So you have activated your internet trading account and your demat account and you are all set to trade online. You are free to trade in equities, futures, options and currency derivatives. But, just hold on for a moment! Have you grasped the basic to know about investing in shares? Do you know about the things to know before investing in share market? Here is a 10-point checklist before trading online.
10-point checklist before you start trading online
These 10 points are not necessarily exhaustive but cover most of the important points that need to be focused on.
The first and foremost thing you need to do is to go through the demo that is available on the website of your trading platform. That explains the entire process in full detail. Also put in some very small trades and check the entire process flow when you buy; the debit to the bank account, the execution in the trading account and the credit to the demat account. When you sell, check the reverse action.
In online (internet) trading you can execute transactions at the click of a button. In fact, you can operate your trading account, bank account and demat account from PC or laptop itself. Being an internet driven order, you need to exercise abundant caution while putting online trades.
In online trading, the importance of password cannot be overestimated. It forms the basis for you to operate your trading account, your bank account and your demat account. You can make your password as complex and as dynamic as possible. Ideally, avoid using your name, date of birth or marriage anniversary as your password. Never write down a password on a piece of paper or in a text file on your PC. Change your password at frequent intervals; at least once in 15 days.
Normally, most of the trading websites will offer you internet trading with double authentication. This double authentication can either be a random code generated or a random OTP generated or a second level password. Make full use of this facility as it will enable you to double protect your trading account and your transactions.
The basic rule is that you must never access your trading account from computers that you are unfamiliar with. Avoid using PCs of others and especially at cyber cafes. The PC or laptop that you are using must have an anti-virus and anti-spyware program installed and regularly updated. If you find the system is slowing or multiple windows opening when you try to access your trading account then shut down the computer as its security could have been compromised.
Be cautious to use a dedicated internet connection for online trading and avoid using cyber cafe connections and public wi-fi in airports, lounges etc. In case your browser (Chrome or Explorer) offers to store your password, just say no. Always use a dial-up connection or a secured wi-fi connection to access your trading account.
It is quite common to keep your trading session open when you go to grab a sandwich or a coffee. That is again an invitation for mischief. You must be logged out of your trading account, the moment you step out of your desk. Online accounts automatically log you out if the system is idle for some time but don’t take that risk. Ensure that your cache is cleared at the end of each day. That means; you have to enter your user name and password each time, but it is worth the trouble.
Avoid downloading any unknown software or programs from CNET or FILEHIPPO because it is a freeware. These are not safety guaranteed. Also, ensure that you are trading behind a firewall as that will successfully repel most of the attacks.
Don’t create cookies on your browser. Type in the internet trading address each time. Avoid using shortcuts and hyperlinks as these can be vulnerable to attacks. When your trading account opens first ensure that the web address is prefixed by https:// as it indicates you have entered a secure area.
Last but not the least, are you regularly checking all the trail reports. Check your order book and trade book each day and cross check with the e-contract notes that you receive. Ensure that shares are credited into your demat account on T+2 and money comes into your bank on T+2 by the end of the day. A basic audit trail will protect you from a variety of operational hitches.
If you are new to the use of computers, then a lot of this stuff looks like rocket science. But don’t worry, this quite simple and just requires a little bit of effort from your side. In this world, there is nothing like fool-proof security, not even at Fort Knox. It is all about making it very difficult to break into your trading account. Once you are familiar with internet security, your job on the internet is largely done and you are ready to trade effectively in the markets.