Buying Shares
Dec 8th, 2009
Buying shares of stock is the first step to most simple stock trading systems. There are many ways to trade the stock market without actually purchasing shares, but this article is back to the basics. You can buy shares of most publicly traded companies using online brokers. The big advantage of using an online broker is the commissions are usually lower than a personal broker.
The process of buying shares of a company is pretty straightforward. There are a few different order types that let you determine the price you are willing to pay for a stock. The simplest order type is called a market order. This type of order will execute immediately at the current ask price of the stock. If you place one of these orders you guarantee execution but not the price you will pay. After you place a market order for shares in a company you will own stock in that company. If you are investing in the company with long term goals in mind you are all set. If you are planning to use these shares as part of a stock trading strategy then you should already have your profit and loss targets set up.
Buying shares of stock simply means that you are investing capital in order to have partial ownership of a company. Every publicly traded company has a set number of shares outstanding. If you multiply the number of shares by the price of one share of stock you get the market capitalization of the company. Many investors use this figure as a basis for fundamental analysis of the company.
When buying shares for stock trading you don’t really need to have a strong long term outlook for the stock. Stock trading is based around short term gains and really doesn’t take the long term viability of the company into account. If you are buying shares as an investment strategy, you need to take a more in depth look at the company. Some people buy stocks with a “buy and hold” approach, figuring that if the company looks to be profitable in the long term the investor will make money. Some people look to buy stock in undervalued companies that have the potential for growth. How to determine what companies fit into each category by using fundamental analysis is a topic for another day. Just know that buying shares for stock trading is very different than buying stock for investment.