Basics of Investing in Stocks

There are some basic rules and terminology you should understand before you open your first brokerage account and begin trading stocks. There's no need to be intimidated by the various aspects of investing in stocks, just get to know the basics.

Market Order

A market order is the sale or purchase of stock at the current market price.

Limit Order

A limit order is different from a market order in that you are naming a price you do not want to sell below or buy above. It is possible your limit order will not be executed if the stock never hits that price.

Good Until Canceled

A good until canceled order (also called GTC) is a directive to your brokerage firm to leave your order in the system until it executes. This will be used when placing a limit order.

Cost Basis

Cost basis is the amount of money you paid for a position. Your taxes on gains will be based on the amount of money you get above your cost basis.

Commission

Commissions are fees you pay to the broker or brokerage firm that you place your trades through. You will pay commissions on both buys and sells.