Hope everyone is having a lovely weekend!  Before I get into more investing and trading ideas, I realized that I skipped a big logistical step.  As inspired by my roommate, I wanted to give a quick demo of how you actually make a trade online.

There are many trading platforms you can use to create a personal account – Fidelity, Merrill Lynch, E-Trade (love those baby commercials), etc.  Mint actually has a pretty nifty tool to help you figure out which brokerage might be best for you: https://www.mint.com/brokerages/.  I personally use Fidelity because I find it really easy to use and commission is a fair $7.95 a trade.

Once you actually go to place a trade, it asks you to make a few different inputs.  When I first started trading I had no idea what was what and pretty much chose whichever option stopped giving me an error message.  Let’s try and avoid this.  I’ll use some screenshots from Fidelity to show what the trading options mean.  While the layout might differ on different trading platforms, the terminology should be the same.

Let’s start with the basics.  First you need to know how much you have to trade with, what stock you’re trading, and when you’re trading it.


Now that you know how much and what you’re trading, it’ll ask you what type of trade you’re making (the action button).

fidelity 2

  • Buy – Pretty simple.  You’re buying/going long a stock.  This is a primary action (you can make it at any time).
  • Buy to cover – This is how you get out of a short sale.  You’ve already sold the stock short, and now you are getting out of the position by buying it back with the funds you received from the sale, hopefully at a lower price.  This is a secondary action (you can only make it on an existing position).
  • Sell – Again, simple.  You bought the stock and now are selling it.  This is a secondary action.
  • Sell short – You’re selling the stock now, as a bet that the price will go down, and will “make good” on your position by buying it back later.  This is a primary position, but you will have to take an extra step to set up your account to short sell.
  • Sell all shares – Sell every share you own of a certain stock.  This automatically fills in the quantity field for you

Quantity – input the number of shares you wish to buy or sell.  If you are selling a stock or buying to cover a stock your quantity can’t exceed the number of shares you already own.

Order type gives you the following options:

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  • Market order – You’re placing the trade at whatever the market is trading at right now.  You’re making the trade “real time.”
  • Limit order – You know what price you’d like to trade at, and you’re asking the account to wait for that price before it makes the trade.  For example, if I want to buy Apple at $520 and it’s trading at $525 right now, a limit order means the trade will automatically execute if it drops to $520.  If it never drops to $520 the order won’t get placed.  You can set the amount of time a limit order is outstanding.
  • Stop loss -An order to automatically sell a stock when it reaches a certain price. Let’s say you want to sell at $15.  Once the stock hits $15 your order automatically converts to a market order, and will sell at the next available market price.  This means you might not sell at exactly $15, just at the next price once it hits $15.
  • Stop limit – This is similar to the above, but the stock will only sell at the amount you set it to, in this case it will only sell for $15.  The risk with this is that if for some reason the stock drops a crazy amount and opens much lower (let’s say it closed at $20 and opens at $10), it won’t sell at the $15 if it dropped too suddenly to hit $15.
  • Trailing Stop Loss/Limit ($/%) – These are also similar to the above, but are triggered by profit and loss, not price.  For example, let’s say that you don’t want to lose more than $5 per share on your trade.  You could put on a stop limit of $5.  The Loss/Limit distinction works the same as the above, and the $/% distinction is just a matter of whether you are counting losses in dollar terms or percentage terms.

Time in Force tells you how long an order will remain active before it is executed or expires.  These are the options:

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  • Day – Order expires when the market closes (4PM EST).
  • Good ’til Canceled – Outstanding until you choose to cancel it.  Generally it will automatically cancel after a few months, or you can set an automatic cancellation date.
  • Fill or Kill – the entire buy or sell order must be executed immediately in its entirety (i.e. if you want to buy 1000 shares it has to buy all 1000), otherwise, the entire order will be cancelled .
  • Immediate or Cancel – All or part of the order must be executed immediately, otherwise the order (or any unfilled parts of the order) will be canceled. Unlike a fill or kill, it allows partial execution of orders (i.e. if only 500 of the 1000 are bought at the right conditions it will allow you to buy the 500 and cancel the remaining 500).
  • On the Open/Close – The order will execute at whatever the stock opens or closes at.

Trade Type – Here, you are trading on your cash or margin account.  In cash accounts, trades must be fully paid for on or before settlement date. In a margin account, you can borrow money to fund transactions.  You also can only make short sales in a margin account.

Preview order – Essentially takes you to an order confirmation page.  You can choose to skip this step.

Phew, pretty sure that covers all of it.  Feel free to reach out with specific logistical questions!


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