The goal posts have moved

While the NASDAQ was swinging wildly during February and March, trading volumes via online brokers reached new records on each of the following days. Each day that recorded 80,000 plus trades was followed by reports of online brokers unable to meet demand, hiring additional customer support or increasing the capacity of their servers.

Many tech stocks are burning cash at unsupportable levels, floats have been put on hold and options are drowning. Those that have not fled tech stocks are waiting and hoping for a comeback. Others believe further falls are not far off and are hesitant to enter the market until volatility retreats. As a consequence online brokers are reported to be experiencing more than a proportional fall in trading volumes.

Such is the investor profile using online brokers. It’s easy to sign up and be a part of any dot com. A work colleague recently opened an online trading account with an online broker. He launched himself into Looksmart at $1.98 with little knowledge of the market, other than the stock had fallen from its highs in the $5.60’s and couldn’t go much further. He placed a bet, has been burnt and vowed never to trade again, until next time. Sound familiar ?

Online brokers, while not advising clients, possess an increasing array of market data and research services that are often freely available to new and experienced investors alike. If you’re unsure of your risk profile or unsure how to interpret market information and company research the old rules still apply – seek advice.

Those online brokers who joined the discount war while relying on February / March volumes to continue may need to rehash their revenue budgets in light of the recent declines. It would be a brave online broker to start another round of discounting if the current climate continues.

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