Please take a look at a few basics. Each day I update and add definitions so that it becomes convenient for others to follow a few key terms.
How to invest in stocks: the basics
Investing in stocks means buying shares of ownership in a public company. Those small shares are known as the company’s stock, and by investing in that stock, you’re hoping the company grows and performs well over time. When that happens, your shares may become more valuable, and other investors may be willing to buy them from you for more than you paid for them. That means you could earn a profit if you decide to sell them. Investing in the stock market is a long game. A good rule of thumb is to have a diversified investment
portfolio and stay invested, even when the market has ups and downs.
How to start investing in stocks
One of the best ways for beginners to learn how to invest in stocks is to put money in an online investment account, which can then be used to invest in shares of stock or stock mutual funds. With many brokerage accounts, you can start investing for the price of a single share. Some brokers also offer paper trading, which lets you learn how to buy and sell with stock market simulators before you invest
any real money.
Investing Steps
1. Decide how you want to invest in the stock market: There are several ways to approach stock investing. Choose the option below that best represents how you want to invest, and how hands-on you’d like to be in picking and choosing the stocks you invest in.
A. “I’d like to choose stocks and stock funds on my own: This path means you will select the stocks or funds to buy yourself. THis is also called self directed trading/
B. “I’d like an expert to manage the process for me: This path means you will select an advisor and let him buy and sell your the stocks or funds. They are called advisors
2. Choosing an Brokerage to invest through: in stocks
For the hands-on types, this usually means a brokerage account. For those who would like a
little help, opening an account through a advisor you generally reach the advisor who will help you open an account. Robo advisors are automated and easy online way to invest through an advisor but digitally.
3. Choosing a Budget
You can choose any amount you please these days.
Learning how to invest in stocks can be daunting for beginners, but it’s really just a matter of figuring out which investment approach you want to use, what kind of account makes sense for you, and how much money you should put into stocks.
Basics understanding the Different Ways to Buy and sell stock.
Market and Limit Orders
The two most common order types are the market order and the limit order.
Market Order: A market order is an order to buy or sell a stock at the best available price. Generally, this type of order will be executed immediately. However, the price at which a market order will be executed is not guaranteed. It is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed. In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price or “real time” quote.
Example: An investor places a market order to buy 1000 shares of XYZ stock when the best offer price is $3.00 per share. If other orders are executed first, the investor’s market order may be executed at a higher price. In addition, a fast-moving market may cause parts of a large market order to execute at different prices.
Example: An investor places a market order to buy 1000 shares of XYZ stock at $3.00 per share. In a fast-moving market, 500 shares of the order could execute at $3.00 per share and the other 500 shares execute at a higher price.
Limit Order: A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute. A limit order can only be filled if the stock’s market price reaches the limit price. While limit orders do not guarantee execution, they help ensure that an investor does not pay more than a predetermined price for a stock.
Example: An investor wants to purchase shares of ABC stock for no more than $10. The investor could place a limit order for this amount that will only execute if the price of ABC stock is $10 or lower.
Special Orders and Trading Instructions: In addition to market and limit orders, brokerage firms may allow investors to use special orders and trading instructions to buy and sell stocks. The following are descriptions of some of the most common special orders
and trading instructions.
Stop Order: A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A buy stop order is entered at a stop price above the current market price. Investors generally use a buy stop order to limit a loss or to protect a profit on a stock that they have sold short. A sell stop order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or to protect a profit on a stock that they own.
Stop-limit Order: A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order.once the stop price is reached, a stop-limit order becomes a limit order that will be executed at a specified price (or better). The benefit of a stop-limit order is that the investor can control the price at which the order can be executed.
Day Orders, Good-Til-Cancelled Orders, and Immediate-Or-Cancel Orders: Day orders, Good-til-Cancelled (GtC) orders, and Immediate-or-Cancel (IoC) orders represent timing instructions for an order and may be applied to either market or limit orders. unless an investor specifies a time frame for the expiration of an order, orders to buy and sell a stock are Day orders, meaning they are good only during that trading day. A GTC order is an order to buy or sell a stock that lasts until the order is completed or cancelled. Brokerage firms typically limit the length of time an investor can leave aGtC order open. This time frame may vary from broker to broker. Investors should contact their brokerage firms to determine what time limit would apply to GtC orders. An IOC order is an order to buy or sell a stock that must be executed immediately. Any portion of the order that cannot be filled immediately will be cancelled.
Fill-Or-Kill and All-Or-None Orders: Two other common special order types are Fill-Or-Kill (FOK) and All-Or-None (AON) orders. An FoK order is an order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be cancelled (i.e., no partial execution of the order is allowed). An Aon order is an order to buy or sell a stock that must be executed in its entirety, or not executed at all. However, unlike the FoK orders, Aon orders that cannot be executed immediately remain active until they are executed or cancelled. Opening Transactions Investors should be aware that any order placed outside of regular trading hours and designated for trading only during regular hours will usually be eligible to execute at an opening price. Investors should contact their brokerage firms to find out their broker’s policies regarding opening transactions