How to buy stocks
If you want to get involved in the markets, understanding how to buy stocks is a critical step. There are several different order types you can use when placing an order, all which are discussed in this beginners video.
Video by ClayTrader
Video by ClayTrader
– So you just heard about this stock market thing,
you wanna buy some stocks but, hey, how do you even do that?
I see all these different order types,
what do they mean?
Let’s talk about it.
First thing, before you can even do
what I’m about to talk about in this video,
you need to take an initial step
and that initial step is signing up for a brokerage.
And, with the brokerage, you wanna do an online brokerage.
Don’t go to your community bank or something like that
and then go through their brokerage
cuz their fees are going to be crazy.
So online brokerage, I’ll put a link
in the description below.
I’ve put together a guide on how
to select the proper brokerage for your situation.
We’ll also flash up a link on the screen here.
So that will be down in the description box below.
So that’s step one, first gotta get aligned
with an online brokerage.
After, you get signed up, maybe you are already signed up,
you’re gonna have a bunch of different choices for orders,
in terms of how to buy and how to sell.
So that’s what I wanna break down in this video.
So we’re just going to take it one by one
and, hopefully, when you get through it all,
you’re gonna understand what all those little
drop down options mean, when you click that little arrow
and you see a bunch of choices.
Maybe there’s just boxes you select or whatever,
but regardless, hopefully, you’ve seen all of these
because they are very commonplace.
Just for argument’s sake, we’re gonna talk about a stock
that is currently trading at $25.
So $25, current price of stock.
We’ll just call it ABC.
Now, the first type of order you may see
is what we call a market order.
So, what does market order mean,
if you select that option?
That means that I just want it
and, not only do I want ABC, I want it at any price.
It does not even matter to me, I just want into the stock.
I want to own shares.
I want to buy it, not in a few minutes, right now.
So market is just,
saying I want it now.
And you’re gonna pay whatever price the market gives you.
So if this happens to fluctuate up to,
let’s just say, $25.02.
So if that price goes up $25.02 for whatever reason,
maybe like a split second before you click the buy button
and it goes up to $25.02, it doesn’t matter,
you’re getting in at $25.02.
Let’s just say it drops
right before you buy.
It doesn’t matter, you’re getting in.
You want it now so it’s going to give you
whatever the market has the current price at.
So that is what a market order is.
Next type of order, a limit.
And all strategies are different
but a limit is, more times than not,
the order that you want to be using
because market orders, especially in penny stocks
or illiquid markets, can get you in quite a bit of trouble.
But, also at the same time, market orders
do have their place in the market.
So I don’t wanna say this is
like a black hole or anything.
They have their time and place.
But a limit order is essentially saying,
I want it but.
So what is the but?
The but is saying, yo, I really do want that
but I’m only willing to pay a certain price for it.
So, again, if the stock is trading at $25
and, you’re like, I do want into ABC,
but I don’t want in at $25,
I’m only willing to pay $24.90.
You would select limit order and, then,
when you select limit, your broker is going to ask you,
okay, well, what is the but,
meaning what price are you willing to pay?
So, in our example here,
you would put in a limit order
All that means is, you’re not going to get
any shares of this, unless the price hits $24.90.
So, if the price drops down, it hits $24.91,
you didn’t get any shares.
If the price goes up to $25.50, you didn’t get any shares.
You’re only willing to pay $24.90.
So you put a limit on the order,
that’s what a limit order is.
The next type of order, very, very important type.
Now, the thing here is, stop-loss only pertains
to you if you’ve gotten in.
So either this or this order type has already taken place
in order for a stop-loss order to be relevant to you.
And the stop-loss
is saying, I want out.
Now, the name’s a little deceiving cuz it implies
that maybe you’re stopping a loss.
But, in other situations, especially when you get
more advanced trading, a stop-loss can still
take you out of a position.
But it’s not really stopping a loss
cuz you would already be making money.
So it’s not like this pertains to only losing trades.
This is just a way, again, of saying,
I want out of the trade.
That could be a losing trade.
It could already be a profitable trade.
But you just want out.
Now, within this family, there are two types.
And, hopefully, these both kinda sound familiar.
There is a market stop.
And there is a limit stop.
Market is saying, I want out, now.
So it is just gonna get you out of the trade whenever.
So let’s say you get in right here at $25,
and you’re like, you know what,
I only want to risk 10 cents.
So you could put in a market at $24.90
and, if the price goes down there, it hits $24.90,
bam, your broker is gonna sell your shares
and you’re gonna get out.
