| Are you interested in investing in the stock market | | | | (GTC) good until cancelled order. A day order will |
| but you are unsure where to start? With all the | | | | expire at the end of the trading day while a GTC |
| stock market information out there it can be a little | | | | order will remain open until executed or a cancel |
| intimidating and overwhelming. Don't let this | | | | order is placed. |
| discourage you. The stock market can be a great | | | | Another common trading term is a stop order. A |
| investment choice, but before you begin trading any | | | | stop order is used to protect against a large loss. For |
| stock on your own you should know a few basic | | | | example, let's say you bought Microsoft (MSFT) at |
| trading terms. | | | | $30 per share but you want to sell the stock if it |
| When a stock price is listed, two prices will be | | | | drops below $28 per share. In this case you would |
| displayed. The lower price is the bid price while the | | | | put in a stop order at $28. If MSFT goes down to |
| higher price is the ask price. The bid price is the | | | | $28 your shares will be sold. While stop orders are |
| highest price someone is willing to buy the stock for | | | | very good protection against loss you do not want |
| while the ask price is the lowest price someone is | | | | to place them too close to the current price. For |
| willing to sell the stock for. The difference between | | | | example, if you were to put a stop order at $29.50 |
| the bid and ask price is called the spread. The smaller | | | | on MSFT and the stock traded down to $29.50 but |
| the spread the better it is for an investor. A high | | | | later rallied to close at $31 per share, you would no |
| bid-ask spread can mean the stock is not very liquid | | | | longer own the stock as your stock stop order |
| making it harder to find a buyer when you are selling | | | | would have closed out your position (sold your |
| a stock (the opposite is true also). | | | | shares). |
| The next terms you should be familiar with are | | | | Finally, two others terms used in trading are round |
| market orders and limit orders. A market order simply | | | | lots and odd lots. Round lots are 100 shares while an |
| means you will buy or sell a stock at the best price | | | | odd lot is less than 100 shares. If you were to |
| available in the market at the time of the order. | | | | purchase 350 shares of stock, you would be |
| When buying a stock, a market order will usually be | | | | purchasing 3 round lots of 100 shares and 1 odd lot |
| the ask price quoted unless the stock price is moving | | | | of of 50 shares. Overall, it doesn't make much |
| very quickly. When selling a stock, a market order will | | | | difference, but round lots and odd lots are traded a |
| usually be the bid price unless the stock price is | | | | little differently. Also, some brokerages will charge a |
| moving very quickly. A limit order allows you to | | | | higher fee for odd lot purchases. This is a good thing |
| determine what price you will buy or sell a stock for. | | | | to check out before selecting a broker if you plan on |
| For example if a stock's last trade was $25.15 you | | | | making smaller trades. Like most things, the more |
| may want to put a limit order to buy in for $25.00. If | | | | you learn about stocks the more you realize there is |
| your limit order can be filled at $25.00 or lower, your | | | | to learn. However, we all have to start somewhere |
| order will be filled. If the stock can not be purchased | | | | and investing can be a very rewarding experience |
| for your limit price or better, it will not be purchased. | | | | both financially and personally. |
| A limit order can be placed as a day order or a | | | | |