Wondering where to buy shares? Movies love to show frenzied traders shouting orders on the floor of the New York Stock Exchange, but these days very few stock trades happen this way. Today, the easiest option is to buy shares online through an online stockbroker.
Once you’ve set up and funded your brokerage account, it’s time to dive into the business of picking stocks. A good place to start is by researching companies you already know from your experiences as a consumer.
a) Identify the right currencies
b) Allocate a percentage of your portfolio to each currency
c) Choose the individual shares that provide that given percentage exposure
Here is a quick summary of what to look for in an investment stock, keeping in mind the points discussed above.
View charts of the shares produced by the screener above. The next criteria for buying shares is:
Also, have an exit plan for how you will exit a profitable trade. Define how and why you will exit. Since we used support to get into the trade, you may consider exiting just below a long-term resistance level. Once you are out of your trade, don't worry about what the shares does after. Take the money and buy other shares, going through the same process again, as discussed above.
This brings us to one final guideline for buying shares:
You should feel absolutely no pressure to buy a certain number of shares or fill your entire portfolio with stock all at once. Consider starting small — really small — by purchasing just a single share to get a feel for what it’s like to own individual stocks and whether you have the fortitude to ride through the rough patches with minimal sleep loss. You can add to your position over time as you master the shareholder swagger.
Take into consideration to buy shares in Margin: Borrowing for a Chance at Bigger Returns
A margin account amplifies an investor’s buying power by allowing her to borrow money to buy shares. Through leverage, an investor can attain higher gains. Without it, an investor’s spending is limited to the amount of money deposited. On the flip side, margin trading exposes traders to losses.
Leverage is actually a very efficient use of trading capital and is valued by professional traders precisely because it allows them to trade larger positions (i.e. more contracts, or shares, etc.) with less trading capital. Leverage does not alter the potential profit or loss that a trade can make. Rather, it reduces the amount of trading capital that must be used, thereby releasing trading capital for other trades. For example, a trader that wanted to buy a thousand shares of stock at $20 per share would only require perhaps $5,000 of trading capital, thereby leaving the remaining $15,000 available for additional trades.
In addition to being an efficient use of trading capital, leverage can also significantly reduce the risk for certain types of trades. For example, a trader that wanted to invest in ten thousand shares of an individual stock at $10 per share would require $100,000 worth of cash, and all $100,000 would be at risk. However, a trader that wanted to purchase shares in exactly the same stock with exactly the same potential profit or loss (i.e. a tick value of $100 per 0.01 change in price) using the warrants markets (highly leveraged markets), would only need a fraction of the $100,000 worth of cash (perhaps $5,000), and only the $5,000 would be at risk.
>> Play around in a demo account and notice how buying stocks on margin can amplify the profits.
Terms like "market order" and "limit order" may sound complicated but in reality, they are simple concepts that you can understand with just a little bit of work after you learn how to buy shares (previous steps). Most investors won't encounter more than a few of these type of trades, but it's smart to think of them as potential tools in your stock trading arsenal.
The simplest and most common way to buy shares online is a market order. Market orders simply tell your broker that you are willing to take whatever price is presented to you when your order is executed. These orders are often subject to the lowest commission since they are the easiest to execute.
Imagine you want to buy 100 shares of Apple. The current market price is $181. You log into your brokerage account or call your broker directly on the phone and tell him, “Place a market order for 100 shares of Apple Computer, ticker symbol AAPL." By the time the order is executed a few seconds later, the market price may be higher or lower; $181.50 or $180.60, for example. Your total cost before commissions will vary accordingly.
A limit order allows you to limit either the maximum price you pay or the minimum price you are willing to accept when buying or selling a stock. The primary difference between a market order and a limit order is that your stock broker cannot guarantee that the latter will be executed.
Imagine you want to buy 300 shares of U.S. Bank stock. The current price is $55 per share. You do not want to pay more than $52, so you place a limit order set to execute at $52 or less. If the stock falls to that price, your order should be executed.
There are three considerations you should take into account before placing a limit order:
In common parlance, stop and stop-limit orders are known as “stop-loss” orders because speculators use them to lock in profits from profitable trades. Most investors don't concern themselves with these kinds of orders, but its worth understanding how they work.
