The internet, and the advent of the online trading of stocks and options, has opened up a new world of trading for retail investors. As the online trading business has boomed, high commissions and limited information for average investors has become a thing of the past.
In the past, the only way to research potential investments was to seek the advice of a broker. Now a days, all of the information you need on a company and its fundamentals is available online. You can also gain access to real-time stock prices, and up-to-the minute stock analysis.
When you have found a stock that has all of the characteristics of a company you would like to invest in, you can then place a trade with an online brokerage. Online brokers offer lower commissions, as well as many options for entering a trade.
How To Invest In Stocks And Options Online
It is important to thoroughly research potential brokerages to find the one that fits into your investment style and budget. Often, online brokerages will offer competitive fees and commissions, as well as additional incentives and tools for new accounts.
If you are interested in the online trading of stocks and options or currency trading in the forex market, make sure that the brokerage you chose offers these trading platforms. Many brokerages specialize in a specific type of trading, but some offer the ability to trade all of your accounts in one place, so if access to all of your accounts in one place is important to you, you should look into an all-in-one account.
Placing An Online Stock Order
A stock order is a set of specific instructions to purchase or sell shares of a specific security. Your order is entered on a stock order ticket that includes the action (buy or sell), the amount of shares to be purchased, the stock symbol, the share price, and the duration of the order.
When you place an order to buy a security you are using your available capital from your account to purchase stock on the open market, and placing that security into your stock portfolio. When you are selling a security, you are selling a stock from your portfolio on the open market, and placing the proceeds from the sale back into your account.
You will also chose the number of shares of stock you would like to purchase (whole numbers), as well as the symbol of the security that you would like to trade. You then need to chose what type of order you would like to place, a market order or a limit order.
A market order is a buy or sell order that is executed immediately, but not at a specified price. It is important that when you are placing a market order that you pay close attention to the bid/ask price since a market order does not guarantee a set price. Be aware that a price may fluctuate considerably before the order reaches the trading floor.
The solution to the problem of fluctuation prices is using a limit order. This type of order is only executed when the price of a security reaches the limit price set by the trader. In the case of a buy order, the security will be purchased at or below the specified price, while a sell order will be executed at or above the specified price.
Using limit orders guarantee that you are getting the best price for the purchase or sale of a security. The main tradeoff for the protection of a limit order is the possibility that it will not be executed if the stock market never reaches your price limits.
While the online trading of stocks and options is an excellent way to grow and preserve your capital, investing in stocks and options involves risk, and these risks should be carefully considered before committing any capital.
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