FYInance

Posts Tagged ‘brokerage account’

I’m using E-Trade and I am confused about the differences between a margin account and a cash account for stock trading online. Can anyone tell me what is the difference (in general or specific) between a cash trading account and a margin trading account?

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Is there any difference between opening a trading account at a brokerage firm and opening an online trading account? What are the differences? I am new at stock investing but would like to start. I want to make sure that I am doing the right thing and opening the right accounts. Many people I know have accounts at brokerage firms and some of them are not so happy with that. Some people have made a lot of money with online trading accounts but they say there is a learning curve. Can someone advise?

I was talking to a colleague about buying stocks and he suggested that I discuss all the different ways you can order a stock. So, I’m going to make this post about how to buy a stock. This is not about how to research your stock. Stock research and what stocks to buy or sell will be discussed another day, allright!

First of all, when you buy a stock or when you are on the phone with your stock broker, he may ask you if you want to place a market order or a limit order or even a stop order. Now, if you are new to stock investing, you might wonder, what? Then your stock broker might tell you the differences between a market order, a limit order or a stop order but still you really need to do your own research to be able to fully understand and give the right  order. So, let’s touch on that subject a bit here. We will only have time to discuss a market order and a limit order. The rest – we will save for another day.

What is a market order?

Most people buy a stock at a market price. When you want to buy a stock at market price, you are giving a market order. When you give a market order, you are paying the market price for the stock. Your purchase is usually immediate and can be executed immediately, especially if you are placing a small order and you are doing it yourself using an online brokerage account, rather than calling your broker. See http://www.investingsmart.info for a review of good discount online brokerage accounts.

What is a limit order?

Now, a more advanced stock trader may not want to pay the current price of the stock but wants to buy that stock at a certain price. He or she can place a limit order which means that when the stock is at a certain price, you will buy or sell that stock. When you place a limit order, your order is not executed immediately. The order will be executed whenever the price of the stock reaches your limit order price that you set.