Buying Stocks


  • Investment Rule #1: Buy low, sell high
  • Investment Rule #2: Be prepared for the prospect of losing your entire investment
  • Investment Rule #3: Have an exit strategy
  • Considerations for placing a stock buy order
    • what price, how many shares?
    • market order vs. limit order
    • all-or-none
    • day order or good-till -canceled
  • We’ll show you step-by-step process for buying stocks online

So you have done thorough research and have selected a stock for buying. In this article, we’ll discuss some considerations before you buy your first shares in the stock, show you how to execute a buy order on-line, discuss how to monitor your stock until such time you’re ready to sell your shares.

Considerations Before Placing the Buy Order

There are a few considerations before you go online to place a stock buy order. The first few considerations follow directly from our Seven Golden Rules for Successful Investing:

Investment Rule #1: Buy Low, Sell High.

#1. Buy Low, Sell High. It’s really that simple. That’s how you make money from buying stocks or just about any other investment. (Well, that and dividend payouts.)

Investment Rule #2: Be Prepared for the Prospect of
Losing All of Your Investment.

#2. Are You Prepared to Lose Everything? Make no mistake: stocks are very risky investments. When they say, “No pain, no gain.” What they also mean as a corollary is, potentially “All pain, All loss.” Are you prepared in the event that your investment goes to $0? Because it can. It has happened to me a few times. That’s a few times too many. If you cannot stomach a complete loss of principal, you should not be investing in individual shares of stock. Though still risky, mutual funds or ETFs might be better for you.

Investment Rule #3: Have an Exit Strategy.

#3. Have an Exit Strategy. Just like super spy James Bond would look for exits in case of threats when he goes into a building or a room. You need to formulate an exit strategy before you buy a stock. If the stock goes up, you need to have a concept of how high you would let it go. But, more importantly, if it goes down at what price would you head for the exits and lock in your gains? Or worse, if the price heads down is below your buying price, how low are you willing to “stomach” the paper loss? At what point would you realize your bull thesis is not working out, and would willing to sell your shares and take a loss? Some schools of thought say you should consider selling out if it drops 10% below your purchase price. The concept is that a 10% loss is better than a 25% loss, 50% loss, 75% loss, or 100% loss. And those heavier losses all begin with a 10% loss. Or you willing to cut your losses early and exit your position? Have a plan ahead of time, so you don’t get caught by surprise and having to make a decision when your emotions are high.

#4. What is the Going Price: Get a Quote. Using Advance Micro Devices, Inc. (ticker symbol: AMD), a manufacturer of computer chips, as our example, here is a free 15-minute delayed internet quote from Yahoo! Finance:

Stock quote for AMD)
Stock quote for Advance Micro Devices, Inc (ticker: AMD) at Yahoo! Finance

Here are the information associated with a stock quote:

  • Current Price – shown here as $12.76, which is down $0.54 from the close of the previous/last trading day, or -4.07% change.
  • Previous Close – price of the last transaction at the end of the last trading day.
  • Open – price of the first transaction of the current/last trading day.
  • Bid – selling price is currently $12.79. The “x 27200” refers to the number of shares that is being sold.
  • Ask – buying price is currently $12.80. The “x 13600” refers to the number of shares that is being bought. The difference between the bid and asking price is the spread, which at the moment was $0.01. Typical for a heavily traded stock.
  • Day’s Range – the lowest and highest transactions so far in the current/last trading day.
  • 52 Week Range – the lowest and highest transaction in the last rolling 52 weeks.
  • Volume – the number of shares transacted so far in the current/last trading day.
  • Avg Volume – the average volume for a typical trading day.
  • Stock Chart – as shown here the 5-day candlestick chart, showing the historical trading prices for each of the last 5 days including today, along with the volume/total number of shares traded along the bottom horizontal axis.

For a real-time (non-delayed) quote, login to your brokerage account during normal trading hours.

Stock Market Hours. Normal hours for stock exchanges is Monday-Friday, 9:30 am to 4:00 pm. The exchanges are closed on the following holidays: New Year’s Day, MLK, Jr Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. And it closes early at 1 pm on July 3rd and Black Friday (the day after Thanksgiving).

#5. What Price? Obviously, this is the hardest question du jour. How much do want to pay for each share of stock? See Investment Rule #1 (above). Try to buy when the stock is selling at a discount, on days of market weakness when the most stocks are going down. Assuming there are no fundamental reasons that you know of why the shares are showing weakness, it’s even a better buy. It’s like buying something you would normally buy at a store for a discount. When you’re buying on weakness, you’re likely to achieve the Investment Rule #1 (see above).

