Be A Better Stock Trader By Understanding Some Stock Trading Fundamentals

If you have money to invest, you can buy and sellIf you want to buy or sell at a definite price,
stocks. There is a specialized vocabulary for stockwhether above or below the current market price,
trading, but once you understand the fundamentals,you can place a "stop order" or a "limit order." The
you will have a better feeling for how the marketstop order tells the broker to trade the stock at a
works. It's just as true for stock trading as it is forspecified price, and the limit order calls for the broker
any investment: The more you know, the moreto trade at the specified price or better.
successful you are apt to be.Stop orders are designed to limit losses and protect
Usually stocks are traded through brokers, who actprofits. They go into effect when the market
as intermediaries, taking and fulfilling orders. "Fullreaches the stop price, but may actually trade higher
service" brokers also can recommend which stocksor lower than the stop price because they are traded
to trade and give advice about the state of theat market price after they become active. At times,
market. These brokers charge higher commissions. Inlimit orders are not placed at all, even when the
order to save money, many people work withmarket has reached the limit price. This happens
discount brokers, who charge considerably less.when the market moves quickly and there is not
Discount brokers don't provide advice, but someenough time to execute the order before the stock
investors consider this a plus.prices goes below the limit price range.
Broker services may include online trading andTo illustrate: You purchase Bell Canada (BCE) for $50
broker-assisted trading. Some have options fora share, and then put in a stop order of $45. If the
placing telephone or online orders, such as Interactiveprice falls to $45, the stop order goes in effect, and
Voice Response Systems for telephone orders andthe BCE stock will be sold at the market price. On
wireless trading systems that allow buyers to placethe other hand, if you place a limit sell for $60 after
orders from their web-enabled handheld devices orpurchasing BCE, your stock will be sold at a profit
cell phones.when the stock price reaches that amount. Also, you
Some brokers give you a password that allows youmight purchase BCE with a limit buy order for $45.
to access their order department through theirThis theoretically would let you buy the stock at a
websites. Others have their own software forprice lower than the current market rate ($50 in this
Internet orders. No matter what system is used, inexample). If the price never falls to the limit buy
most cases a number of charting options are offeredprice, though, you will not buy any of that stock.
to help you track movements on the stock market.An order can be designated as "good till canceled"
Also, some services may include analysis software or(GTC) or as a "day order." As their names suggest,
offer it at additional cost.GTC orders remain in effect until they are canceled,
Different kinds of orders are made when selling orand day orders are only good until the end of the
purchasing stocks. A "market order" gives instructionsmarket day.
to buy or sell at the current market price. The orderTypically stocks are traded in multiples of 100, which
is usually executed at a price very close to what youare called "round lots." When other amounts are
are quoted when you order. Sometimes, however,traded, they are called "odd lots." Odd lot orders are
there can be a difference between the quoted pricesomewhat more difficult for trading software to
and the transaction price. This usually happens whenhandle, although both types of orders can certainly
the stock price is fluctuating or if the stock in notbe accommodated.
actively traded.