The Stock Market Buying, Selling, and Trading parts of businesses you own for cash.
Buying and Selling Stock Part 1
-
Upload
how-to-be-a-stock-market-player -
Category
Economy & Finance
-
view
680 -
download
0
description
Transcript of Buying and Selling Stock Part 1
Buying and Selling
Stock IStock I
Odd Lots vs. Round Lots
Real Time Orders vs. Regular Orders
Types of Real Time Orders
� When purchasing stock you can buy in either:
• A Round Lot
• An Odd Lot
• Mixed Lot Transactions
Odd Lots vs. Round Lots
ROUND LOTS
� A round lot is simply 100 shares of stock or
multiples of 100 shares of stock.
Round Lots
� An example of a round lot would be a
purchase of 300 shares of stock.
ODD LOTS
� An odd lot consists of less than 100 shares of
stock. Unless you are a wealthy individual, odd
lots will probably make up the bulk of your
stock transactions.
Odd Lots
� An example of an odd lot would be a
purchase of 25 shares of stock.
MIXED LOTS
� A mixed lot transaction consists of both round and
odd lots.
Mixed Lots
� An example of a mixed lot would be a � An example of a mixed lot would be a
purchase of 125 shares of stock
100 shares
(round lot)
25 shares
(odd lot)+ = 125 shares
(mixed lot)
REAL TIME
ORDERS VS.
REGULAR
ORDERSORDERS
Note: An order is synonymous with trade;
hence a real time order is like saying a
real time
trade or real time stock trade.
� A regular order is an order to buy or sell stock
at the price available at the time the order is
filled.
Regular Orders
� You put in an order for 2 shares of Starbucks
stock.
• The order isn't expedited immediately by your
broker.
• As a result, the market price for that stock may be
Example of Regular Orders:
• As a result, the market price for that stock may be
higher or lower when the order is finally filled by
your broker.
� Usually if you are involved with an automatic
investment plan or a direct investment plan
you will encounter regular orders.
Special Note:
� A real time order is an order to buy or sell stock immediately at the price available.
� The orders are filled immediately within minutes, if not seconds, from when the order was placed so the market price for that stock will change minimally, if at all, once the order
Real Time Orders
was placed so the market price for that stock will change minimally, if at all, once the order is filled.
� This is primarily a method used by day traders or stock traders, who monitor stock prices throughout the day.
� If you want to control the amount you spend
or limit the amount you lose on a stock, there
are a couple of options out there. Of course,
these special benefits come with a price in the
form of higher commission fees.
Types of Real Time Orders
form of higher commission fees.
COMMISSION
� Usually the commission for making real time
trades is much higher than placing regular
trades.
The Differences In Commission
LIMIT ORDERS
� A limit order is an order to buy at or below a
specified price or to sell at or above a
specified price.
� This way you control what you will pay for a
stock and what you will sell your stock for.
Limit Orders
stock and what you will sell your stock for.
� Investors use this strategy to limit their losses
and prevent over paying for a stock.
� You place a limit buy order to buy 75 shares of
Microsoft at $20:
• The stock is currently trading at $21 per share.
• Once the price falls to $20 or below per share your
broker will execute the order.
• Once the price exceeds $20 per share the broker will
Example 1 - Limit Orders:
• Once the price exceeds $20 per share the broker will
stop the order.
$21$20 BUY!
$21$20 STOP BUYING
� You place a limit sell order to sell 20 shares of
Starbucks at $22
• The stock is currently trading at $21.50 per share.
• Once the price rises to $22 or above your broker will
expedite the order.
• If the price falls below $22 the broker will stop the
Example 2 - Limit Orders:
• If the price falls below $22 the broker will stop the
order.
$22SELL!
$22STOP SELLING!
$21.50
Below
$22
� Keep in mind that these market prices may
never be reached; hence you may never buy
or sell stock at that particular price.
� These orders will not be activated until they
reach your specified price points.
Limit Orders, cont’d
reach your specified price points.
� You can place a limit order in one of these
forms:
1) A fill or kill order, which simply means that if the
limit order cannot be filled immediately, it is
canceled.
Different Forms of Limit Orders
canceled.
2) A day order means that if the limit order is not
executed by the end of the day, it is canceled.
3) A good-till-canceled order means the limit order
is in effect unless executed, canceled, or
renewed.
STOP-LOSS
ORDERS
� A stop-loss order is an order to sell a stock
when the market price reaches or drops
below a specified level.
� This minimizes your loss on your investment in
a stock.
Stop-Loss Orders
a stock.
� Special Note: All of these orders happen in
real time once activated or your specific
market price is reached.
� You have stock in ExxonMobil; the stock is
currently trading at $95 per share.
• You place a stop loss order with your broker to sell
if the price drops below $90 per share.
• Once it hits $89 per share your order is activated
Example of Stop-Loss Order:
• Once it hits $89 per share your order is activated
and you sell at the best price available to avoid a
big loss, hence stop-loss.
� Stock is bought and sold in round lots, odd
lots, or mixed lots. You can place orders to buy
and sell stock in real time or by regular order,
which is associated with automatic investment
plan or direct investment plan. If you want to
In Summary:
plan or direct investment plan. If you want to
control what you spend and lose on stock you
can place special real time orders called limit
orders and stop-loss orders.