Case In Point: Using AMD as an example, the quote graphic show above was taken during the afternoon of Monday, September 25, 2017. Shares of AMD were reacting to the Intel announcement of the Coffee Lake CPUs, codename for its 8th generation of CPUs. Apparently some shareholders were panicking at the news, fearing renewed stiff competition from the Intel camp. These are the times when you have to ask yourself, did AMD’s future prospects really get impacted? This is when your homework would payoff. If your answer is “no”, what a great time to buy, down 4% from Friday’s close. And it was only the day before that it was trading over $14/shares. Look at the 5-day historical price chart to the right of that quote graphic. What a discount!

#6. How Many Shares? The number of shares doesn’t really matter. What really matters is how much of an investment you want to make. For example, if you have $10,000 to invest in stocks and you want to invest in two companies, say $5000 each. Do you want to buy all $5000 in one trade? Or do you want to buy $2500 now, and buy the other $2500 later? Remember to factor in the cost of the commission, about $4.95 at Schwab, or $6.95 at most other discount brokerages.

#7. Market Order or Limit Order? A market buy order will immediate fetch the best price at that current moment during normal trading hours. A small order will execute at the same price. Larger orders may get filled at different staggered prices, depending on the trade volume at that moment. For example, a market buy order for 1000 shares during a low volume period may get filled for 500 shares at $12.76, then another 300 shares at $12.80, and the final 200 shares at $12.85.

If you place a market order outside of this time, it will trade upon market opening the next business/trading day. It would execute at whatever the opening market price is on that day. Suppose there were great news that was announced after the previous day’s close or before the market opens at 9:30 am Eastern, excited investors may bid up the price of the stock. The stock price might surge up sometimes by a couple of percent from the previous day’s closing price, and maybe even 10%+ for significant news. With a market order, you would be buying at that higher price, helping to drive up the stock price further. In a sense, you are writing a blank check if you submit a market order after hours or before market opening.

A limit buy order will limit your purchase price to the maximum that you set. When the market price is at or lower than the limit buy price that you set, it will execute. Almost all brokerages charge the same trading fee whether you have a market order or limit order.

#8. All-Or-None? In the case of a limit order, you have the option to specify “all-or-none”. That means your order is filled with all the shares you specified or it does not execute at all. Depending on the brokerage, this option may be offered with a minimize size order (e.g., 300 shares or more). Other brokers do not place a minimum size order. Without this option, the broker may partially fill your limit buy order. For example if you placed a limit buy order for 1000 shares at $5.00/share, your order may partially execute when the price drops to $5.00 or lower, but the volume of shares traded may have only been enough to fill 600 shares of your 1000 share order. If the price does not drop below $5.00 again that same day, your order is completed with the 600 shares. The rest of the order expires upon the close of market (4:00 pm Eastern) that day. To buy the rest of the shares, you would have to place another order, which would incur another trading fee.

“All-or-none” options do not apply to market orders, because the market order will fill no matter what. The prices that it gets filled may vary depending on the volume of the trades. For example, a market buy order for 1000 shares may get filled for 500 shares at $5.00, then another 300 shares at $5.05, and the final 200 shares at $5.08.

#9. Day Order or Good-Till-Canceled? Another option for limit order is to make it a “day order” or “good-till-canceled”. A day order is valid the current trading day, up until the close of market that day (4:00 pm Eastern). If you place a day order after the close of business, your order will take effect the next day through 4:00 pm close of that day.

A “good-till-canceled” (GTC) order lasts multiple days based on the last day that you specify. Depending on the broker, the maximum number of days can be 60 days or 90 days. This option allows you to set a limit buy order that lasts a specified duration and will execute when it gets to your limit price. If it doesn’t, then it expires on the last day that you specify. Be sure to track these open orders so you don’t forget that you have a commitment to buy a stock.

On the sell side, the good-till-canceled limit sell order will allow you to set a price and have it execute when the stock price reaches the limit that you set.

Extended Hours Trading. As we said, the normal hours for stock exchanges is Monday-Friday, 9:30 am to 4:00 pm. The exchanges are closed on Federal holidays, and closes early on Good Friday. Extended hours trading are Monday-Friday, 4:00 am – 9:30 am, called pre-market. And also 4:00 pm – 8:00 pm, called after market or post-market. During these pre-market and post-market hours, the number of market makers is far fewer than during normal trading hours. Volume is thinner, and the spread between the bid and the asking prices widen considerably. You would have to explicitly specify Extended Hours Trading for your buy and sell orders to transaction during these limited sessions. Unless you know what you’re doing, I consider extended hours trading are for experts only.

