Getting Your Feet Wet In Stocks

Knowledge is power -- particularly when it comes to stocks. You’ll find that you need more than just a little money to buy and sell stocks. You need to know the basics, including such simple things as the vocabulary used.

With stock investments, the more that you know about them, about how the whole thing works, the better you will do.

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Usually stock trades are done through a broker. This is a person who handles orders and executes them.

Brokers come in 2 types. Both will conduct the stock trades for you for a small fee. In addition, full service brokers can help you by offering advice about which stocks to trade and the condition of the market as well. You should expect to pay more for their services. Many people go with a discount broker who doesn’t offer advice.

You can expect services such as online trading, broker assisted trading and some offer options like an interactive voice response system which allows you to place orders through the phone or through a wireless trading system such as web enabled mobile phones and other handheld devices.

Often, you’ll find brokers who have their own software for handling orders. This is done through the web, with a website/password set up. Your broker will have charting options that can help to track the movements of the stock market. Analysis software is often included as well, or may be available for an additional cost.

What Am I Ordering, Again?

When you are buying and selling stocks, there are several types of orders that you can place.

A market order is an instruction to buy or sell at the current market price. The transaction will generally be made fairly close to the price which you have been quoted, but in some cases may change significantly depending on what is happening.

The stop order (also called the limit order) can be used when you expect the price to move some and want to buy or sell when it does. The stop order allows for a sell when a price is reached, while a limit order is used to buy at a specified price or better.

The stop order limits any losses that may happen otherwise. The limit order is not always executed, for example if the market reaches the limit price and moves quickly downward, there may not be time to use the limit order before the price changes.

Your orders can be placed as good until canceled (GTC) orders or day order. The GTC order stay in effect until they are cancelled, while day orders are effective for that day only, they expire at the end of that day.

Most trade is done in round lots, ie. in multiples of 100, but you can trade in lesser amounts as well, called the odd lot.

Knowing these basic terms about stock trading will help you to avoid some potentially costly problems you might encounter. The more that you know, the better off you will be in the market game.