Taxi - Here's an article from the wall street journal re: the difficulties we had with on-line trading this week.
IMO - this problem will happen again and when the next correction occurs, (if) make sure to place orders before the trend reverses. Learn to read the early signs of a reversal.
1- Prices beginning to stabilize
2- Lower volume once they stabilize. This occurs when investors are unsure what direction the market will take. This happens in individual stocks too. This may be the best time to buy but wait for 2-3 major upticks.
3-When a few major upticks have occured, it may be too late.
4- Many people will try to buy early after the next correction, watch points 1-2 carefully, don't lose any points as small investors jump the gun.
* Log on to your trading web site early and do what you have to to keep it active.
Web Investors Learn
Painful New Lessons
By TERRI CULLEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
When Lisa Walker tuned her television to CNBC early Monday to check
in on the markets, she couldn't believe her eyes.
The correction she had been waiting for
was finally at hand, and many of the
overpriced stocks the self-employed
Washington computer-systems specialist
had longed to include in her portfolio were
approaching attractive levels.
Ms. Walker's elation was to be short-lived, however, as she joined
thousands of other do-it-yourself investors whose fortunes this week
turned not on their own stock-picking savvy, but on the network-server
capacity of their on-line trading companies. The unprecedented volume of
trades logged in the markets, and the Web brokers' difficulty in managing
the trading surge, taught many investors hard lessons in Web-based
trading.
"A great deal of my income comes from stock-market investments," she
says, "so I was quite excited about Monday's drop." Not excited enough,
however, to send her rushing to access her account on Charles Schwab &
Co.'s Web site to shop among the rubble.
"I wasn't sure we'd seen the bottom yet," she says. Throughout that
nerve-wracking day she watched, anxiously, and waited.
So, evidently, did many other on-line investors, who took a wait-and-see
approach Monday as the Dow Jones Industrial Average tumbled to its
biggest one-day point drop in history after turmoil in the Asian equity
markets sparked a world-wide sell-off.
"I didn't buy or sell into the fall," says Scott Twite, an import/export
consultant in Minneapolis who also manages his own investments. Like
Ms. Walker, Mr. Twite had cash held in reserve waiting for his big chance
to "buy on the dips." "I planned ahead, did my homework and tried not to
trade in a frenzy. When the markets opened Tuesday, I was ready," he
says.
As was virtually everybody else. Monday's caution gave way to what
amounted to an all-out bull run early Tuesday, as small investors -- fearful
of missing out on what appeared to be turning into an massive recovery --
flooded their on-line trading accounts with buy orders.
The torrent overloaded the capacity of even the most state-of-the-art
on-line trading systems. "In terms of volume, Monday was a continuous
lava flow, but Tuesday was an avalanche," says Kim Shephard, a
spokesman for on-line discount broker E*Trade Group Inc.
Darrell Davis, vice president of information technology at Discover
Brokerage Direct, the on-line trading unit of Morgan Stanley, Dean Witter,
Discover & Co., says the volume at its site Tuesday was so overwhelming
that his computer technicians have had to go back to the drawing board.
"Up until this week we were using the 1987 crash as an example of a
heavy trading day, now obviously we have a new metric," he says.
As a result, many investors who relied solely on their Internet brokers for
trading quickly found themselves shut out of the market.
It was as if hundreds of high-priced quality stocks got tossed into the
bargain bin and small investors were locked out of the store, says Mr.
Twite. "It wasn't just a matter of being unable to get orders off, you
couldn't even get connected to the site," he says, referring to his account
with DLJ Direct, Donaldson, Lufkin & Jenrette Securities Corp.'s Web
trading unit.
Grant F. Smith, a Minneapolis Internet-site consultant working for a client
in Bogata, Columbia, had a similar experience with his e.Schwab account.
At first, he became frantic because he feared the delays were caused by
his Columbian Internet connection. "I had no trouble or delays getting into
any of my usual Web sites," he says. "But after about 50 tries [to access
the e.Schwab site], I was still unable to open my account."
"The site was slow all day [Tuesday] and we put a message up on the
home page that let people know," says Tom Taggart, a spokesman for
Schwab. "The Internet has some wonderful conveniences for investors, but
it's certainty going through some growing pains. We look at it as a great
tool for trading, but only one of many."
It wasn't access problems that plagued attorney Joseph Beltran of Morro
Bay, Calif., however, it was a matter of accountability, he claims, with his
on-line broker Waterhouse Securities. "With Waterhouse, I was able to
get to the site and execute one trade when the ask price was at $12 a
share," he says. "I placed an order for 1,000 shares, but I never got a
confirmation. After a number of calls, where I had to wait for 20 minutes
before I received a response, I was furious to find the trade was executed
at $2.25 above the ask."
Waterhouse Securities didn't return phone calls.
But despite the missed opportunities and trading glitches, most investors
have been understanding. "I'm not going to change my account because of
this," says Mr. Twite, "I'm a rational person and can see that the high
volume was the reason for this." He does, however, intend to keep an
account open at a full-service brokerage to serve as a back up in the
future.
Ms. Walker says her anger at not being able to access her on-line trading
accounts abated somewhat after she participated in several Web
discussion groups. "I had actually expected more angry responses, but
everybody was pretty laid back," she says. "When I discovered how
widespread the problem was it didn't make sense to me to continue to
fume."
But this week's contretemps have left many other investors eager to leave
their brokers behind. "I'm going to look for a more reliable service with
quick executions and quick confirmations, and I'll be more than happy to
pay a premium for that," says Mr. Beltran, "When you really need the
execution and it's not there, I shouldn't have to pay a premium for the
service."
And Mr. Smith of Minneapolis is having second thoughts about conducting
trades on-line at all. "I have lost confidence that the small investor gets a
fair shake during periods of high volatility." |
