Schwab Outlines Active Trading Tips for Investors Returning as the Market Rebounds

Thursday, October 1, 2009 8:54 am PDT

Dateline:

SAN FRANCISCO

Public Company Information:

NASDAQ:
SCHW

SAN FRANCISCO--(BUSINESS WIRE)--Charles Schwab today released a list of tips to help self-directed investors better manage their approach to trading as people return to the market amidst increased trading volumes.

“With investors expressing renewed faith in the market, Charles Schwab remains dedicated to providing traders with education and basic guidelines to improve their trading strategies,” noted Kelli Keough, vice president, Schwab Investor Services. “These tips will help traders to better manage risk while taking advantage of more sophisticated investing tactics, especially after their experiences this past year.”

  • Stick to a trading plan. Identify at the outset why you are entering or exiting a trade. Having a trading plan can help curb your emotions and keep you on course—if you stick to it. Diversification and a proper asset allocation plan are critical to success in any market environment: don’t allow your portfolio to become over-concentrated due to market appreciation.
  • Be mindful of the size of your positions. Taking on a position larger than you are comfortable with, in order to try to maximize gains, also increases your risk. Consider scaling in and out of positions when you feel the market may be reaching a high or low point.
  • Consider using limit orders. Identify an execution price and set limit orders to help minimize risk associated with market swings. Remember that although a limit order allows you to specify a price, there is no guarantee of an execution, even if the market moves and reaches your limit price.
  • Trade the trend. The trend can be your friend. Trying to pick tops and bottoms seldom works to your advantage. It is often better to enter or exit a position a little late than to be completely on the wrong side of the trade.
  • Consider ETFs rather than individual stocks. Exchange-traded funds (ETFs) can be a good way to gain exposure to sector or industry trends without buying individual stocks. ETFs allow you to participate in areas of the market while helping reduce the company-specific risks associated with buying individual stocks.
  • Set conditional orders (such as stop orders) consider volatility vs. price. Define profit and loss targets and set stop orders or bracket orders when you place your trade. Consider using stop orders by looking at the trading range, or volatility of the stock. But remember there is no guarantee that a stop order will be executed at or near the stop price.
  • Use extra caution when trading on margin. Leverage is a double-edged sword. When things are good, you tend to forget the downside of leverage; if things go bad, you can lose everything (and then some).
  • Procrastination seldom pays off. The cost of waiting for the perfect moment to invest often exceeds the benefit of even perfect timing. Since trying to pick tops and bottoms seldom works to your advantage, the best strategy for most investors is not to market-time at all. Instead, make a plan and invest according to it.

Exchange Traded Funds are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. For more complete information, including charges, expenses, investment objectives and potential risks, on a specific exchange traded fund, please call your Schwab representative at 800-435-4000 for a prospectus. Please read the prospectus carefully before you invest.

For More Information

Charles Schwab provides active traders with several trading platforms, free seminars and workshops, online education resources and 24-hour access to experienced trading specialists. For more information, please visit www.schwab.com/AT or call 800-435-9050.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.6 million client brokerage accounts, 1.5 million corporate retirement plan participants, 646,000 banking accounts, and $1.3 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Advisor Services division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (0909-11027)

Contact:

Charles Schwab
David Weiskopf, 415-667-0478
david.weiskopf@schwab.com
or
Intermarket Communications
Neil Shapiro, 212-754-5423
nshapiro@intermarket.com

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