Execute a Trade; Part 3 of 3

Whew, I’ll bet you had no idea there was so much to this stock buying/selling business! (Or maybe you did, and that’s why you’ve stayed away from it.) But we’re breaking it up into manageable pieces, and by the time this article is read, you’ll be able to go to your brokerage Web site and buy and sell with the best of them. In fact, you’ll be one of the best of them!

Okay, so here you are with an order to buy XYZ stock, 50 shares at market, meaning, again, to review, that whenever your transaction hits the market, it will execute at whatever the going price is for the stock you want to buy. It’s a little like waiting in line to buy something, but the price of that object doesn’t stay the same; it may fluctuate by a penny or two (or sometimes more) from minute to minute.

You put in the information: stock symbol (which of course you must know to buy the stock and a tool that TheSavvyGal.com will soon offer), number of shares you want to buy, and the fact that it is a market order. It is also going to be — for our purposes right now — an order for today only. In other words, you’re going to buy it during the current trading period, not tomorrow or next week. After you click the order button, most brokerage firms will give you a chance to repent.

At this point, you can look again to see what the order to buy (or sell) is: how many shares, the name of the stock. This is in case you were in a trance a few seconds earlier and have no memory of putting in this information! This is a good thing! It gives you one last opportunity to change your mind in case you decide at the last minute that you really don’t want to make a stock purchase or sale.

Let’s say that you check the facts on the preview of the purchase order, and it’s all to your liking. Now you do the final click, “send order” or however it is worded on your Web site.

Off the order goes into the market ether, and within a very short time, usually seconds, the trade is executed (and there’s that unfortunate wording again! It sounds ominous, but it really isn’t. It just means the trade went through). You now want to know exactly what the trade cost you. After all, you sent it as a market order, not a specific price, so it would be good to know what that final price was at trade. So you click on the link that identifies orders that have been processed in your account. Some brokerage firms call it “order status,” some call it “open/recent orders.” You’ll have to look around on the Web site to identify how your particular brokerage firm identifies it. (Some brokerage firms actually require that you go into your “account history” to gather this information.)

You see the date of the purchase, the name of the stock, the number of shares, the price you paid per share, the commission and the total amount of the transaction (including commission). You will also see the precise time that the trade went through, in hours, minute and seconds.

When you make a trade, it is never exact. In other words, if your brokerage account has $1,000 in it and you buy some stock, you will never spend exactly $1,000 to the penny. (Hopefully you will always be under, not over that amount!) Let’s say the trade cost you $975, due to the fact you cut it very close and did a good job of figuring out the purchase price of the transaction. You now have $25 left over.

Where is that $25? Well, every brokerage account automatically has attached to it a money market, like a savings account at your bank. It pays interest just like your bank savings account. So that $25 would automatically go into the money market account and sit there until your next transaction. In other words, if you sell the stock you purchased today one month later and make $50 on the trade (good job!), that’s $1,025 less commission that returns to you. That money — unless you have another stock to buy immediately — would also get dumped into the brokerage account money market. Dividends and interest on the account get dumped into the money market. It is in essence a holding tank for cash associated with your brokerage account.

You did it! You bought a stock! If a month later you decide to sell that stock, you go through the same procedure except that you designate “sell” instead of buy. You put in the number of shares, the stock symbol, and most likely — as I said earlier — send it off as a market sale. When that offer to sell hits the market, someone will buy your shares for whatever the going price is for that company at that instant. The proceeds (less commission) are dumped into your money market account, ready for you to make another stock purchase.

It takes three days for the funds to settle, just like it does when you deposit a check at your bank.
You are now a stock buyer and seller. Reach around and pat yourself on the back. Or have someone close by do that for you.

Next time we’ll start the learning curve as to how you research and decide which stock to buy. See you then!!

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