I understand that Online Trading Academy instruction will prepare me to actively trade securities and/or other financial
instruments for my own account at an appropriate financial firm which utilizes the Electronic transmissions of securities and
other financial instruments orders to execute trades for its customers. I understand that this course is not preparation to be
a Licensed Broker in the financial industry or will help me get a job.
Online Trading Academy Training Program should not be construed as a recommendation or an offer to buy or sell any security
or the suitability of any investment strategy for Student. The purchase, sale, or advice regarding any security, other financial
instrument or system can only be performed by a licensed Industry representative; such as, but not limited to a Broker/Dealer,
Introducing Broker, FCM and and/or Registered Investment Advisor. Neither Online Trading Academy nor its representatives are
licensed to make such advisements. All purchasers of the Online Trading Academy Training Program or other Online Trading Academy
products are encouraged to speak with a licensed representative of their choice regarding the appropriateness of
investing/trading or of any particular investment/trading strategy.
Online Trading Academy training centers are independently owned and operated and each location may set its own fees for
We Help You Minimize Trading Risk
At Online Trading Academy, we understand the risks involved in short term trading and emphasize risk management in our
classes. Enroll in one of our free seminars to find out more!
Understanding Trading Risks
Electronic active trading involves special risks and may not be suitable for everyone. Electronic active trading may also
involve a high volume of trading activity. Each trade generates a commission and the total daily commission on such a high
volume of trading can be considerable.
Electronic active trading accounts should be considered speculative in nature with the objective being to generate short-term
profits. This activity may result in the loss of more than 100% of an investment, which is the sole responsibility of the
customer. An electronic active trader should understand the operation of a margin account under various market conditions and
review his or her investment objectives, financial resources and risk tolerances to determine whether margin trading is
appropriate for them. The increased leverage which margin provides may heighten risk substantially, including the risk of loss
in excess of 100% of an investment.
STATEMENT BY CHAIRMAN ARTHUR LEVITT SECURITIES AND EXCHANGE COMMISSION CONCERNING ON-LINE TRADING
JANUARY 27, 1999
Chairman Arthur Levitt today issued the following statement to investors:
The Internet and other new technologies are in many ways transforming how our capital markets operate. There are clear benefits
to these changes including lower costs and faster access to the market for investors. I believe that investors need to remember
the investment basics, and not allow the ease and speed with which they can trade to lull them either into a false sense of
security or encourage them to trade too quickly or too often.
Over the last two years, particularly in recent months, the SEC has been hearing concerns about retail, on-line (Internet)
investing. In fact, the number of complaints concerning on-line investing has increased 330 percent in the last year. Some of
the issues raised specifically relate to on-line trading, others are generic to all investing. The majority of them can be
addressed through better education and investors ensuring that they have done their homework.
Every day, more and more Americans are investing in the stock market, and many of them are doing so through the Internet.
On-line brokerage accounts account for approximately 25 percent of all retail stock trades. And, the number of on-line
brokerage accounts is expected to exceed 10 million by the end of the year.
While the manner in which orders are executed may be changing, the time-honored principles of evaluating a stock have not.
An investor's consideration of the fundamentals of a company-net earnings, P/E ratios, the products or services offered by the
company-should never lose their underlying importance.
Investing in the stock market-however you do it and however easy it may be-will always entail risk. I would be very concerned
if investors allow the ease with which they can make trades to shortcut or bypass the three golden rules for all investors:
(1) Know what you are buying; (2) Know the ground rules under which you buy and sell a stock or bond; and (3) Know the level of
risk you are undertaking. On-line investors should remember that it is just as easy, if not more, to lose money through the click
of a button as it is to make it.
In recent months, we have begun to identify a number of issues every on-line investor should be aware of. First, investors
must understand the issues and limitations of on-line investing. You may occasionally experience delays on these new systems.
Demand has grown so quickly that many firms are racing to keep pace with it. In the meantime, you may have trouble getting
on-line or receiving timely confirmations of trade executions. You should not always expect "instantaneous" execution
and reporting. There can and will be delays in electronic systems. You should investigate and understand options and alternatives
to executing and confirming your orders if you encounter on-line problems.
Second, investors may sometimes be surprised at how quickly stock prices actually move. For example, many technology stocks
have recently had dramatic and rapid price movements. When many investors attempt to purchase (or sell) the same stock at the
same time, the price can move very quickly. Just because you see a price on your computer screen doesn't mean that you will
always be able to get that price in a rapidly changing market. You should take precautions to ensure that you do not end up
paying much more for a stock than you intended or can afford.
One way to do this is to use limit orders rather than market orders when submitting a trade in a "hot" stock. The
result for investors that do not limit their risk can be quite surprising. Say an investor wanted to buy a stock in an IPO that
was trading earlier at $9.00 and failed to specify the maximum they were willing to pay using a limit order. That investor could
end up paying whatever price the stock has moved to at the time his order reaches the market -- $60, $90 or even more. If, on
the other hand, the investor submitted a limit order to buy the stock at $11.00 or less, the order would only be executed if the
market price had not moved past that level. Investors should understand the risk associated with trading in a rapidly moving
market and make sure that they take all possible actions to control their risk.
Third, I am concerned that investors buying securities on margin may not fully understand the risks involved. In volatile
markets, investors who have put up an initial margin payment for a stock may find themselves being required to provide additional
cash (maintenance margin) if the price of the stock subsequently falls. If the funds are not paid in a timely manner, the
brokerage firm has the right to sell the securities and charge any loss to the investor. When you buy stock on margin, you are
borrowing money. And as the stock price changes, you may be required to increase the cash investment. Simply put, you should make
sure that you do not over-extend.
Fourth, while new technology available to retail investors may resemble that of professional traders, retail investors should
exercise caution before imitating the style of trading and risks undertaken by market professionals. For most individuals, the
stock market should be used for investment not trading. Strategies such as day trading can be highly risky, and retail investors
engaging in such activities should do so with funds they can afford to lose. I am very concerned when I hear of stories of student loan money, second mortgages or retirement funds being used to engage in this type of activity. Investment should be for the long-run, not for minutes or hours.
Millions of new investors have taken advantage of the unprecedented access and individual control the Internet provides. But,
new opportunities present all of us with new responsibilities, challenges and risks. The SEC will do everything it can to protect
and inform investors during this time of great innovation and change. But, investor protection-at its most basic and effective
level-starts with the investor. I say to all investors-whether you invest on-line, on the phone, or in-person-know what you are
buying, what the ground rules are, and what level of risk you are assuming.
Important Information about trading Foreign Exchange.
Trading foreign exchange is not for everyone. Trading foreign exchange on margin carries a high level of risk, and may not
be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade
foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The
possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not
invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading,
and seek advice from an independent financial advisor if you have any doubts.