended with the electronification of almost every facet of exchange trading.
Works Cited
Abell, Howard, Robert Koppel, and Ken Johnson. The Sixth Market. Chicago: Dearborn Trade, 2000.
Carreon, Charles. "Mutual Funds." 401KInvestor.Net: Charles Carreon's Simple Guide To Investing. 9 Apr 2007
Collins, Victoria. InvestBeyond.com. Chicago: Dearborn, 2000.
Goodchild, John, and Clive Callow. Double Takes. Chichester, England: John Wiley and Sons Ltd, 2000.
Masonson, Leslie N. Day Trading on the Edge. New York: Amacom, 2001.
Pasternak, Melvin. "Technicals versus Fundamentals." Street Authority. 18 Apr 2007 http://www.streetauthority.com/terms/t/technicals.as>.
Seeto, Brandon C W. The Psychology of Electronic Trading. Singapore: John Wiley and Sons (Asia) Pte Ltd, 2004.
Thomsett, Michael C. Mastering Online Investing. Chicago: Financial Publishing, Inc., 2000.
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