Our Recommendation: Use a Limit Buy Order, All-or-None during normal trading hours. Limit orders protect you from uncertainties of a “blank check”. All-or-None mitigates your orders from being broken up and incurring more trading fees. Use Day Order or Good-Till-Canceled at your discretion. We usually use Good-Till-Canceled. And avoid trading during extended hours.

Placing the Buy Order Online: A Step-By-Step Guide

The following instructions are for Schwab One brokerage account. Why Schwab One? Because we recommend the Schwab Bank account, and you get a linked Schwab One brokerage account when you open the bank account. Open both accounts and fund your Schwab One brokerage account with $1000 and get a $100 bonus, using our referral.

In any case, other brokers have similar buy order formats. We highlight the differences below.

Step 1. Login to your brokerage account.

Step 2. Verify that you have sufficient funds (cash balance) to buy the stock, including commission.

Step 3. Under the tab “Trade”, under the “Stocks & ETFs” heading, choose “Trade Stocks”.

Step 4: In the Symbol text field: enter the stock ticker symbol. We will continue with our example of Advance Micro Devices, Inc. (ticker symbol: AMD). See screenshot below…

Filling out the Trade Stock form at
Filling out the Buy Order for AMD at

Step 5: Review the real-time quote.

Step 6. Under Action, select “Buy”.

Step 7. For Quantity, enter the number of shares you want to buy, in whole numbers (no decimals).

Step 8. Under Order Type, select “Market” or “Limit”. If you choose “Limit” (as shown above), you will get another field…

Step 9. Enter the limit price in dollars and cents, using decimal. (We entered a limit order to buy at $5.00/share in our screenshot example, because we don’t want to actually buy AMD at the moment we took the screenshots for this article. So we set a ridiculously low price.)

Step 10. Under Timing, choose “Day Order” or “Good Until Canceled” (GTC). We usually choose the latter, because if you set a limit price lower than the current asking price, it could take a few days for the price to reach your limit. Schwab One brokerage defaults the duration of the Good Until Canceled option to 60 days. You cannot change the end date. But you can cancel the limit order altogether at any time from the Order Status screen. See Order Status screen graphic below (third graphic below).

Other brokers, like TD Ameritrade, allow you to go up to 90 days, with the end date specifiable by the user.

Step 11: Expand Option to show the All-or-None checkbox. Check it.

Some brokers will require that you have a minimum number of shares before you can have the option for All-or-None. For example, E*Trade has a minimum of 300 shares before you can use the All-or-None option.

Step 12. Check the order total. This is the amount before the trade commission.

Step 13. Click on the button “Review Order”. The next page will summarize the order, before you commit to the trade.

Step 14. The next page summarizes the order. Be sure to review your order parameters: the stock ticker symbol (AMD), action (Buy), quantity (1000 shares, all-or-none), order type (limit order at $5.00/share), timing (Good Until Canceled).

Confirming the buy stock order at
Confirming the buy order at

Step 15. Check the total amount, with trade commission (Schwab charges $4.95).

Step 16. When all fields are acceptable, click on the “Place Order” button to submit your order to the stock exchange.

Step 17. You will get an Order Received screen, showing you the order parameters. The same info as that you just verified in Step 14. It will display the order number for your reference/record keeping.

Order Received screen from
Order Received screen from

Step 18: From here, click on “Order Status” link to see the results of your stock trade order.

What Happens Next: Trade Execution, Or Not

If you placed a market order. The order will execute if or when the market is open. No question.

A limit order, however, depends on the set price and the various options such as All-or-None and Day/Good-to-Canceled. When the order is placed, but the trade has not been executed, it is called an “open” order. When the order executes, its status is considered “filled”.

To check your order status, login in Schwab One brokerage account. Then pull down the tab “Trade”, under the “Order Status” heading, choose “All Orders”. The following Order Status screen displays.

Order status
Order Status for the buy order from

When the market is open, you can cancel an open limit order, if it has not executed yet. It is not possible to cancel a market order because it executes immediately.

When the market is closed, you can cancel any order that is “open”, including market orders submitted for the next trading day. Be sure to keep the cancelation number/reference in case of issues.

After your trade executes, within the same day or next day, you will get notified by email that your trade confirmation is ready for downloading. The trade confirmation is a legal and tax record that you own a share of a company, listing the company name, its stock ticker symbol, the trade date, buy/sell price, commission paid to the broker, the net price paid, and the total price paid (includes commissions).

Example stock buy trade confirmation from Schwab brokerage.
What’s Next? After the Buying Stocks…

Congratulations! so now you know the mechanics of buying stocks – one of the Tools of the Trade. Next, you get to monitor your stocks until it’s time to sell these shares. Hopefully when you finally sell, it would be for a big profit.

We will publish more articles related to investments. Follow us on facebook to be notified when new articles are posted.