Is volatility really good for online brokers? This question has come up recently as the online brokerage firms discuss what has happened to their volume during the up and downs of the second quarter of 2010. Many investors have opted to get out of their investments rather than watch them go down again like they did in 2008. I know I watched some of my investments decrease by one/half during this period. My investment portfolio did eventually come back in 2009. However, many investors do not have the stomach to watch that happen again. There has been a lot of talk about double dip recession.

The online brokers do have something to say about the outlook of the stock market, and how it relates to their business. Charles Schwab feels that the “worst of the environmental pressure on our revenues is now behind us”. On the other hand TD Ameritrade has cut its fiscal-year earnings forecast due to low intraday volatility and low interest rates. E*Trade indicated that its May volume did increase but was down from where it was the previous year.

There does not seem to be a consensus opinion on where the stock market is going to go. Those investors who feel that the market will turn around may be choosing to invest in online brokerages. This is due to the reward of low commissions and trading costs. If the stock market is going to have volatility, then it would be best to have low trading costs so that the profits from the swings is not eaten up by investment costs. The swing profit may still be there, but could be small. It is possible to make money on the volatility of stock prices if you are able to time it correctly, and you keep your costs down.

The volatility may actually be good for online brokerage firms. Wells Fargo in their analysis of the second half of 2010 feels that the stock market will trade in a range, and that we are in for a bumpy ride. The savvy investor still may be able to make money on their investment strategy if they choose wisely. This may include investing in gold, options or a properly timed swing trading strategy.

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Tags: intraday volatility, make money, online brokerages, Stock Market, volatility