If you’re interested in trading, one of the first questions you will need to answer is “Which marketplace should I use?” The stock market is an excellent place to start. Which leads us to the question, “how to buy stocks?”
What exactly is the stock market anyway? Think of it like your average Trader Joe’s market, except this time; you’ll be buying shares instead of apples. Essentially, the stock market is where shares of publicly listed companies are bought and sold. Also known as a shares market or equities market, the stock market collates “stock,” representing ownership of a company.
Go Long Or Go Short
Investing in stocks can be as straightforward or as complex as you choose to make it. One basic strategy is to “buy low, sell high.” When you “go long” on a stock, you buy shares of that company from the market. You now have an open position in the stock market. When you “go short,” you sell the stock and profit from its decline. Regardless of the direction of your position, there is a “spread” between the bid price and the ask price which is to cover the transaction cost.
Of course, investing in stocks successfully will require research and strategy on the part of the trader. It would help if you considered your risk aversion, investment size, and the time you have to trade. The stock market also has its volatility, market hours, and liquidity. Then there is the leverage and costs to factor in, depending on which broker you use.
How do you buy stocks?
When you are ready to start your trading journey on the stock market, the first thing you will need is a broker.
Find a broker you trust: Opening an account with an online stock broker is easy, and you can start trading in minutes. There are many brokerage platforms to choose from, however, and do beware of scam brokers. Do the research first to make sure you avoid those rotten apples!
Choose your stocks: Once again, research is king. It is not about how much stock you own but which shares you choose to buy. There is an overwhelming amount of “advice” on the internet (and remember that it could be in the advisor’s interest for you to purchase a said stock!). The best place to start is to think about the company you value as a consumer and in which you would like to invest.
Make a trading plan: When you know what you want to buy, when you want to trade, and how much you want to invest, it is time to create your trading strategy. The ideal plan looks forward to your future goals and back at your trades to use your profits (and losses) to move ahead.
Know your order types: Once you have chosen what stocks to buy, you need to decide on your order types. There are many different types, but the main two you should know now are “market order” and “limit order.” A market order tells the broker you want to buy or sell at the best current market price. Market orders take place immediately.
On the other hand, a limit order indicates to your broker to buy or sell only at a specific price. Limit orders guarantee price satisfaction, but you may be charged a commission while waiting for the amount you want. The order types determine not only when but how to trade stocks with your broker.
Most importantly is finding the right broker for your trading style and monetary needs. If you are a beginner trader, TradeOr is an excellent choice and their 24/7 customer support will guide you through the learning process.