Market mechanics
Once you have done your homework and decided which companies you feel are worth investing your money in, you can go ahead and buy their shares.
This is a simple process but there are some tips worth knowing before you start. Your first step should be to find a stock broker who offers the kind of services you need. Read more about choosing a broker.
Once you have registered you need to decide what type of order you want to place. There are a variety of ways you can buy or sell shares, not just at the best price your broker can get. You can, for example, set limits on the prices between which you are happy for your broker to trade. Remember that not all brokers will offer every type of order so check with them when you register.
At Best
Limit orders
Stop order
Fill and Kill orders
Trading systems
At Best
At best orders are used by the vast majority of private investors. If you choose to buy or sell shares at best you are simply instructing your broker to trade immediately at the best price they can get.
Limit orders
If you place a limit order you are simply asking your stockbroker to buy or sell shares at a price that matches or betters the level you specify. You might, for example, have noticed that shares in XYZ Plc have fallen to Rs.3.5 in the past few days and you think they are worth buying at Rs.3.5. You could, therefore, ask your broker to buy the company’s shares if they fall below this level.
There is no restriction on when these orders can be placed and then can stay in force for anything up to 90 days. This would be useful if, for example, you were going away on holiday but didn’t want to miss out on buying shares at a specific price.
Stop orders
This type of order enables you to buy or sell shares within a specified range once a price you determine has been reached and is a type of limit order. If, for example, you decide you want to buy shares at a specific level above the current market price you can ask your broker to place a contingent stop buy order. If you want to sell your shares once the price has dropped below a pre-determined level you can place a contingent stop sell order. This type of order can be useful if, for example, you are a momentum trader and want to reduce your exposure to a stock as prices fall or increase your holding as prices rise. Read more about momentum trading in strategies for investment.
Fill and Kill orders
If you want to buy or sell shares at a price that matches or betters the level you specify when the market next opens, you can place a fill or kill order. Your order with either be ‘filled’ if your broker gets a price matching your requirements or ‘killed’ if the price cannot be matched at the first attempt.
You can only place fill and kill orders outside market hours. These orders expire when the market opens on the first business day after the order has been taken. So, if you place a fill or kill order on a Tuesday evening, the order will be filled or killed at the start of the next day’s trading.
This is a simple process but there are some tips worth knowing before you start. Your first step should be to find a stock broker who offers the kind of services you need. Read more about choosing a broker.
Once you have registered you need to decide what type of order you want to place. There are a variety of ways you can buy or sell shares, not just at the best price your broker can get. You can, for example, set limits on the prices between which you are happy for your broker to trade. Remember that not all brokers will offer every type of order so check with them when you register.
At Best
Limit orders
Stop order
Fill and Kill orders
Trading systems
At Best
At best orders are used by the vast majority of private investors. If you choose to buy or sell shares at best you are simply instructing your broker to trade immediately at the best price they can get.
Limit orders
If you place a limit order you are simply asking your stockbroker to buy or sell shares at a price that matches or betters the level you specify. You might, for example, have noticed that shares in XYZ Plc have fallen to Rs.3.5 in the past few days and you think they are worth buying at Rs.3.5. You could, therefore, ask your broker to buy the company’s shares if they fall below this level.
There is no restriction on when these orders can be placed and then can stay in force for anything up to 90 days. This would be useful if, for example, you were going away on holiday but didn’t want to miss out on buying shares at a specific price.
Stop orders
This type of order enables you to buy or sell shares within a specified range once a price you determine has been reached and is a type of limit order. If, for example, you decide you want to buy shares at a specific level above the current market price you can ask your broker to place a contingent stop buy order. If you want to sell your shares once the price has dropped below a pre-determined level you can place a contingent stop sell order. This type of order can be useful if, for example, you are a momentum trader and want to reduce your exposure to a stock as prices fall or increase your holding as prices rise. Read more about momentum trading in strategies for investment.
Fill and Kill orders
If you want to buy or sell shares at a price that matches or betters the level you specify when the market next opens, you can place a fill or kill order. Your order with either be ‘filled’ if your broker gets a price matching your requirements or ‘killed’ if the price cannot be matched at the first attempt.
You can only place fill and kill orders outside market hours. These orders expire when the market opens on the first business day after the order has been taken. So, if you place a fill or kill order on a Tuesday evening, the order will be filled or killed at the start of the next day’s trading.
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