Fund Your Account
After you open a brokerage account, you’ll need to fund a cash account (also known as a Type 1 account). The amount of your initial deposit will vary from broker to broker. As of May 28, 2024, the settlement for a stock trade is one business day after trade execution. To be safe, use only the amount or a fraction of the amount in your cash account before trading. You can easily set up a link to your checking account. Stock market hours are 9:30 AM to 4:00 PM EST.
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Money Market Accounts
When you open a new brokerage account, you may be given an option for a cash account or a money market account. Money market accounts are outstanding and offer higher interest rates, but are not ideal for stock trading. Funds in a money market must be sold during market hours and settle to a cash account the next day to pay for a stock trade. This involves two steps: buying a stock and selling a money market. Just use a cash account.
Market Order
When you buy a stock, the simplest type of order is a market order. This is an order to buy or sell a stock at the market’s current best available price. The advantage of a market order is that it is processed immediately, and you receive the stock without worrying about whether it reaches a particular price. Use market orders 90% of the time until you feel comfortable trying other ones.
Limit Orders
Limit Orders are used for both buy and sell orders, but are typically employed to purchase a stock at a specific price. If a stock is trading at $87 and you want to wait during the day (Day Order) or days to buy it at $84.50 (GTC), you can set a limit price.
Time-Related Orders
A Day Order is an order to buy or sell a stock that expires at the end of that trading day. For example, if a stock is trading at $87 and you want to buy it at $84.50, but the stock doesn’t reach that price, it will expire at the end of the trading day.
A Good-Til-Canceled (GTC) order stays in effect until transacted or until it is canceled. The same $84.50 order shall remain in effect for many days. If you change your mind and want to buy the stock, always convert the GTC order to a market order; otherwise, you may inadvertently buy the stock twice if you forget about the GTC order.
Stop-Loss Order
A Stop-Loss Order isn’t designed to take advantage of small, short-term moves in the stock’s price. It’s meant to help protect the bulk of your money when the market suddenly turns against your stock. It’s a form of discipline aimed at minimizing potential losses. Many investors set up a Stop-Loss order 10-15% below the buy price.
What to do for Beginners?
- Fund your cash account with the money you have set aside for investing.
- To buy a stock, look for the “Trade” tab.
- Enter the stock symbol for the stock, not the company name.
- Select “Buy” or “Sell.”
- Select “Market Order.”
- Select the number of shares or the dollar amount for fractional shares.
- At the top of the “Trade” page, it should show “Available Cash.”
- Select “Review Order” to double-check everything, then place the order.
- Go to “Account Summary” and see your stock.
New to investing? These explanations may help:
• Understanding Earnings Season
• Risk Categories & Diversification
This article is for general informational and educational purposes only. It is not intended as financial advice, investment guidance, or a recommendation to buy or sell any security. The content reflects publicly available information and broad market commentary. Readers should conduct their own research and consult a licensed financial professional before making investment decisions.