How to Buy Shares – Step by Step Instructions
Once you open and fund your online brokerage account, the process of placing a stock trade can be broken down into five simple steps:
- Choose whether to buy or sell
- Insert quantity
- Insert symbol
- Select order type
- Review order, place trade
1. Choose Buy or Sell
The first step is always to choose what we would like to do, buy shares long or sell shares short. As a new investor, keep it simple, buy shares long!
2. Insert Quantity
Next we enter how many shares we would like to buy or sell in total. To calculate how many shares we can afford, simply take the total amount of cash currently in the account and divide it buy the stock’s last price. So, if stock XYZ is trading at $10 and we have $1000 in our account, we can afford to purchase 100 shares of stock ($1000 / $10).
3. Insert Symbol
The ticker symbol represents the company we are going to trade. For example, Disney has a ticker symbol of “DIS”, Apple is “AAPL”, and Facebook is “FB”. If we are not sure of the company’s symbol, you can click on the Symbol field and search to find it. Tickers are also required to read a stock chart.
4. Choose Order Type
The most common order types: market, limit, and stop (see my guide, Best Order Types for Stock Trading). Market orders buy or sell immediately at the current best market price. Limit orders only buy or sell these shares at, “$xx price or better”. Lastly, stop loss orders are combined with a market or limit to trigger once $xx price hits. For new investors just getting started, I always suggest just sticking with market orders.
5. Review Order and Place Trade
After the essential sources of info have been made, the “Spot Trade” catch will seem to finish the request. Of course, an outline screen consistently shows up once this catch is clicked to sum up the request and affirm we have enough assets in our record. When speculators have understanding and are OK with the exchange ticket, this affirmation page can be crippled.
Here’s an example of a TD Ameritrade order ticket filled out,
Other fields (Expiration, Special Instructions, Routing)
New investors should ignore these fields and leave them set to their default values. These options give investors more control as to how long certain orders should remain active and how they should be filled. For example, “GTC” for expiration means “good-till-cancelled”.
Regarding routing, 99.9% of orders are routed using the online broker’s automated system. However, day traders will sometimes hand select (direct route) their orders to a specific market center to receive market rebates. See this StockBrokers.com guide for more on order routing.
Tips for Success
Learning from the greats, here are variety of stock trading tips from some very successful investors. By applying any of the following lessons, you can become a better trader. Success takes time, and these rules will lead you in the right direction.
William O’Neil is the founder of CANSLIM investing, Investors Business Daily, and has authored numerous books on investing, with his most famous being, How to Make Money in Stocks: A Winning System in Good Times and Bad.
- As a new investor, be prepared to take some small losses.
- Persistence is key when learning to invest. Don’t get discouraged.
- Learning to invest doesn’t happen overnight. It takes time and effort to become successful at it.
- As a beginner, set up a cash account, not a margin account.
- Concentrate on a few, high-quality stocks. There’s no need to own twenty or more stocks.
- Don’t get emotionally involved with your stocks. Follow a set of buying and selling rules, and don’t let your emotions change your mind.
- Don’t buy a stock under $15 a share. The best companies that are leaders in their fields simply do not come at $5 or $10 per share.
- Learning from the best stock market winners can guide you to tomorrow’s leaders.
- Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes.
- Stocks never go up by accident. There must be large buying, typically from big investors such as mutual funds and pension funds.
- Replace the old adage, “buy low and sell high” with “buy high and sell a lot higher.”
- History always repeats itself in the stock market.
- Ignore personal opinions about the market.
- Three out of four stocks, regardless of how “good,” will eventually follow the trend of the overall market.
- When starting to invest, keep it simple.
- Short stocks only in a bear market. Use tight stop losses and take profits often.
Jesse Livermore, respected as one of the greatest investors of all time, has been featured in many investment books. The most iconic was Reminiscences of a Stock Operator by Edwin Lefevre in 1923. During the course of his life he made and lost millions, going broke several times before committing suicide in 1940. These are his seven greatest trading lessons:
- Cut your losses quickly.
- Confirm your judgments before going all in.
- Watch leading stocks for the best action.
- Let profits ride until price action dictates otherwise.
- Buy all-time new highs.
- Use pivot points to determine trends.
- Control your emotions.
John Paulson, a hedge-fund manager in New York, lead his firm to make $20 billion in profits between 2007 and early 2009. By betting heavily against first the housing market and then later financial stocks, his firm made a killing. Paulson’s success netted him a paycheck of some $4 billion, or more than $10 million a day. His funds during this time had returns of several hundred percent. These are his eight investing lessons:
- Don’t rely on experts, be skeptical.
- Always have an exit strategy.
- Debt markets can do a better job predicting problems than stock markets.
- Always educate yourself on new investment vehicles.
- Don’t underestimate insurance (such as put options).
- Experience counts.
- Don’t fall in love with any single investment, keep emotions aside.
- Don’t risk too much on any single trade, diversify risk.
My Three Favorite Stock Tips
After completing over 1,000 stock trades, representing over 4,000 individual buys and sells, here are three tips I wish I knew and fully appreciated on day one:
- Think win/win. Psychology is a huge aspect of trading. If you have a big winner on your hands and aren’t sure whether you should hold the shares to try for higher prices or sell them to lock in a profit, consider selling half and holding the rest with a stop loss (at worst) back at your original buy price. That way, if the stock drops back to your buy price, you still win because you sold half and made a profit. Similarly, if the stock shoot higher in price, you also win because you still hold half your original position. Heads you win, tails you win too. 🙂
- Set strict rules to help you stay disciplined.
- Always know the day and time (pre or post hours) when your stock holdings are posting earnings next!
Something that I generally underline to new stock merchants when they email in is that investing is a long lasting game. Take as much time as necessary! There is no motivation to hurry into the stock market.
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