Investments: Analysis and Management, 12th Edition

chapter 5

How Securities are Traded

Now that you know what investing alternatives are available to you, both direct and indirect, and where they trade, you need to consider the details of trading securities as you prepare to invest your inheritance. What type of brokerage account will best meet your needs? What type of orders can you use to buy and sell securities? How well does the securities legislation in place today protect you from the many pitfalls awaiting you as an investor? Should you take additional risk by buying stocks on margin, and if so, how do you go about trading on margin? Should you bet on security price declines by selling short, or is this technique too risky for average investors? Details, details, but investors must deal with them. Unless you master these details, you will not be able to take full advantage of the trading opportunities that financial markets offer. Furthermore, you will be at the mercy of others who may not have your best interests at heart.

In Chapter 4 we considered how securities markets are organized. In this chapter we learn the mechanics of trading securities which investors must know in order to operate successfully in the marketplace. Chapter 5 discusses various details involved in trading securities, critical information for every investor. Brokerage firms and their activities are analyzed, as are the types of orders to buy and sell securities, and the handling of these orders. The regulation of the securities markets is discussed. ...