There are two questions you must answer to learn how to trade stocks: where to order and from whom to buy the stocks.
Placing an order also means placing a buy or sell order. When selling an order, there are two ways to sell. First is the market order and second is the limit order. In market order, the prevailing market price will be the price at which the sale is executed. Meanwhile, in the other alternative, which is the ‘limit order’, both the minimum purchase price and the maximum sale price are set. In limit order, you may end up having your sell price higher than your minimum and your purchase price could also be lower than your maximum. In any case, it is the broker’s obligation to offer the best price. This means that you can still get a better deal than expected with a broker on your side.
In order to trade stocks, you need to have an account with a stock brokerage firm or perhaps an ASX-licensed broker, such as an accountant or financial planner, to guide you to the best deal. This is also to ensure that the business environment is safe and to ensure that you understand the risks involved in your decisions. There are many new investors who have sought the help of brokers to begin with; But some prefer to do their own research and use online brokers.
Most of the time, many brokers will ask you to fund a cash management account. This is to ensure that you have sufficient funds to process new purchase orders. Meanwhile, online brokers will require you to have an account with their partner financial institution before you can start trading. So how do you trade stocks with the help of Commsec? Well, they don’t actually require the funds in your account before the trade starts. How about E * Trade? On the other hand, they will require funds in an investment account, which is linked to a cash management account.
The next stop in learning how to trade stocks is answering the question of who is buying the stocks.
Typically, when stocks are purchased, they are sold to an investor on the ASX or sold directly from the institution. In any case, this is where the investor participates in an initial public offering also known as an IPO. This is where the company first sells its shares to investors.
In Initial Public Offering or floating of new shares, companies raise new funds in order to expand their business. Once the company that intends to float files information with the Securities and Investments Commission, a Prospectus is issued to the public. Information on the investment is detailed in said brochure. This is where you can get information about possible investments for a company. After reading the Prospectus and deciding that the company is a solid investment, you will need to apply for shares by completing a form and submitting it to the company with the payment per share.
There are over 1,800 companies listed on the ASX that investors like you can invest in directly.