How to trade stocks online
So you opened your first online discount brokerage account and put some money into it. You are all set to trade stocks online. But how to start?
Learning where to start investing in the market can be daunting for beginners. But here’s the good news: If you’ve ever gone through the forms needed to open a brokerage account and have money transferred into it, this was the hardest part. Learning how to use this account to buy and sell stocks is actually quite easy, as we’ll now show you with this simple three-step guide to getting started trading.
Online stock trading really comes down to three steps: login, find your ticker and fill in the blanks.
Step 1: Log in
Regardless of the broker you use, the first step to trading stocks is to log into your discount broker’s website. Enter the username and password you chose during account setup. Click “Login” and you should be taken to your broker’s main page.
Step 2: Find your ticker
Presumably, you have a stock in mind that you want to buy, right? Suppose you want to invest in shares of Bank of America (NYSE: BAC) Stock. Statistically, this seems a likely choice. After all, Bank of America was the most active stock traded on the New York Stock Exchange on the last trading day of 2016 – and the first trading day of 2017 too!
However, before you can buy and sell Bank of America stock, you need to know how your broker refers to it: by its “stock ticker.” A ticker is a unique series of one to five letters, each identifying one of the approximately 7,000 stocks trading in the United States today.
There are many ways to learn the stock symbol of a company. Here is a simple one: click on Yahoo! Finance (Here’s a link.) Find the search box in the top center and start typing the words “Bank of America” into the box. Halfway through your entry, the search engine may suggest “BAC, Bank of America Corporation”. And bingo! It’s the one you want.
This three-letter stock symbol is how the market refers to shares of Bank of America.
Step 3: Fill in the blanks
Now that you know what you want to buy, you need to find the right “button” on your brokerage account to buy it. It could be anywhere, depending on the broker you use, but it’s probably some variation of “trade” or “trading”. Click on it and a box containing several empty fields should appear, in which you will enter the following information:
- What you want to do (“buy”)
- The number of shares you want to buy (say “100”)
- The name of the stock you want to buy (BAC)
- The price you are willing to pay per share (currently Bank of America shares are around $23)
- The type of order
- And the lead time of the order
Answering “100”, “BAC”, and “23.00” will create an order to buy 100 shares of Bank of America, at a cost of $2,300 – plus a small commission of perhaps $10. But let’s dig a little deeper into these last two points.
The two most common order types are “market” and “limit”, but your broker may offer other options – “stop loss” or “stop limit”, for example. Rather than confuse you with the details of what it all means, here’s my advice: always choose “limit”.
With a limit order, you can be sure that you will never pay more than the price you enter – or sell for less. As simple as that. A market order, on the other hand, will execute at whatever price the stock is trading at the time you enter it, and it may pay out a lot more than expected.
Your broker may offer you even more options for how long your order will remain in effect. It can “fill or kill” immediately, expire at the end of the day, be valid only during normal market trading hours — or only outside of these hours, or remain “valid until cancelled”, for example.
Your safest choice? Set your order to expire at the end of the day, and you’ll never forget you placed an order for something. You will never “accidentally” buy a stock days or weeks after placing the order, especially right after your stock has announced bad news and its price has dropped.
At this point, you have entered all the information that your broker asks you. Click “enter” (or “preview”, or a reasonable facsimile), and your broker will present you with a summary of your order, including its total cost. At this point you can confirm that you want to place the order – or not. Your broker will attempt to buy the stock at the price you set, within the time frame you set.
Once he succeeds – if he succeeds – you will own your first stock and have successfully completed your first online stock trade.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.