But market means, no matter what,
so if the price really starts to go down fast,
maybe by the time all the little computer algorithms
do their thing, the price is at $24.85.
Well, because you are doing a market,
meaning you want out now, it’s still gonna just sell you
and get you out at $24.85.
Sure, you said $24.90 but, because it’s a market,
that’s not a guarantee.
The only guarantee is your broker
will get you out of the position.
On the flip side,
so we’ll go with this $24.90, you want out there,
but if you choose limit, you’re saying,
I want out but I’m only willing
to take a loss of up to 10 cents.
Meaning if the price does one of these numbers,
where it’s just moving so fast that it just, essentially,
goes down through your order, which is possible
depending on how fast things are moving.
That’s just the way the market works.
But, let’s just say, the price just starts to collapse,
like bad news or something comes up,
and the price just, whoosh,
you know the toilet flush, down it goes.
Because a lot of other people are going to try at $24.90,
you just may not have any shares there
or you may not be able to get out.
But the problem here is, well,
you’re only willing to sell for $24.90.
So what the price hits $24.85, you’re not selling.
Price hits $24.50, you’re not selling.
Price hits $24, you’re not selling
because you said, well, I’m only willing to sell for $24.90.
Sure, it can cost you a little bit more,
because maybe you don’t quite get out,
when you thought you do.
But at least you get out.
So, again, all orders have their time and place.
But I’m just gonna circle this one, a limit stop-loss
can be very, very risky for this situation
where, if some sort of bad news comes out,
and, if it skips over what your limit order is,
who knows how low it can get,
and your broker is just gonna hang onto the shares
because you told them, well, I only want to sell at $24.90.
Keep that order in mind.
I’m not going to say to never, ever, ever use it.
But I’m really struggling right now,
off the top of my head, to think of an instance
where that sort of stop-loss order maybe wise to use.
So these are going to be the three main ones you use.
Now, there’s a whole other family of orders
called conditional orders, but that’s more advanced.
Maybe I’ll come back and do another video
on that sort of stuff.
But these are going to be the backbone of the orders.
If you ever watch any of my live trade videos,
these are the orders that I’m using.
So it’s not like because there’s advanced orders,
that means you have to use them.
The plain and simple orders, such as you see right here,
are gonna be more than enough.
And then final, or finally I should say.
These aren’t really order types.
I suppose in a sense they are but maybe you’ve seen GTC.
This just means good ’til canceled.
Meaning, your order is gonna sit out there,
so if you put in a limit order for $24.90,
it’s gonna sit there and sit there.
And, next week, it’s gonna still be sitting there.
Three months from now, it’s still gonna be sitting there.
Opposed to, this one I don’t think
there’s a universal term for it, but, essentially,
it implies it’s good ’til the end of the day.
So we’ll call it GTE.
Good ’til end of day.
And, this is one, where hopefully
that’s pretty self-explanatory.
If, by the end of the day, the price,
let’s just say goes to $25,
$25.05, $25.02, $24.97,
so it’s just fluctuating, it never quite hits $24.90
by the end of the day, well, then this order
is going to be canceled.
And you don’t have to worry about it.
So, obviously, something like this
is if you forget about the order.
Then it’s okay cuz it will get canceled at the end …
Hopefully, you’re not forgetting about orders,
but if you do, it’s gonna cancel itself.
But this one here, if you forget about it,
you may have a surprise if you don’t come back
and check your broker for another three weeks
and, you’re like, oh yeah, I forgot about that order.
And it maybe sitting out there,
who knows, maybe it’s been filled.
But that’s gonna be what GTC stands for:
good ’til canceled opposed to the other type
of orders where it’s just good up until the end of day.
So, like I was saying, these are the, not advanced orders.
Very basic but this is what I use all the time
in my every day trading.
This is what probably, I was going to say 90% of people use,
but I guess I don’t really know if
that’s an accurate fact or not.
But the majority of people, I’ll just use the word majority,
majority of people do use these order types
and they’re really all that you need.
So, limit, market and then your stop-loss orders here.
You get a grasp of these and how they work.
I just like to remember it as these,
market I want it now,
limit I want it but …
And, then, you combine these with the stop-loss
which when you’re talking about stop-losses,
you just want out of the trade.
So, hope you found this helpful.
Obviously, this is designed for more
of the new people out there.
So, if you are newer, and this helped ya out,
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Hopefully, you found this helpful.
So get out there and happy trading.