Online trading not best option for newcomers

INTERNET: Online trading has had its ups and downs in the past couple of years, with the misfortunes of apprentice day- traders providing much of the bad news, writes Una McCaffrey

In reality, trading shares on the internet can represent a cheap and secure alternative to buying and selling through traditional channels.

The problem, and the reason for much of the bad publicity surrounding the various online trading services on offer, is that this option is most definitely not the best one for all.

Only well-informed and experienced traders are truly safe online, largely because it's just too easy to click your fortune away.

The safest way to trade online comes in setting up an account with your existing broker.

This way, you benefit from the speed and efficiency of the online option but have the considerable back-up of reliable research and advice.

In the Republic, just three of the traditional stockbroking houses - Goodbody Stockbrokers, Merrion Capital and NCB - offer online trading facilities to their customers, with conditions varying according to broker.

Clients of Goodbody Online, for example, can buy and sell Irish, British and US stocks at a basic fee of €31.74 (£25) per trade, plus commission and additional charges such as levies and stamp duty.

A minimum opening balance of €1,270 applies to the service.

The alternative to using the online services of conventional brokers is to set up an account with a web-based broker.

This will be the cheaper option but the low price must be balanced against lack of support and guidance, with many such companies offering little more than a trading facility.

Well-regarded online brokers include www.etrade.com and www.schwab.com, with Irish-based investors eligible to open accounts on both.

E-Trade UK is currently offering new investors deals at £4.95 sterling (€8) each for their first 30 days of trading on Irish and UK stocks, with this price rising to £14.95 sterling thereafter. Irish people who wish to invest in US securities will need to set up another account with E-Trade's US site.

Back at home, a new kid on the web-based trading block is OctagonOnline.ie, an Irish service introduced last month. Using Octagon's system, a stock purchase worth $5,000 (€5,607) will cost $20.

Potential customers, who will be offered a free demonstration of the system, will have to set up a bank account in their own name in a nominated bank and lodge $10,000 before they can trade.