Here are some things to consider when making your first buy or sell with an online broker. Most online brokers have a specific page or pop up window for orders. Often it’s the same form for buying and selling. To distinguish between a buy and a sell order there should be an option to pick which you want to do. While you are learning to invest make sure to start a position in a stock by using a BUY order. All brokers are different and the order form might be different than we described.

When entering a buy order, the main thing to consider is the amount of shares you want to purchase. We have constructed a simple formula to help you decide how many shares to purchase.

A = The amount of money you want to invest in the particular stock.
P = The current price of the stock (You can use the Last price or the Ask price).

S = This will be the amount of shares that you want to purchase.

A / P = S

This formula gives you the amount of shares you will want to purchase. This number usually won’t come out to a whole number so you will want to round up or down depending on your preference. Once you have your rounded S amount (share amount) you can multiply it by P (price) to see about how much the purchase will actually cost. When you are buying an expensive stock, say $400 a share, rounding up or down makes a big difference. Also keep in mind that stock prices are always changing so the amount you figured could go up or down with the stock price.

Selling is much easier. You should have a portfolio page or a statement page that tells you how many shares you own in a particular stock. It's good to check this and not assume it’s the same number you purchased. The share amount can be affected by a stock split. When you are ready to close a position in a stock just complete a sell order and put in the amount of shares that you own. If you only want to sell some of your shares, you can enter a smaller amount than you own. Say you own 100 shares, you can enter 50 and hold on to the other 50 shares.

Be sure to check back for other parts of the Learning to Invest in the Stock Market series! Sign up for a free trial and view this topic in more depth, along with other beginner investing topic in the members area. We also offer a well researched stock portfolio to help you successfully invest in the stock market!

Tags:   Buying Stock   Learn How to Invest   Selling Stocks  

Posted on March 22, 2007 12:25 PM | Digg | del.icio.us