Many people who are considering online trading will already have the required kit at work or at home. For trading shares online, an IBM-compatible PC may be the best foundation hardware, because Macintosh computers are not compatible with all online brokers. Barclays Stockbrokers, Hargreaves Lansdown and Stocktrade are among the brokers whose websites don't perform via a Mac. If you already have a Mac, be sure that the online broker you choose provides a Mac-compatible service.

You should avoid cheap and cheerful internet service providers (ISPs) which might let you down with poor line quality or bandwidth. It could cost you dear if your attempt to trade time-sensitive deals is interrupted or curtailed.

For trading, you may need a more up-to-date version of a browser - Netscape 4.7 or Explorer 5.01 - to ensure you are protected by 128-bit encryption, the most sophisticated level of online data security. Check with your broker that your hardware and software make the grade. If you plan to use a computer at work for trading, check that the company firewall does not prevent you from accessing the broker sites you choose. Java application broker sites will almost certainly be blocked by your company's firewall.

Finding a broker

An experienced trader of shares will probably have an established relationship with an offline broker. If your traditional broker has an online arm, that is an obvious place to look first. Then compare its service to the competition.

This information should also help inexperienced traders to choose a broker. Decide what is important to you - cost, research, support services, 24-hour dealing - and pick out a few names. Then try surfing between the broker sites. Many will let you access a number of general information pages, giving you a feel for the speed, quality of information and the timeliness of data and news.

For more interactive help on choosing a broker, try some of the generic websites such as Investors Chronicle, European Investor, FTyourmoney and Investopolis have pages dedicated to the different brokers in the market and how to choose one. The more sophisticated International Investor International, for example, lets you rank brokers by different criteria.

The advantage of going online to choose a broker is that information websites will keep pace with the fast-changing broking environment, where price cuts and new launches seem to happen every other week.

Setting up an account

You will normally need to wait a few days between choosing a broker and being given the green light to start trading. Nearly all the online brokers allow you to complete at least some of the application process online, but most will ask you to print off some forms, sign them and send them in by post. Only Hargreaves Lansdown does everything by post.

Most brokers ask you set up a trading account with them. You can usually transfer the funds from your bank account with a debit card payment. Alternatively, you can send a cheque in the post or transfer existing shareholdings to the account. Most will accept share transfers free of charge, although RedM and The Share Centre may impose a modest charge.

Some brokers enforce no minimum account balance and merely require you to have enough money in the account to fund trades as they are executed. Others ask you for a minimum injection of funds, typically £1,000, although the figure can be as high as £10,000 (with Killik).

Two brokers - NatWest and Halifax - do not require or even allow you to open trading accounts, but instead ask for direct debit details which will be used to charge you for trades as they are executed. This frees you up to hold your cash in other accounts where you might earn better interest.

Keeping cash in a trading account is not too onerous, however. All the online brokers pay decent interest on cash balances. The least generous is Schwab, which pays between 1 per cent and 4.75 per cent depending on how much you have on deposit. Xest, on the other hand, will pay up to 5.8 per cent. A few pay flat rates - 5.2 per cent from Selftrade is the best, though Sharepeople has had a 5.6 per cent special offer over the summer.

Getting your house in order

If you plan to trade regularly, it is probably a good idea to set up a system to keep track of your trades before the paperwork piles up.

As an online trader, you are most likely to hold your shares via your broker's "nominee" service. One of the administrative benefits is that you get no paper certificates each time you buy a stock. A nominee service should also keep a tally of your holdings and send you an account for tax purposes each year.

There are plenty of online tools available either through your broker or through third party sites, which will help you to keep track of the value of your investments and tax position. But whether you use these, a financial software package - such as Updata - or your own pen and paper system, it is worth remembering some golden rules of sharedealing record keeping.

Make sure you have money to deal. If you have a trading account with your broker, keep sufficient funds in it. Taking funds from another account, without waiting three days for the transfer to take effect, will increase the cost of your deal - most banks charge a £20 fee for same-day cash transfers.

Keep a record of your trades. Your broker should do this automatically online, but you may want a duplicate in case the site is down at a crucial time.

Keep your contract notes - records of your buys and sells. You will need them when filling in your tax return, and the Inland Revenue may ask you to produce them as proof. Most online brokers will send you paper contract notes through the post, but some - Halifax and iDealing, for example - prefer e-mail.

An online record and paper contract notes should be enough to enable you to file your tax return. In the US, some broker sites, such as E*Trade, will automatically fill in your return for you. Such a facility has yet to arrive in the UK.

Some basics of dealing

Inexperienced traders should take things steady at first. Stories abound of debutant investors getting a "hot tip", rushing to the first broker they find and putting £10,000 on a stock they had barely heard of before. Too often, the tip proves to be a rogue one and tussles ensue with the broker, too, because you hadn't read the terms and conditions thoroughly. Do your broker research first. Register with a couple to check out the quality of service and back-up.

Take time to check out share tips - especially if you've got them from an online chatroom, where unscrupulous fellow investors may have a lot to gain from ramping up a share price with false rumours. Do your fundamental research into a company.

If you are a "chartist" and believe share prices follow patterns, take time to look at all the charts you can. Don't invest all at once. Inexperienced investors, in particular, can benefit from drip-feeding money into a share.

If you have £2,000 to invest in a stock, put in half one week and half a week or a month later.