Getting Started with Stock Trading – Buying and Selling Stocks.

Anyone with money to invest can buy and sell stocks. Stock trading has its own specialized vocabulary but once you have the basics under your belt you can understand better how the market works. As with any investment, the more knowledge you have about stock trading the more successful you are likely to be.

Most stock trades are done through a broker – an intermediary who takes orders and executes them. Brokers can also offer advice about which stocks to trade and the condition of the market. These ‘full-service’ brokers charge a relatively high commission. To cut costs, many people use discount brokers that charge significantly less. You don’t get advice, but to some, that is an advantage.

Some of the services commonly offered by brokers include online trading, broker assisted trading and some brokers offer options like Interactive Voice Response System for placing orders by telephone and wireless trading systems for making orders by using web-enabled cellular phones or other handheld devices.

Some brokers have their own proprietary software for placing orders over the Internet while others allow you to access their order department through their website with a password. Whichever systems they use, almost every broker offers a variety of charting options that allows you to track movements on the stock market. Analysis software may also be included in their service or available for an extra fee.

Types of Orders

There are different types of orders that can be made when buying or selling stocks. A ‘market order’ is an instruction to buy or sell at the current market price. The order is usually executed very near the price you are quoted at the time of your order. However, if the stock price is fluctuating or is not actively traded there may be a difference between the quote and the actual transaction.

A ‘stop order’ or ‘limit order’ can be placed if you expect the stock price to move and wish to buy or sell at a certain price above or below the current market price. A stop order instructs the broker to trade at a certain price, while a limit order is an instruction to trade at a specified price or better.

A stop order helps to limit losses or protect profits. They become effective when the market hits the stop price but may trade above or below the stop price because they are traded at market price after they become active. Limit orders may not be placed at all even if the market reaches the limit price. If the market moves quickly there may not be time to execute your order before the price falls out of the limit price range.

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