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Learn the lingo
Even though you are not too hands-on with the markets because your broker sorts most things out for you, you need to understand the language of stockbroking to a certain extent. You want to know that you have control over the effort and money your putting into the financial endeavor. Here are a few easy ones to get you started:
- Market
Market is the simplest command you can give to your stockbroker. It basically means you will buy stocks for their current market price in the hopes of seeing a return. Say for instance you told your broker you want a market order of 25 shares for McDonald’s. Each share is worth $182.53 at the time of your purchasing. If for whatever reason McDonald’s shares go up, you will have made a profit from your market order.
- Limit
Limit is another simple order you can give to your broker. This basically sets a limit to what price you’ll pay for specific shares. You do this in the hopes that you’ve bought shares at a low point, and that they will increase over time. Again, we’ll use the McDonalds example. Say you put a limit of 120 on your order. This means that the transaction won’t execute until McDonald’s share prices fall under 120. So, you would buy them at a low point. And then, if shares in McDonald’s went back up (as they probably would sooner or later) you will have made a profit.
- All or None
The standard procedure when you a buy a large amount of a company’s stock is that your broker will take their time to fill your order over hours but often weeks. This is done to stop you from manipulating the price of stock by affecting it with a single, huge order. There will come times, however, when you want to place an order at a single, normal price. This is what is known as an all-or-none trade. This communicates to your broker that there is no way you want a trade executed unless it can be done in one singular order.
Plan Ahead
The markets are some of the most unpredictable things in the world. They are affected by economic, political and often cultural changes as well. So if you are going to enter into the fray of stock trading you need to have this in the very forefront of your mind. Stock trading should never be seen, at the very start, as a stable income that can support you or your family. It takes a certain amount of time to find your sea legs in the unforgiving waters of the markets. The only way to solve this instability is to plan ahead, make sure you are able to commit the funds that you are promising, and always have a plan B.
Don’t get overexcited
So, imagine this. You check your quarterly report to find that all or most of your stock is up a substantial amount. You’re extremely happy about this. So what do you do? Do you call up your stockbroker and try and capitalize even more on the good news, trying desperately to have some of the same good fortune? No. This is not a good idea. You need to put a stopper in your excitement. This is because market hyperactivity can be the forbearer of your downfall. The really fantastic traders know when to play it calm and take what they have been given.
Disclaimer: Our service is not intended to be, nor should it be construed as financial advice. We help our readers make informed decisions via impartial information and guides. Where appropriate, we may introduce partner companies who can provide services relating to financial products.