Chapter 5. Getting It Done: How to Enter and Execute Trades

In This Chapter

  • Understanding the different ways your broker can hold your shares

  • Differentiating between different types of orders

  • Finding data about options

  • Using put and call options

  • Appreciating the upsides and downsides to trading after hours

  • Knowing the potential rewards and risks of buying on margin

All the theory in the world about online investing won't do you a bit of good if you can't seal the deal and execute your trades. Trade execution is the process of logging on to your online broker and buying or selling investments. You might be wondering what's so hard about buying a stock: Just log on to the online broker's Web site and click the Buy button. And in some cases, you're right. But sometimes you want to be a little more exacting. You have ways to tailor your buys and sells so that your broker carries out the transaction precisely how you want it to be handled. For instance, you might want to buy a stock only if it falls below $25 a share, or you might want your broker to automatically sell shares if they fall below a certain price.

In this chapter, I start at the beginning and go over all the ways you can hold your stock and how that decision affects how your trades are executed. Then, I go over the main ways to enter orders — ranging from market orders to limit orders — and talk about the advantages and costs of each. For the adventurous types, this chapter examines buying investments using borrowed money, called ...

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