Buying stocks
 

Once you have created a user with a stockbroker and chosen which account you want to use. The next step is to transfer funds/money to the selected broker and account. You are now ready to trade shares on the stock exchange. This is a fairly simple and similar process for all brokers. Once you have decided which stock or instrument you want to trade, you must place an stock order in the order book with a buyer's price.

Buyer price is what you are willing to pay per. share. You then select the number of shares you want to buy at this buyer price. The total amount for the trade with brokerage is automatically calculated and displayed by the broker. Finally, you choose a date for how long you want the order to be in the market. Once all this is done, you can choose to place the order or cancel.

Examples of trades

 

If you place the order, it does not automatically mean that the trade goes through. A stock trade is between two players in the market, if they agree on price and number of units, the trade will take place automatically. At most brokers you can see the order book, in this, you see where the nearest seller and buyer have placed an order.

 

If you want to buy the share/instrument immediately, you must place an order at the nearest sales order. It is also possible to look for a better price by putting a order close to or well below the nearest sales order. This is in cases where you think today's selling price and selling orders is a little too expensive.

 

Let's take some examples:

  • Phil wants shares in "Vitas", the last traded price was 13$, and when he looks in the order book there is a sale order of 5000 shares at this price. Phil thinks this is an ok price after looking at the company and its fundamentals. He is therefore placing a purchase order of 1000 shares at 13$ a piece. The trade takes place automatically and Phil owns the shares in the company.

  • Phil wants shares in "Vitas", the last traded price was 13$ a piece, but when he looks in the order book, the nearest sell order is 5,000 shares at 15$ per share.  Phil did not think the company was worth more than 13$ per share, and places a purchase order of 1,000 shares at 13$ a pice. This order does not go through automatically but is entered as an order in the order book that sellers can see. If the sellers thinks the price is fair after thinking about it, they may lower their asking price to 13$ and sell 1000 shares to Phil. Phil's order will be in the order book equal to the date he set for the purchase order, or until he manually cancels the order.

  • Phil wants shares in "Vitas". The last traded price was 13$, but when he looks in the order book, there is only a sale order of 500 shares at 13$ a pice. The next sale order is of 3,000 shares at 15$ per share. Phil had a desire to buy 1000 shares at 13$. He therefore places this order where 500 of the shares automatically go through and into his account. The rest of the order is still in the market, equal to the last 500 shares at 13$ This purchase order remains in the order book until the date of the purchase order expires, until a seller lowers their ask to 13$, or until he manually cancels the order.

stock trading investment trading orders trading stocks trading stocks order book trading stocks

orderbook.png

Source: marketcapculator.com

There are several scenarios that can arise during something as simple as a stock trade, as you could see in the text above. We have shown you the most common things you can deal with as a single actor in the market. If you become more advanced in your trading, and follow special trading strategies, like using stop-losses, or another automatic trading tools, you orders may play out a little differently. In theory, a trade in any case, means that a purchase order and a sales order are placed in an order book, where they are automatically executed if the purchase price and sales price are equal.