How to Trade on the Stock Market
In order to trade on the stock market, you will need to open an account with either a Bank or a Online Broker. Here on The Investing Loon we use Questrade as our online broker.
Step 1. Open your Trading Account
Open your trading account with either a Bank or an Online Broker. At this stage and depending where you live, you can apply for a Margin or Registered account. The main difference is that with a registered account, your capital gains will be treated different by the Tax Agency but you can’t (In Canada at least) short stocks, on a Margin account you will be able to short stocks, but your gains will be fully taxed by your government.
Step 2. Funding your Account
Each Bank or Online broker will have different minimun funding accounts, for questrade, this amount is $1,000.
Step 3. Start Trading!
Search for stocks:
Look for the security you want to purchase by searching by name or by the ticker. In example, if you want to buy Shopify shares, you could search for the Ticker which is SHOP or just by typing it’s name on the search bar.
Please keep in mind that there are several stocks that are traded in more than one Stock Market, for Shopify, it is traded on Toronto Stock Exchange (TSX) and also on the New York Stock Exchange (NYSE), the real difference between this stocks is the currency you are buying them for. You are still buying the same company
Buy the stock:
Once you found the stock you want to buy, you will have to decide how you will buy the stock. There are two main ways to do it (Order Types) which are Market Order and Limit Order.
Market Order: Buying a stock with a market order gives the instruction to your broker that you are willing to buy the stock at whatever price the market sets it for. In example: you want to buy SHOP which is trading for $100 each share, but at the time you submitted the Market Order, the price went up and you bought the shares at $110, this means that you paid 10% more than you were willing to. In essence, we are telling the broker please get me shares at no matter the cost.
The benefit of the market order is that it will be executed immediately (for shares that are traded with big volumes)
Limit Order: Setting a limit order will tell your broker the maximum amount of money that you are willing to pay for shares. In example: you want to buy SHOP which is trading at $100, therefore you set a limit order and tell your broker, please get me shares, but I’m willing to pay up to $105 per share. This will get you shares at $105 or less.
The benefit of the limit order is that it will set a limit to the price you are willing to buy the share, the downside is that it might take a while for the order to be executed (maybe the price goes up, which in this case your order will only be executed if the price goes down again)
Step 4. Follow your stock
By follow your stock we mean to follow the news regarding the stock and not to follow the price every second of the day, this will only cause your emotions to take control and panic sell the stock because the price went down by 0.01%, seriously!
Please do your research for a bank or broker to trade with, here at The Investing Loon we use Questrade as our broker because of the low fees and how easy it is to use. If you click on the link above and sign with Questrade you will get a minimum of $25 and we will receive a commission for the referral! Win win situation!
Disclaimer: The Investing Loon is not sponsored by Questrade or any other bank or trader