How to Buy a Stock Online
This How to will teach you to buy or sell a stock online. Learn how to buy and sell stock online from the comfort of your own home. Start trading stocks for commissions as low as $7 per trade.
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Instructions
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First you need to open an account at online trading company like Scottrade, E-Trade, or Ameritrade TD. The setup will vary at each of these trading companies but to get the best bang for your buck you'll probably want to use Scottrade. They have the lowest per trade commission at $7, which means you pay $7 every time you buy or sell shares. Scottrade also has many locations throughout the country that can be found within a few miles of most major cities. You can start trading with less than $500to start out but you will need to have a minimum of $2,000 in your account to trade stocks below $4 a share.
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Once you have an account and you have money in your account ready to be traded. After you've done some research on the stock you want to buy its time to make a trade. Find the tab on your account page that says trade, it is usually located at the top of the navigation menu or on the left side of the page. Once you know which stock you want to buy enter that stock symbol in the field. You will then select your order to be a buy order and then to be safe change your type of order to a limit order and not a market order. This will ensure you buy the stock at the price you want to pay. When you use the limit order you will be prompted to pick the price you want to buy the stock at. The best way to choose a price is to make your limit price somewhere near the bid price but under the asking price. Once you place the order you will be notified when the trade goes through and you will now own that stock.
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The Ask is the price at which a market maker or brokerage offers to sell a stock. You really should never buy a stock at the Ask price because this price is always slightly higher than the value of the stock price for that day. Typically you will see the last price and the bid price lower than the ask, this is because brokers are trying to get investors to buy the stock at a higher price. However if you can't wait for the stock price to get to the bid and you want to buy at the Asking price then make sure to place at limit order at that price. If you place a market order you risk paying a higher price than the Ask price. This is very crucial when buying a new stock because of the fluctuation in stock price you could place a market order for a stock with an asking price of $19 and actually pay $25 per share. This can all be avoided by placing a limit order for the $19 with the option to buy all or none.
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The reason you want to set limit prices close to the bid is because the bid price is what other buyers are willing and ready to pay. When placing a limit order you should use the bid price as an indicator as to what price you should set your limit at. If your limit order is below the bid price you will have difficulty getting order to go through but if the bid is much lower than the last price or asking price you might have luck by placing a limit order slightly above the bid price.
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When your ready to sell your stock you go back to the trade screen and enter in the amount of shares you want to sell and at what price if your using a limit order. Try to set a price that is at above the ask and not the last price. The last price someone traded the stock at is known as the last. This last price simply means that someone either bought or sold the stock at that given price. Many stock tickers will show the last price as positive in green and negative in red. The positive means the stock last traded up and the negative means the stock traded down. Traded up refers to a stock purchase for a price higher than the last price, which is usually at the asking price. Trading down is when the stock goes below the last price and happens when a shareholder sells the stock at a lower price than the last price. It is important to use the last price as an indicator before you set you next limit order on the stock. If the last price is close to the bid price you may want to place a limit order below the last price to insure the next time it ticks below current last price you will buy the stock at that price. Once the order goes through you have successfully sold stock, hopefully for a profit.
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Tips & Warnings
Never use Market Orders, Always buy stocks using Limit Orders.
Remember to check the box that says AON (All or none) so that the stock is purchased for the full amount of the order. If you don't use this option its possible that you will not buy or sell the amount of shares your order was placed for.
