A Beginner’s Guide to Buying and Selling Stocks — Part 2
Buying and selling shares is relatively easy today thanks to modern and largely self-explanatory systems at online brokers. The desired security can be found using a search mask, whereby the name is usually sufficient. If this is not sufficient, for example, because there are different shares of a company, it is useful to know the security identification number.
Selection of the trading venue
The most important stock exchange for USA trading is the New York Stock Exchange. In addition, there are seven other trading venues, which account for a significantly smaller share of total trading. The choice of trading venue determines at what price and how quickly an order is executed.
Not all securities are traded on all exchanges, and there are also so-called “exchange-dependent fees”. Alternatively, some securities can be traded over the counter.
Bid and ask price
Different prices are displayed depending on whether you want to buy or sell. The bid price is the current price received when selling a security, the asking price is the price to be paid when buying the security.
Normally, the software of the online broker already shows the appropriate price as soon as you select “buy” or “sell”.
Limittrade
If one wants to buy a security at a certain price, the “Limit” addition helps. Depending on the broker, additional fees may be charged for this, especially if the order is not executed within the validity period. The same applies to limit changes.
In addition to the simple limit, there are other constructions such as Stop Buy/Stop Loss, but you should familiarize yourself with their handling before applying them.
In the “cheapest/best” option, the security is bought at the current cheapest offer price or sold at the best demand price. The order will be executed as soon as there is an offer or demand at the selected trading venue, which is usually immediately in the case of frequently traded securities.
Order fees
Once the order is executed, various fees become due. These include the order fee of the online broker, the exchange-dependent fee as well as other items (e.g. rewrite fee for registered shares and commission fees for foreign trading). The costs vary greatly depending on the provider and should therefore be compared in advance.