How to Buy Stocks Online
Buying stocks online is a fairly straightforward process. Gone are the days of calling up your broker, unless you want to. This financial article will guide you through the process of buying stocks online.
Finding an Online Broker
The first step is to start an account with an online broker. Since you’re just starting out, focus your selection process on the larger names out there.
I recommend looking at Scottrade.com at some point in your search. They offer many nice features and $7 trades—unless the stock is under $1 per share.
If you’re someone who will need personal attention—face-to-face meetings, phone conversations—look for a full-service online broker.
If the online broker has a local office, that’s a plus. For instance, Scottrade.com has one in my area. When I created my account, I went to the office with a check to fund my account. It was a simple process.
Buying Stocks Online
Okay, you now have your online broker and you’re ready to go. After you log into your account, you can buy stocks online.
To buy a stock online, you’ll need the stock’s symbol. For instance, Goog is Google’s stock symbol. If you don’t know the stock’s symbol, the online broker should have a symbol lookup feature. If not, you’ll find one at finance.yahoo.com.
Next, you’ll need to specify how many shares you want.
Never do market orders. Always do limit orders. When you do a limit order, you specify a price, which ensures that you get into or out of a stock on your terms.
For instance, here’s an example of a limit order:
Stock: Google (GOOG)
Shares: 100
Limit Price: $560
When I place this order, I’m saying that I want 100 shares of Google and I’m willing to pay up to $560 per share for them.
Additionally, you can select an option called “All or None.” When you select this, your order will only be filled if all the shares can be purchased.
So, let’s image that I didn’t select this option. It would be possible for me to receive under 100 shares at or below my limit price.
Another option is the order’s duration. I could put that order for Google stock in for just today (market close) or I can keep it open until I cancel it, which is called “Good Until Canceled.”
Stock Price
When you look up a stock, there will be two prices shown—Bid and Ask. The Ask price is the price that sellers are willing to sell for at that moment. The Bid price is the price buyers are willing to buy at for that moment.
Take a look at this stock overview.
As you can see, Google’s Bid is $552.50 and its Ask is $552.98.
If you were to put in a limit order for $552, you could be “in line” for a little bit, because the Ask price is $552.98.
But, limit orders are your way of saying: “I’m only getting into this stock at my price.”
A less knowledgeable investor would simply use a market order. The order would most likely be executed fast, but he or she would pay “top dollar” for the stock. This isn’t wise.
Buying Stocks Recap
Let’s recap how an order to buy stocks works.
- Enter the stock symbol.
- Select Buy Stock.
- Enter how many shares you want to buy.
- Decide if you want to use the “All or None” option.
- Select the order type—use LIMIT orders.
- Enter your limit price.
- Select the duration—order ends today or good until you cancel it.
- Review your order and execute it.
Buying stocks online is a very easy process as you can see. The time it takes for your order to be filled depends on market conditions.
