Trading stocks is not limited to the brokerage professionals any longer. Online trading tools have helped even the playing field among rich investors, institutional traders, and the individual investor. Online brokers offer the investor cheap commissions and quality research tools, allowing the individual to trade according to their own needs and goals without the expense of a traditional broker. However, before diving into online trading, here are a few things to consider.
Finding an Online Broker
Your first step is to find an online broker. There are plenty of brokers out there that differ in terms of rates and quality of service. Do your research to find the one that fits your needs best. If you simply want cheap commission, you’ll have to settle for meager services; pay a bit more and you’ll get more of a full-service broker experience.
Doing Your Research
Once you’ve settled on a broker, do your own research (or “due diligence”) before you purchase any stocks. You need to keep in mind your own investing strategy and goals – are you saving for retirement, or are you willing to be more aggressive for short-term gains? Whatever your methods, don’t simply rely on the latest “hot stock tips”. Find out the health of the company and its future underneath the stock before buying.
Trade Your Stocks
Once you’ve narrowed down the stocks you want to buy, make your purchases. Enter in the number of shares you want. If you place a market order, you will buy the stock at the current market price. If you set a limit order, you tell the broker what you want to pay for the stock. If the stock’s price hits that mark, the broker will automatically fill the order for you. When selling your stocks, you can also place a market or limit order. Which type of order you submit depends on your investing strategy, the number of shares you own, and the stock’s liquidity. There are other advanced buying and selling options available, but market and limit orders are the most common and useful for most investors. Don’t forget that you’ll pay commission each time you buy or sell a stock, so don’t make unnecessary trades!
“DOB: Hot Tips for Online Investors.” CT.gov Portal. N.p., n.d. Web. 11 Mar. 2011. http://www.ct.gov/dob/cwp/view.asp?a=2235&q=297964.
“Investor Tips: Trading in Fast-Moving Markets.” U.S. Securities and Exchange Commission (Home Page). N.p., n.d. Web. 11 Mar. 2011. http://www.sec.gov/investor/pubs/onlinetips.htm.