A stop order automatically converts into a market order when a predetermined price is reached (this is referred to as the “stop price”). At that point, the ordinary rules of market orders apply; the order is guaranteed to be executed, you simply don’t know the price – it may be higher or lower than the current price reported on the ticker symbol.
Contrast that to a stop-limit order, which automatically converts into a limit order (not a market order) when the stop price is reached. As discussed earlier in this tutorial, your order may or may not be executed depending upon the price movement of the security.
One way to protect gains and limit losses automatically is by placing a trailing stop order. With a trailing stop order, you set a stop price as either a spread in points or a percentage of current market value.
Imagine you purchased 500 shares of Hershey at $50 per share. The current price is $57. You want to lock in at least $5 of the per-share profit you’ve made but wish to continue holding the stock, hoping to benefit from any further increases. To meet your objective, you could place a trailing stop order with a stop value of $2 per share.
In practical terms, here is what happens: Your order will sit on your broker’s books and automatically adjust upwards as the price of Hershey’s common stock increases. At the time your trailing stop order was placed, your broker knows to sell HSY if the price falls below $55 ($57 current market price - $2 trailing stop loss = $55 sale price).
Imagine Hershey increases steadily to $62 per share. Now, your trailing stop order has automatically kept pace and will convert to a market order at a $60 sale price ($62 current stock price - $2 trailing stop value = $60 per share sale price). It should provide a capital gain of $10 per share.
Much is made about buying shares; investors tend to put far less thought into how to sell shares.
That’s a mistake, as the sale is when the money is made. Getting it right can be key to claiming your profits — or, in some cases, cutting your losses.
Three steps to selling shares:
There are good reasons to sell shares and bad reasons.
Ongoing poor performance relative to the competition, irresponsible leadership and management decisions you don’t support may all make the list of good reasons. Maybe you’ve decided your money would do better elsewhere, or you’re harvesting losses to offset gains for which you’ll owe income taxes.
Bad reasons typically involve a knee-jerk reaction to short-term market fluctuations or one-off company news. Bailing when things get rocky-only locks in your losses, which is the opposite of what you want. (You know the saying: Buy low, sell high.) Before you sell a stock, go over your reasoning to ensure you’re not giving in to an emotional response you might later regret.
» Prone to emotional investing? You might be a good candidate for a Robo-advisor.
If you’re familiar with buying stock, you’re familiar with selling it — the options for order types are the same. The goal, however, is different: You use order types to limit costs on the purchase of stock. On the sale, your main objective is to limit losses and maximize returns
Let’s go through some examples. Say you have a stock with a current market price of $40.
The order will execute within a few seconds at market price. You may sell for $40, slightly more or slightly less — stock prices can fluctuate in the time it takes to place and execute the order.
The risk: Your stock could sell at any price, with no restrictions.
You set a limit price and the order will execute only if the stock is trading at or above that price. If your limit order is for $41, your order will execute only if the stock trades at or above $41.
The risk: You could end up not selling if the stock never rises to your limit price.
You set a stop price and your order will execute only if your stock begins trading at or below that price. If your stop price is $38, your order will execute as a market order if the stock price falls to $38 or less.
The risk: You could sell for less than your stop price — there is no floor. Also, a temporary drop in price may trigger a sale when you don’t want it to.
You set both a stop price and a limit price. If your stop price is $39 and your limit price is $37, your order will execute as a limit order at or above $37 if the stock’s bid price drops to $39.
The risk: You’ve added a floor, but if the stock drops below it too quickly — which can happen in a volatile market — you may not sell at all.
We hope your first stock purchase marks the beginning of a lifelong journey of successful investing. But if things turn difficult, remember that every investor — even Warren Buffett — goes through rough patches. The key to coming out ahead in the long term is to keep your perspective and concentrate on the things that you can control. Market gyrations aren’t among them.
What you can do is:
Understanding how to buy shares online is important, but if you need some help MetaTrader 5 AM Broker provides access to the largest Stock Markets in the world, as well as currency market to identify those shares in a strong uptrend.
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