Online trading helps to grow your cash pile; in trying to increase their retirement funds, some have been burnt by a bear market. Others have taken the bull by its horns and managed to retire early and continue to make a few hundred dollars a week as pocket money through online trading.

MANY OF us cherish the dream of earning enough money to allow us to retire at the age of 45. With prudent financial planning of where to put your cash pile, many have managed to retire early to enjoy life with their families.

There are many success stories about those who wisely invested their savings in the correct stocks and continue to make money after retirement. There are also many sad stories about some who mortgaged their family homes to speculate in stocks and end up renting a house to live.

With the growth of the Internet and the simplification of online trading, making money part time has become a hobby for many employees holding a steady job. They study the performance of selected stocks and key in their orders at the broker's Web site after 6 pm then they forget about the orders till they return from work the following day to see if their purchase or sale of stocks are done.

With their trading account linked to their bank, payment for purchases is done via the Internet and payments from the broker are credited electronically to their bank accounts.

The advantage of online trading is that the investor does not need to talk on the phone with his remisier. Sometimes, the remisier may dissuade the investor from putting his dollars into a particular stock as he may have some additional negative information. If the trader has done his homework, he should go ahead and make the purchase anyway. He should only refer to his remisier when he requires specific information about the counter. Although he trades online, his remisier still gets the commission on his trades although the commission is less when trading online.

In the United States, there are day traders who trade 10, 20, 50 or hundreds of times a day. Their aim is to ride the market up and down to take out quick profits within a day or within a few days. Under normal circumstances, they sell all the stocks purchased at the end of the trading day.

According to Carol Troy in her book Understanding Electronic Day Trading, "The mental and physical stamina demanded by this particular twitch game is mind-boggling. The top player needs the discipline of a Zen monk, the mind-body connection of an elite athlete, and the focused concentration of a chess master. One pop of the mouse, you buy; another pop, you sell. Make a mistake and you pay for it. There are no corrections, no order cancellations, as there are with online brokers".

Startup Capital

To invest in stocks, you need some capital--$25,000 is a tidy sum as a start and the larger your capital, the easier it is to make some profits. Having more funds means that you have more holding power. If you trade on borrowed funds, you may have to pay exorbitant interest if you happen to be stuck with a stock that plunges.

For traders who need extra credit to buy shares, they may apply for margin financing facility from the broking house. This allows them to have an extra seven-day interest-free grace period after the due date for all purchases funded under this facility. The margin financing facility is secured by a pledge of cash and/or marginable shares as collateral. The trader may obtain financing of up to the maximum of 3.5 times the amount of collateral pledged.

Selecting an Online Broker

To commence online trading, you should select an online broker from the members of the Singapore Stock Exchange. Some of their Web sites are more friendly than others while others offer more free features to assist in your trading decisions.

These are some features you should look out for in the online trading site:

* User-friendly screen. Some sites allow the trader to customise the screen including the choice of colours. Other sites allow the user to open more than one window to monitor different aspects of his trade.

* Streaming real-time quotes that is free. This is very important as prices change every second when the market is open. On studying the number of sellers against the number of buyers, you can decide what price you need to secure the order.

* Free intra-day charts. This feature displays charts plotted with the time and sales data.

* Customisation of a Watchlist. This shows the stocks that you are monitoring and the live prices. A sample Watchlist is shown in Figure 1.

[FIGURE 1 OMITTED]

* Portfolio. Ability to look at your portfolio to see the profit or loss you made over a specific period of time. This feature is good only if you trade with one broking house. Many experienced traders use more than one trading house so the realised or unrealised profts or losses may not be accurate in the portfolio with one particular broking house.

* Stock alert feature. This is a very useful feature where you can key in selected stocks you are interested in. You put in a price for the system to alert you either via your E-mail or in the form of a phone message. This feature is used by traders who have no access to the Internet as the travel in the course of their duties. Many broking houses offer this service without charge.

With electronic trading you can make wiser investment decisions with trading tools such as:

* Trade Summary, which displays actual trades done by price.

* Time and Sales, which displays actual transactions done for that particular stock sorted by time, and

* Market Depth is a subscription service which displays the SGX stocks in the ready market of up to 50 levels of bid and offer prices.

Do your Homework

Selecting profitable stocks to invest in requires much work on the part of the investor. If picking the winning stocks were so easy, there will be many Singaporeans on the list. Picking stocks that will grow your money requires skill, research, and some luck at times.

You need to gather information about the listed companies and the economy in general. You will spend a lot of your time gathering information from the Worldwide Web, publications, radio and television.

CNBC and Bloomberg cable television provides updated information 24 hours a day. Channel News Asia has a useful business programme each week night featuring Singapore businesses. Many investors read the Business Times, The Edge, and the business pages of the Straits Times to keep themselves updated about industry and economic news.

Online resources include the Singapore Stock Exchange, SGX, Web site where you can get the latest company announcements and the annual reports of the listed companies in PDF files. Take your time to study the annual reports as the financial information there will help you decide if the company's stocks are worth investing in. For a fee, you can subscribe to reports by stock analysts who make useful recommendations on which stocks to buy or sell.

Narrow your Focus

Drilling down into an industry, for example, disk drive component suppliers inside a larger information technology sector, allows you to pay more attention to a narrower universe of stocks.

As a start, you don't want to be a contrarian looking for an underpriced stock that will make money in two of three years. That is for the long-term investor who can afford to park his funds with certain selected stocks.

Other investors may want to spread their risks by investing in shares in more than one industry. In the past year, those who bet their money on property shares would have made good profits. The prices of such shares have continued to climb but some analysts warn about the bursting of the property bubble.

It seems to be wiser to put your extra funds in property shares, for example, rather than investing in physical property which can be very expensive considering the high interest rates. Those days when merely booking a new apartment can be turned to gold a year later are over. However, investing in property stocks do not require huge capital and one can take profits in the shorter term. To spread the risks, many have put their money into real estate investment trusts, Reits.

I spoke to a remisier who wants to be known as John Ong for this article. He has been in this line for 36 years. He says that those clients who make big sums from stock trading "go for dividend yield. They will sell their stocks when the counter goes ex-dividend or when the price of the counter appreciates. They invest in companies that do not have high gearing."

Gearing compares some form of owner's equity or capital to borrowed funds. Companies with high gearing are perceived to be riskier, as it suggests that they have more obligations to creditors and could be more vulnerable during industry downturns. It should be noted that some industries generally have higher gearing than others. Before putting your cash into a stock, learn more about the management of the company. Good management matters in the long term.

John has been fortunate in his many years as a remisier. Even during the market crash when some of his clients couldn't pay their debts to the broker, John had to pay on their behalf, but the sums are not staggering. Yes, the remisier is responsible for the debts of the trader, so he has to be very careful when granting credit especially to those who are more gamblers out to make a quick buck from the market.

After 36 years of stocks and shares, John is looking forward to retiring. As a stock broker, he can't afford the time to go for long vacations. He wants to retire but his loyal clients are so used to trading through him that they persuade him to stay on for a few more years. Many of his clients are old-timers who are not good with the computer and so are unable to trade online.