WASHINGTON (AP) -- As online trading swells with millions of armchair investors getting caught up in the excitement, the chairman of the Securities and Exchange Commission has a warning: Be careful out there in cyberspace.

In a rare public statement to individual investors, Arthur Levitt, who heads the market watchdog agency, told people Wednesday to use as much caution trading over the Internet as when going through a broker.Levitt's remarks came amid regulators' concern over the recent wild price swings and crushing trading volume of the Nasdaq Stock Market, especially among hot Internet stocks.

"Investing in the stock market will always entail risk, no matter how you do it," Levitt said in an interview with The Associated Press. "It is just as easy, if not more so, to lose money through the click of a button as it is to make it."

By year's end, an estimated 10 million amateur investors will do at least occasional trading over the Internet, with online brokerage accounts representing about one-quarter of all retail stock trades -- a trend that prompted Levitt to warn investors in the interview and a press statement issued later.

People trading online should "remember the investment basics, and not allow the ease and speed with which they can trade to lull them either into a false sense of security or encourage them to trade too quickly or too often," he said.

In all kinds of trading, Levitt advised:

-- Follow three "golden rules": Know what you are buying, know the ground rules under which you buy or sell a stock or bond, and know the level of risk to which you're exposing yourself.

-- Be very wary of buying securities on margin, with borrowed money.

-- One way you can reduce your risk in a turbulent market is by using limit orders, as opposed to market orders, when placing trades in "hot" stocks.

Market orders are executed fully and promptly, without regard to price. In volatile markets, execution may be at a price that is very different from the current quoted price of the stock.

Limit orders, on the other hand, are executed only at a price specified by the investor or better. Investors using limit orders benefit from price protection, but there is the possibility that the order won't be executed.

For example, Levitt noted, an investor might want to buy a newly released stock, called an initial public offering, that was trading at $9 a share. If the investor failed to specify a maximum price using a limit order, he or she could end up paying $60, $90 a share or even more when the market order was executed.

Levitt also made his first public comments about day trading, a risky endeavor used by a small but growing breed of investors, many of whom have abandoned their regular jobs for the prospect of quick riches. Day traders seek out stocks solely for their sharp price swings, buying and selling them quickly to capitalize on the short-term movement in price and rarely holding a position overnight.

Strategies such as day trading can be "highly risky" for Main Street investors, who should engage in it only "with funds they can afford to lose," Levitt said. He expressed dismay at stories he had heard of people putting up their student loan money, mortgages or retirement savings to finance their day trading.

"Investment should be for the long run, not for minutes or hours," he said.

State securities regulators have stepped up their scrutiny of day-trading companies, which sell training courses to novice investors. A handful of regulators, particularly in Massachusetts, have filed fraud charges.

Operators of the day-trading companies acknowledge they're not for everyone, but they say the state regulators are unfairly tarnishing the industry because of a few rogue firms that may have misled investors about potential profits.

James H. Lee, chairman and president of the Electronic Traders Association, commended Levitt for his concern. He said most day-trading companies act responsibly and disclose the risks to investors "because they are getting into a professional's game."

SEC regulators have tried to encourage technological development in the financial markets while also protecting investors, and are not "choking off" day trading, Lee said.