How to Successfully Buy and Sell Stocks

The stock market remains the last bastion of pure capitalism in The United States. Individual stocks, mutual funds and exchange traded funds allow investors to participate in the growth and prosperity of companies listed on the various stock exchanges in the U.S. and around the world.

Choosing a Broker

In order to place buy and sell orders for stocks, it is first necessary to establish a brokerage account. There are two primary types of brokerages that that deal in individual, joint, and retirement accounts that are authorized for stock transactions.

A full service broker offers a number of different financial products to their clients in addition to actually placing orders. In developing retirement strategies, tax planning and stock research, they can be a valuable resource. Fees for stock transactions at a full service broker are typically $75 per trade or higher.

Some of the more high profile full service brokers include:

* Edward Jones

* Raymond James

* Morgan Stanley

Discount brokers allow customers to trade stocks inexpensively when compared to full service brokers. Commonly called "self directed" traders, these account holders generally conduct their own research and retain total control over how their investments are allocated. Customers of discount brokers can initiate simple buy or sell stock transactions for as little as $7 per trade.

Some of the more popular discount brokers are:

* E*Trade

* Schwab

* Scottrade

Placing Buy and Sell Orders

Once the appropriate research on a stock has been completed, the client can log into their brokerage account and begin the stock trading process. Online brokers offer access to every individual trading account registered to that particular client including individual, joint or self-directed IRAs.

Once inside the desired account, the client should look for a "Trade" tab. When selected, a drop down screen will appear that identifies different fields that will require input to complete the transaction.

* Order Field: The account holder will select either "buy" or "sell" from the drop down menu. There are also other more complex options available such as "sell short" or "buy to cover."

* Quantity Field: The number of shares to be purchased or sold should be entered in this field.

* Symbol Field: The assigned symbol representing the equity, mutual fund or ETF is entered here. There is also an available feature to look up a company's stock trading symbol.

* Price Type: Perhaps the most confusing aspect of a stock transaction for the novice investor is learning the meaning of the different types of orders. In the drop down menu, the options are listed as either "market" or "limit."

Market orders are executed at the price of the most current offer at the time the order is received through the exchange. It is important to recognize that the last price traded does not guarantee that a market order will be executed at that price.

As the name implies, limited orders place a specific boundary on the price of a stock transaction. For example; if a stock is trading for $11 per share, and a limit order is placed for $10.80, the transaction will not be completed until another trader offers to sell their shares for the $10.80 price.

* Term: Traders are given the choice of how long they want the order to remain active."Good for the Day" orders remain open until the end of the trading day. If the transaction has not been completed, they are permanently canceled."Good until Canceled" orders remain active until they are completed. It is important to remember that good until cancelled orders can remain open through many trading sessions. In the interim, the financial position of the equity may change which can affect its relative value significantly.

* Placing Orders: Once the required information for the transaction is entered, a radio button will appear that is labeled "Preview Order." This will lead to the screen which displays the metrics of the transaction. After placing the order, a different screen will track its status until it is ultimately filled or cancelled.

Final Considerations

The stock market can be highly unpredictable on an inter-day basis. To help novice investors improve their trading skills, most brokers provide a practice account to familiarize their customers with basic trading concepts and the actual platform itself.

Discount brokers allow customers to trade stocks inexpensively