Are you ready to do your trading online?

Want to get comfortably online and positioned for the next bull run? Here's how.

Becoming an online trader
The mechanics of opening an investment account are similar at both online and offline brokerages. You may open an individual, joint or custodial (for a minor) account on either a taxable or tax-deferred basis, or an individual retirement account for retirement investing.

If you choose to open a cash account, your investments will be limited to the amount in your account.

If you opt for a margin account, your broker will front you a line of credit with which to purchase stock and charge you interest on the margin loan (the amount of credit you use). Federal Reserve Board Regulation T requires that you have at least 50 percent of the price of any new stock purchase in your account and maintain on deposit an amount equal to 25 percent of its value. Your broker may require a higher margin, perhaps 30 percent to 35 percent, be kept in reserve, and may restrict or even forbid margin buying on some securities.

If you don't have the money to maintain the required equity, your broker may issue a margin call, which informs you they plan to sell some of your stock to make up the difference. The margin call is a courtesy, however; brokers have the power to bring your account into line without notifying you first.

Next, you need to deposit funds in your account; brokerage firms may require a minimum deposit, typically via check or automatic transfer from your bank account, or through deposit of existing stock, bonds or other holdings.

Your broker also will want to know a fair amount of personal and financial information about you in order to work on your behalf. You will be asked to designate where you would like to keep your funds between investments, as well.

Last, but certainly not least, your broker is required by law to fill out a suitability or "know your customer" questionnaire on you. For your protection, they need to know how much experience you have with investing, your approximate risk tolerance and your investment profile, typically classified as aggressive growth, growth, income or capital preservation.

Kid yourself (and your broker) here, and you may face uncomfortable risk down the road.

It's time to trade!
Ready to start trading online? You can do so in one of two ways.

A market order is used when speed is of the essence. It directs your broker to buy (or sell) so many shares of stock as quickly as possible, regardless of the price.

A limit order, as its name implies, places limits or conditions under which you wish to buy (or sell) a stock, typically when a stock reaches a certain price. The stock purchase (or sale) will not take place until it reaches that price limit.

The trading method you choose will depend in part on market conditions for the security you're buying. You may opt for a market order to take advantage of a sudden-strike opportunity, while a limit order may be your best bet if a stock is exhibiting volatility outside of your comfort level. But either method can just as easily disappoint by buying or selling too soon or too late to catch the best price.

To trade online effectively, you need to make sure you receive a real-time quote on the price of the stock you want to buy and mentally build in time for your order to be completed, especially in fast-moving markets where delays are commonplace.

Although online brokers often make claims of "instantaneous" trading, behind the scenes even online or direct brokers face a choice of markets, and options within markets, for executing your trade. Many of these market options pay a small per-share commission to the broker, further complicating the trade.

Because these options can and frequently do affect the ultimate buy or sell price, some online brokers allow you to designate which option you prefer they use to execute your order.

The trouble with day trading
A word of caution from the pros about abandoning your career for the pajama-clad life of a day trader: Those who made it look easy during the tech run were far more lucky than skilled.

"We had a lot of day traders in the marketplace through 2001," says Brotner. "We testified in Congress that 77 percent of the people who day trade lose money, and they lose all the way from a little amount to big amounts of money. The fact is, the same amount of professional traders who were in the marketplace in 1995 are still there, but those who thought they could make a living there are almost all gone."

Alvarez, who teaches courses on day trading, agrees.

"Day trading is speculation. That should be no more than 10 to 15 percent of your portfolio," he says. ""Within the first four months, if you get the proper training, you should be able to determine if you're going to be good at it."

Brotner estimates that learning curve will cost a minimum of $50,000.

Online or off, Alvarez says it's still the same old story: a fool and his money will soon part.

"Investing is a lifelong commitment if you're going to do it yourself. If you're not willing to learn how to analyze companies and stay on top of every quarterly or annual report, I say give your money to somebody to invest for you."

Whether you intend to dabble or day trade, make sure you research the various online brokerages first. Investingonline.org and the Securities and Exchange Commission's Internet and Online Trading site are two great places to get started.

Jay MacDonald is a contributing editor based in Florida.