The first part of the page is on the basics of buying
stocks:
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Stock Brokers
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| To start investing, the first thing you have to go out
and find is a stock broker. A stock broker is a person or
company that does the actual buying and selling of your
shares on the stock market. When you find a stock broker,
the first thing you must do is open an account such as you
would at a Bank. The difference is this account will not
only hold your money but it will also hold other
investments such as Stocks, bonds and mutual funds. When
you buy shares of a company, money will be taken out of
your account and changed over to company shares. When your
selling company shares the opposite will occur, your
company shares will be changed over to money. Before this
sounds confusing, you should know that there are two types
of Stock Brokers: discount and full service brokers. The
differences are explained lower.
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Full Service Stock Brokers
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| Full service brokers will give you advice and
investment recommendations. But there is a price to pay
for these recommendations, they do have very high
commission fees and are usually only suitable for
investors who have a great deal of money to invest and who
do few trades. If your more into the excitement of Penny
Stock investing which by the way is our specialty, then
full service brokers will probably be too expensive for
you, you might end up paying the broker most of your
profits. You may be required to pay as much as $100 or
more to have your full service broker buy you some shares,
and just as much again when you sell.
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Discount Stock Brokers
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| Discount brokers can answer any investment questions
you may have, but they offer fewer personalized services
for their clients, such as making stock recommendations or
giving you portfolio advice. These are the brokers that
advertise trade very low trade commission fees such as 10
dollars a trade. When you buy or sell stock, you will be
paying this lower commission rate, which results in you,
the investor, making more money.
As well, with discount brokers you can often monitor
your account and execute trade orders from your computer
or through an automated telephone system. With the
computer system you are able to see all of your open buy
orders, check market indexes and get stock price quotes.
There is also plenty of research and other analysis that
these discount brokers offer to their clients. Online
discount brokers are best for anyone investing in penny
stocks, as you are able to check prices anywhere there is
Internet access, and as many times as you like throughout
the day. Usually all research as well as stock quotes and
other market info is free if you are a client.
When you’ve chosen which broker you want to establish
an account with, simply contact them and they will help
you fill out any forms and set up your account. You
generally will need an initial deposit of cash. Getting
your account running and ready for trading is simple and
should not take more than three days.
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Buy Orders
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When you want to acquire shares of a stock, you give
your broker a buy order. Make sure you have enough money
in your account to cover the cost of the shares, as well
as the commission fee. You will need to know the
following;
- The ticker symbol of the stock (i.e.- YHOO is the
ticker symbol for Yahoo! Inc.)
- The market the stock is trading on (i.e.- NASDAQ)
- How many shares you want to acquire. This is also
referred to as the volume. With penny stocks you should
always buy in multiples of 1000 shares, as you may be
otherwise subject to extra commission charges from your
broker.
- The price you are willing to pay for the shares.
- The duration of your order. For example, you may
keep your order good for just that trading day, or have
it good every trading day until it expires on the date
you specified, which may be weeks later.
Thus, an example order you might enter would be; “I
wish to buy 6000 shares of Alternative Fuel Systems Inc.,
ticker symbol ATF, at 1.30 cents or less. The stock is on
the Toronto Stock Exchange, and I want this order to stay
active until Friday of this week.”
If the price of ATF hits 1.30 cents or less, your
broker should acquire the shares for you. You will find
that 6000 shares of ATF have been added to your account,
and the money for them has been taken out (6000 shares x
$1.30 = $7800 + commission fee).
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Sell Orders
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| A sell order is simply the reverse process of buying.
Make sure you know how many shares you have in your
account when selling a stock. Tell your broker; I wish to
sell the 6000 shares of Alternative Fuel Systems Inc. from
my account. The ticker symbol is ATF, and the stock is on
the Toronto Stock Exchange. I want to sell at 1.50 cents
or higher, and keep the order good for the rest of this
week.
If the price of ATF hits 1.50 cents or higher, your
shares should be sold and the money from the transaction
(6000 shares x $1.50 = $9000 - commission fee) deposited
into your account within three days, ready to be used in
another purchase.
When you have made your first stock buy and then sell,
check out the AllPennyStocks.com Stock profit or loss
calculator located here. As you can see, if you were to
have bought 6000 shares of ATF at $1.30 and sold the 6000
shares at $1.50 after a buy commission of $20 dollars and
a sell commission of $20 dollars, then you would have made
$1160.00 dollars profit!
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Special Trading Notes
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| When trading on an exchange, investors either enter a
bid price (if they are buying) or an ask price (if they
are selling). When a bid and ask price meet at an agreed
price, a trade takes place. In other words, if you are
willing to pay 24 cents per share for a stock, and someone
is willing to sell shares of the same stock for 24 cents,
you will exchange the shares for the cash.
At any one time there are usually several buy orders
and sell orders all at different prices for a given stock.
However, when you check a stock quote you will only see
the highest bid price and the lowest ask price,
representing the most that investors are willing to pay
for the shares, and the lowest price at which shareholders
are willing to sell, respectively.
Due to the ‘best price’ priority, your order to buy
stock will not get filled until all buy orders of a higher
price are filled first. Similarly, your sell orders will
not get filled until sell orders of a lower price are
filled.
For orders to buy (or sell) stock that are entered at
the same price as other similar orders, preference will be
given by the exchange in the order in which they were
received.
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Unfilled Orders
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| Due to the above mentioned ranking order, and the
often light volume of shares trading, you may not always
get your order filled. You may put in an order to buy at a
certain price, and find that the shares did not trade at
that price during the duration of your order, and
therefore you did not make the transaction. There will be
no broker fee when no trade takes place.
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Partial Fills
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| You may also find that you got your order partially
filled. You may want 8000 shares of a stock, but only get
3000. This is because only 3000 shares were available at
the price you had requested. This applies to both buying
and selling. If you see that this may be the case mid-day,
you can respond by adjusting the price of your order to
ensure you trade all the shares you want. You will not get
an extra commission for that. However, if your order goes
for several days and is partly filled on more than one
day, you will get a commission charge from your broker
each day you trade shares.
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Canceling and Changing Open Orders
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| Buy and sell orders can be canceled or changed during
their duration. Consult your broker for more information
about changing open orders.
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Margin Accounts
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| You may also want to open up a margin account when you
are opening a trading account. A margin account is
basically a account that lets you, the investor loan money
from your brokerage firm to pay for stocks. But there is a
catch, when you lend the money from the brokerage firm you
have to pay them interest from the money they lent you.
Also not all stocks are marginable, your broker can tell
you if the stock your interested in is marginable or not.
Usually stocks traded under $1.50 a share or in other
words penny stocks, are not able to be bought on margin.
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For more info on investing and the stock market, you may
want to read (No insult intended, this is the name of the
book!):