How to Begin Stock Investing Using Software
No longer does investing in the stock market require placing a call to your stockbroker, who then charges you a large commission fee for the service. You can buy and sell stock right using a computer and by paying an online brokerage fee that is a fraction of what it used to cost to trade stocks. Getting started is straightforward, requiring an overview of how the software works.
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Instructions
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Open a brokerage account online. There are many Internet-based brokerage companies from which to choose. You do not need to be a millionaire to participate in the stock market. Many brokerage require about $300 to $1,000 to open an account.
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Understand the basic principles of the market. Using stock-trading software, you will be able to perform many functions from your brokerage homepage. However, the most important function is how you are going to make money. In theory, you want to buy a stock at a lower price and sell it at a higher price to make a profit. This is known as being "long" on stock because you believe the shares will increase in value. Conversely, you could make an investment if you think a stock's value is about to decline. This is called being "short" on stock. In this latter scenario, you will actually sell the stock at a higher price and then buy it back at a lower price. The difference will be your profit. This constant battle of positive vs. negative (or supply vs. demand) is how the stock market in general, and individual stocks in particular, increase or decrease in value.
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Learn about ticker symbols. A ticker symbol is an abbreviation for a company's shares that are traded on a public stock exchange.Most reputable stock-trading software programs feature a database for looking up company ticker symbols.
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Read up on the stock snapshots. Most brokerage software offers a snapshot of a stock which includes things such as the stock price, the high and low price for the day, the price-to-earnings ratio, and a chart illustrating the stock's historical price behavior. The price-to-earnings ratio, or P/E, is the price of the stock divided by the earnings per share. Typically the lower the price-to-earnings ratio, the stronger the investment. However, be sure to compare P/E ratios for companies within the same sector. The P/E of technology companies will differ from those in retailing in designating what constitutes good, bad or average stock performance.
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Learn about stock orders. There are two basic stock orders. The first is a market order. This means as soon as you hit the buy or sell button, the stock is purchased or sold at the market price. Because the market moves rapidly, the price at trade execution may be above or below the price that was shown on the order page. The second type of order is called a limit order. This means that the stock is not bought or sold until it reaches a certain limit. Once that limit is reached, it then turns into a market order and the trade is executed. This protects the buyer or seller from rapid price declines or increases. Investors who are both buying long and selling short can execute these types of trades.
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Determine how many shares of stock you want to buy. Calculating the cost of buying or selling shares of stock is simple. Multiply the number of shares by the order price. For instance, if you wanted to buy 50 shares of stock that cost $20 apiece, it would cost you $1,000 plus any commission charged by the brokerage. This information will entered along with the type of order you want to place.
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Watch your portfolio. After you have bought a few stocks, you will have a portfolio page in your trading software. This portfolio page will let you know if your investment has gained or lost value. It will detail information such as price paid, current price, number of shares purchased, percentage gain, percentage loss and value of stock.
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References
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