In this modern day and age, the vast majority of the population has access to the internet. The internet puts a whole world of knowledge at your fingertips and there are a great many websites that will tell you how best to invest your money. These usually take the form of eBooks and courses on how to buy stock and in particular how to buy stock online.
There are also a wealth of stock trading systems available to the investor that can be made to automate part of the process and are almost always packaged with a hand book teaching the new investor how to buy stock online.
Stock Trading Over the Years
The conventional method of stock trading used to be a rather more tiresome affair with the trader having to ring up their particular stock broker or even see them in person to make a trade. The advent of the internet and more specifically online stock trading has simplified this process, which is good news for all of us.
Buying Stock Online
Learning how to buy stock online is a relatively straightforward process. All you need to do is create an investment account, open an account with an online stock broker and you can be trading within minutes. The problem arises as there are so many to choose from so you need to be sure you are not getting a bum deal. It pays to do some serious research into the online broker you are thinking of setting up an account with, you need to be well aware of the company and its standing in the modern business world.
If you have been trading stocks off-line then you may want to see if your favourite broker has an online service as this can eliminate the need to do any research. This also stands true if you have any friends that regularly trade online as they should be able to point you in the direction of a good online broker.
When learning how to buy stock online you may want to only invest small amounts of money until you feel comfortable with the system, we have all heard the horror stories of people logging into their online brokerage account, clicking the wrong button and losing a ton of money. The chances of this happening are very remote but it still pays to be careful.
Step by Step Guide on Buying Stocks Online
Step 1: Create an Investment Account
The very first step is to create a separate banking account from your primary share draft and savings accounts. You really don’t want to combine these different bank accounts. You want to isolate your investing money from the money you secure in your savings and you use for living in your checking account. Move however much money you plan on investing into this separate account.
It is advisable for you to have at least a couple thousand dollars in this account. If you can’t safely put that much money in an investment account, you probably shouldn’t be messing with buying stocks just yet.
Step 2: Apply With a Brokerage Firm
Now you’ll see why it is important to setup that investment account. Go to the website of an established, trustworthy stock broker and apply for a new account. Don’t go cheap if you’re new to buying stocks. You’ll regret it. Go with a well-known full service brokerage firm. Plus500 is often among the best rated, but do some research of your own before you commit.
To register your account, you’ll need to offer a bank account to which you will connect your brokerage account. It often will take a couple days for your accounts to be connected, at which point a selected amount of money will be moved from your bank account to your broker’s account.
There is the universe and more between this step and the next step, but for now I’ll proceed with the purely functional aspects. The point of this article is to simply answer the question, how do you buy stocks, after-all. But we still want to point out that you absolutely must do your due diligence before you invest real money. Don’t just throw cash into the wind.
Executing a Buy Order with a Market Order or a Limit Order
Now you’ll need to collect the following information: the stock’s ticker symbol, where the stock is traded (NYSE or NASDAQ?), the volume you wish to buy and the expiration of your order. The expiration indicates when you want your order to expire should it not be fulfilled right away.
You’ll also select either a market order, where you ask that the order be executed immediately at current market price, or a limit order, where you ask that the order be executed when the stock is in a specific price range. If it doesn’t reach the defined price range before your expiration, no transaction is executed.
After you’ve made these decisions and collected this data, you then execute an order or put in a “bid” with your broker. With online discount brokers, this will be a matter of clicking a few buttons. With some full service brokers, you’ll send the order to your broker who will then execute the order for you.
There’s a tiny bit more to it than that, but the terminology varies depending on the broker you’ve selected, so it’s best to verify the last details through your individual broker.
Things to Watch Out For
When you are learning how to buy stock online it pays to be well informed, as once a trade is initiated it is not often possible to halt. If you are planning an investment you will need to have studied the companies past moves and had a look at their historic analysis as you want to eliminate as much risk as possible.
It is not always a good idea to find a broker who charges the smallest fees as in this business and as with many other businesses the phrase You Get What You Pay For stands true. This is particularly true in terms of the quality of service you receive. This does not mean you should go out and hire the most expensive online broker you can find, just be sensible.
Whilst you are learning how to buy stock online it pays to do a few paper trades first. A paper trade is a theoretical buying or selling of a stock that proves whether you have the skills to make a profitable trade or not. This is a great way to learn the ropes if you have no or little experience of trading stock online.
It is important to maintain a balanced portfolio and be prepared for losses as this is a certainty of trading stock, you cannot always back a winner. It is also a wise move to diversify as much as possible with your stock. This has the effect of cushioning your losses ensuring that, should a market go belly up as it were, you will not lose everything. This is especially important when learning how to buy stock online.
The trick to making good money on the stock exchange is to understand the often subtle relationships that govern the share prices. The first thing you need to be aware of is the dividend the company is offering to its shareholders as it is the company’s earnings that decide the value of the company’s stock in the open market.
Another important consideration is the P/E value. In this, the P stands for price and the E of course, stands for earning. Therefore P/E is the ratio of the price of the share to the earning from the share. It is best to try to find stocks with as low a P/E value as possible.