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How to buy and sell stocks online
Compare fees, trade options and your trading style before you get started.
Thanks to online stock trading platforms, buying and selling shares of company stock online is easier for the average person than ever before. Find out how you can start buying and selling the stocks listed on the major stock exchanges in the US and around the world, along with plenty of tips to help you get the most out of your online trades.
Choosing an online stock trading platform, also called an online brokerage account, can be one of the most difficult parts of the process. With dozens of platforms available, choose from major banks like Chase and Ally or specialty brokerage companies like Robinhood and Betterment.
It might be more convenient to stick with your current bank, but it’s best to compare trading accounts, features, fees and tools between banks. There might be something better out there to fit your needs.
What to consider when comparing brokerage accounts:
- Brokerage fees. Applies to each buy or sell transaction and can range from $500 to $1,000. Depending on the platform and the size of your transaction, this could be a flat fee or a percentage of the total transaction cost. While many brokerages have eliminated commissions for US-listed stocks and ETFs, there may be fees for options and mutual funds.
- Other fees. Brokers charge all kinds of additional fees to use their platform. Some of the most common include an inactivity, subscription and foreign exchange fee.
- What you can trade. Some platforms offer access to US-listed stocks and ETFs, while others offer trading on stock exchanges all around the world.
- Trading style. Determine if you’re an active trader that needs a platform that can support frequent trades. On the other hand buy-hold investors will want to look for platforms that specialize in long-term investors.
- Level of experience. Some stock trading platforms are designed with casual investors in mind, while others are more suited to active and experienced traders. If you’re a first-time trader, you’ll want to choose a beginner-friendly platform.
- Customer support. Find out how to contact customer service, whether by phone, email or live chat.
Compare online trading platforms
Registering an account is usually free, but some providers may charge subscription or ongoing fees for features like market research.
The registration process takes place online, and if you’re a new customer, you’ll need to provide:
- Your name, address, date of birth and contact details
- Your Social Security number
- Proof of ID
- Linked bank account details
Most platforms require a minimum deposit to open an account. Once you’re approved, it’s time to start trading.
Start researching stocks that match your investment goals. To help you make informed decisions, access a wide range of market research, analysis and even trading recommendations through your platform.
Also consider the number of shares you want to buy. This is determined by your budget and your investment goals, but keep in mind that most trading platforms require you to buy full shares. So if a company trades for $1,000, you’d need to invest $1,000 to buy a full share. However, some trading platforms are beginning to offer fractional shares, so you can invest only $10 or $100 in that $1,000 stock.
Larger purchases may cost more or involve flat rates versus a percentage, depending on the trade. For example, your platform may charge you a $30 brokerage fee to buy a smaller number of shares, but charge 0.1% of the trade value with larger shares.
This is where trading can get confusing for novice investors. You have two main options when placing a trade to buy shares — trade market “at market” or “at limit.”
- Market orders. When you want to buy a share immediately at the best price currently available. Though you risk paying more than you expected if shares are difficult to trade or prices are volatile.
- Limit orders. Set a maximum purchase price for your buy order. If that price becomes available within your specified time period, your trade is executed. Here you risk not trading at all if the price changes too much. You can generally set your order for the day or until you decide to cancel it.
Depending on the platform you choose, you could take advantage of conditional orders that allow you to take advantage of market opportunities. For example, by placing a rising buy order, you can instruct your online trading platform to buy shares in a particular company once its stock price reaches a certain level.
Once you’ve entered all the specifics of your transaction, review all those details before placing your buy order.
You need sufficient funds in your online trading account to cover the cost of the transaction, including any brokerage fees that apply.
Most online trading platforms require you to link a bank account to deposit money to invest, and it often takes two or three business days for that deposit to clear. However, some brokerages allow what they call “instant deposits” that make it possible for you to invest the deposited amount right away while the deposit is processed. Credit cards are typically not allowed for depositing funds into a brokerage account.
Monitor the performance of your shares against your investment plan. However, how often you monitor them depends on your strategy.
For example, if you have a long-term investment strategy, you may only check in and see how your shares are performing every month. If you have a medium-term strategy, it may be a good idea to check each night or each week.
Review the performance of your investments by logging into your trading account.
If you decide to sell your shares, the process is similar to buying shares in step 4. Choose whether you want to sell via a market or a limit order.
- Market orders mean the shares are sold immediately at the best available price.
- Limit orders allow you to set the minimum sale price you’re willing to accept.
Advanced orders like stop-loss and trailing stop-loss orders are more complex and are for more experienced traders.
- A stop-loss order sells your shares if they fell to a predetermined price you set to limit your losses.
- A trailing stop, if available, is a percentage loss from the stock’s highest price rather than a specific price you set, so it “trails” or follows the stock price higher. For example, if you set a 25% trailing stop-loss order and the stock rose 10% before falling 25%, your sell order is triggered at a loss of only 15% from the price you bought.
Tips when buying or selling shares
To get more out of your online stock trading, consider these tips:
- Do your homework. Making informed trading decisions is crucial to the success of your investments. Research the financial health and growth prospects of companies by poring over annual reports, keeping an eye out for company alerts, reading prospectuses and accessing research reports.
- Stay up to date with the economy. Understand the health of the economy, interest rate decisions, government policy changes, levels of investor confidence, exchange rates and the performance of stock markets in other countries. All of these can influence when to invest.
- Start with blue-chip companies. One of the safest options for anyone starting out in the stock market is to invest in blue-chip companies. These are America’s biggest, most established companies, many included in the Dow Jones Industrial Average. They usually offer the best chance for minimizing your risk and providing steady returns.
- What about speculative stocks? Small companies, whether they’re listed on a stock exchange or traded over the counter, have a shorter business history. Some investors find these shares attractive because they offer the potential for large returns — but could also suffer large losses.
- Buy what you know. Rather than diving in at the deep end and investing in a company in a field you know nothing about, start with industries and businesses you know and understand.
- Diversify. To minimize your exposure to risk, diversify your portfolio across a range of different industries. If you buy stocks across five or six industries instead of only one or two, you can be better protected against losses if one particular industry experiences a sharp downturn.
- Pay attention to trading hours. If you place a market order after trading closes for the day, your broker may place the trade at open the next day — even if the price has changed significantly. Most US stock exchanges close a 4 p.m. ET, though some brokers offer after-hours trading.
Risks of online stock trading
Before you start buying and selling stocks like Gordon Gekko, be aware of all the risks involved, including:
- Financial losses. A company’s stock prices can fall dramatically and even drop as far as zero. This can mean significant financial losses for investors.
- Last in line. Shareholders are usually the last paid when a company goes broke. So there’s a chance you won’t get your money back.
- Stress. The stock market fluctuates daily, which causes plenty of stress for investors. If you can’t afford the ups and downs, you’re better off looking for a safer and steadier investment option.
- Unexpected problems. Even with thorough research into a company, you can’t predict the future. Natural disasters, terrorist attacks, pandemics, bad company news and even changes in government policy can all occur unexpectedly and adversely affect the price of shares.
- Lack of expertise. While investing in the stock market sounds easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors take investing slowly.
- Getting in over your head. Don’t bite off more than you can chew. Take a cautious approach when investing in stocks, property or anything else.
You’ve got lots of options for where to buy and sell stocks, which stocks to buy and sell, and how you buy and sell them. So take your time and compare trading platforms, research the companies you want to invest in, learn about your investing options and plan out both your entry and exit points. And be prepared to follow your plan — even if emotions tell you otherwise.
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