Understanding the Stock Market is Easy and Fun - Part Nine - How to Buy Stock
Are having trouble understanding the stock market? Keep reading because in this article I am going to explain everything you need to know about understanding the stock market.
Understanding the stock market is not as difficult as it's made out to be.
In this article I am going to teach you how much stock you should buy and how to buy it.
The first thing you need to know about buying stock is that you will pay the same service charges per trade.
For example if you buy $100 of xyz share you will pay $107, $100 for the shares and $7 for the service charges.
If you buy those $100 worth of shares in ten separate purchases you will pay $170.
Therefore it is advantages to buy large amounts of shares at a time.
When buying stocks you will need to decide if you are going to buy round lots or odd lots.
A round lot is the purchase of a 100 shares, while an odd lot is a purchase of anything less than a 100 shares.
There are also a number of shares that are sold in groups of 10; these are known as cabinet stocks.
Shares that are sold in groups of ten like this are usually the most expensive.
There are two advantages to buying shares in round lots.
Firstly you will be paying far fewer service charges and secondly you will usually have the advantage of lower prices per share.
If you are a smaller investor who wants to buy round lots you can a) deposit money into your brokerage account until you have enough to buy the round lot and b) group together with other investors to buy the lot.
When you purchase stock it is important to consider your timing.
If you want to the broker to complete the purchase on the day you order then you put in what is known as a day order.
The vast majority of orders are day orders.
There are also three other kinds of order they are.
· Good through week (GTW) - this means the order will remain open until the last trading day or session of the week.
· Good through month (GTM) - this means the order will stay open until the last trading day of the month.
· Good until cancelled (GTC) - this means the order will stay open until the investor cancels it.
Next you will need to tell the broker how much you want to pay for the purchase.
You do this by giving one of the following orders.
· Market orders - these are the most commonly given orders.
When you place a market order it simply instructs the broker to immediately purchase or sell a certain number of shares.
· Limit orders - this order places a limit on the price the investor is willing to pay to purchase the stock.
Limit orders can also be used to instruct the broker the purchase stock at a lower price than the current market price or sell stock at a price higher than the current market price.
· Stop orders - by using a stop order the investor limits the fluctuations of the price at which they are willing to own the stock.
In other words the stop order is used to keep an investor from losing money they have already made on long and short positions.
A long position means that the investor owns the share of stock outright and has full rights to that stock.
A short position means that the investor has sold stock that they have borrowed with the intention of returning the stock by repurchasing it at a later time when the price has dropped.
For example, you buy $10 worth of xyz shares.
The price then rises and you make a profit.
You're happy about this but suspect that xyz will later drop.
To protect your profit you give your broker a buy stock order, this means that should the stock drop below a certain amount the broker will sell it and save you from loosing your profit.
As you can see understanding the stock market is easy and fun.
Understanding the stock market is not as difficult as it's made out to be.
In this article I am going to teach you how much stock you should buy and how to buy it.
The first thing you need to know about buying stock is that you will pay the same service charges per trade.
For example if you buy $100 of xyz share you will pay $107, $100 for the shares and $7 for the service charges.
If you buy those $100 worth of shares in ten separate purchases you will pay $170.
Therefore it is advantages to buy large amounts of shares at a time.
When buying stocks you will need to decide if you are going to buy round lots or odd lots.
A round lot is the purchase of a 100 shares, while an odd lot is a purchase of anything less than a 100 shares.
There are also a number of shares that are sold in groups of 10; these are known as cabinet stocks.
Shares that are sold in groups of ten like this are usually the most expensive.
There are two advantages to buying shares in round lots.
Firstly you will be paying far fewer service charges and secondly you will usually have the advantage of lower prices per share.
If you are a smaller investor who wants to buy round lots you can a) deposit money into your brokerage account until you have enough to buy the round lot and b) group together with other investors to buy the lot.
When you purchase stock it is important to consider your timing.
If you want to the broker to complete the purchase on the day you order then you put in what is known as a day order.
The vast majority of orders are day orders.
There are also three other kinds of order they are.
· Good through week (GTW) - this means the order will remain open until the last trading day or session of the week.
· Good through month (GTM) - this means the order will stay open until the last trading day of the month.
· Good until cancelled (GTC) - this means the order will stay open until the investor cancels it.
Next you will need to tell the broker how much you want to pay for the purchase.
You do this by giving one of the following orders.
· Market orders - these are the most commonly given orders.
When you place a market order it simply instructs the broker to immediately purchase or sell a certain number of shares.
· Limit orders - this order places a limit on the price the investor is willing to pay to purchase the stock.
Limit orders can also be used to instruct the broker the purchase stock at a lower price than the current market price or sell stock at a price higher than the current market price.
· Stop orders - by using a stop order the investor limits the fluctuations of the price at which they are willing to own the stock.
In other words the stop order is used to keep an investor from losing money they have already made on long and short positions.
A long position means that the investor owns the share of stock outright and has full rights to that stock.
A short position means that the investor has sold stock that they have borrowed with the intention of returning the stock by repurchasing it at a later time when the price has dropped.
For example, you buy $10 worth of xyz shares.
The price then rises and you make a profit.
You're happy about this but suspect that xyz will later drop.
To protect your profit you give your broker a buy stock order, this means that should the stock drop below a certain amount the broker will sell it and save you from loosing your profit.
As you can see understanding the stock market is easy and fun.