How to Buy & Sell Shares on an Online Broker
With more than 100 online stockbrokers facilitating transactions at the click of a mouse, it's easier than ever to buy and sell shares using an online broker. Online brokers allow unprecedented access, ease of use and remarkably low commissions per trade.
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Instructions
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Open an account with an online broker. Compare the offers of several brokers and research such factors as account minimums, opening requirements, interest rates on cash, FDIC coverage, trader services, platforms and branch locations.
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Fund your account. The more money with which you start, the easier it can be to grow your account. Still, the learning curve for trading can be considerable--and expensive. Don't expect to pay your bills by trading the first few months or maybe even years. If you can't invest as much as you'd like, consider getting permission to trade on margin, but read the contract carefully so that you understand the risks particular to margin trading.
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Learn the platform and trade actively. Trades can be placed online or over the phone with a live broker, usually at additional cost. Most brokers offer special services or pricing for accounts that reach a certain threshold of trading activity. Any good platform should include real-time quotes, bid and offer prices, charting and options chains. Some platforms allow for order routing and bidding in penny increments.
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Bid carefully. Most traders follow discrete strategies that can be consistently applied. A trader should understand the goals and parameters of any position before executing the trade. Using an online discount broker can save vast sums in transaction costs, but it also transfers the responsibilities of planning and making trades to the account holder. Buying a stock means placing a bid, an order to buy. Limit orders allow bidders to name their prices, whereas market orders are filled at the going rate when received.
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Diversify. If you choose to hold stock positions for the intermediate or long term, purchase the best stocks in a several different sectors. Each sector will have specific metrics that distinguish the good from the bad, but generally companies with low debt, strong profit margins, proven executive leadership and significant cash reserves are the best performers.
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Speculate responsibly. Buying only the safe stocks is a good way to preserve and slowly grow capital, but it won't make big money fast. Speculating on small-cap stocks and unproven business models can be either profitable or disastrous. Thus, performing research before investing is just as important when speculating. It can also be helpful to use stop-loss orders, which sell your shares if the price of a stock drops below a certain level.
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Take profits. Your stock values may go up, but you've never made a profit until you've sold. Selling involves making an offer, entering an order to sell a certain number of shares. Taking profits by selling shares incrementally as a stock goes up allows an investor to realize gains, protect against losses and reallocate capital.
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Tips & Warnings
Periodically withdraw money from your account if you're doing very well. This discipline makes it harder to lose this cash and makes it easier to set aside money to pay taxes on your capital gains. Be familiar with the broker's methods for depositing and withdrawing funds from the account, as this can take several business days to process. If your broker has a local branch, it is helpful to be on a first-name basis with the manager. Occasionally, trades are executed incorrectly, and in such cases, customer service's speed in rectifying the problem can be crucial. Get the branch manager involved as soon as possible.
Never put money in your trading account that you can't afford to lose. Using an online broker involves significant risk and the possibility of financial loss. Whenever possible, contact an investment professional before acting on any advice. Access to an online broker is subject to your Internet connection and that of your broker. High-volume trading days can lead to delayed quotes or partial execution of orders. Connectivity issues on your part can lead to consequences beyond your broker's control.
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