How to Do Online Trading of Shares

The days of calling your stock broker to make a trade went away with VCRs, cassette tapes and CDs. Welcome to your life: it's online. Not only is trading stocks with an aggressive broker passe, it's also absurdly expensive. For a relative pittance, you can trade shares of stocks online and look really cool in the process.

Step 1

Find an online brokerage. Options range from bare bones discount brokers and firms that allow you to purchase partial shares for relatively low monthly fees to full service brokers with an online arm. As the U.S. Securities and Exchange Commission notes, trading commissions generally range between $5 and $100 along that continuum.

Step 2

Complete an account application. Most online brokerages allow you to complete the process entirely online. The information you submit online is no different than what you would provide on a paper application -- basic personal and contact information, your Social Security number and, if you want to open your account as an IRA, beneficiary information.

Step 3

Consider options and margin trading privileges. Most online brokerages give you these choices when you apply for an account. Neither are automatic. Your investment profile -- a combination of your investment experience and objectives and your tolerance for risk -- along with your credit profile dictate whether your prospective brokerage will grant options or margin trading. Both are relatively risky propositions. Options are contracts that give you the "option" to buy or sell a security, but only if the security hits a certain price by a certain date. When you trade on margin, you essentially borrow money from the brokerage, using your portfolio as collateral. Using a margin account increases your purchasing power. You can decline both features.

Step 4

Fund your account. Send in a check, which is very year 2000; transfer some or all of the assets from another account, which is a slower-than-molasses method; or electronically transfer money from your checking or savings account, a quite hip approach, to get things going. Most firms require a minimum initial investment. Others don't, particularly if you agree to automatically transfer cash into your account on a regular basis, usually monthly.

Step 5

Wait for your funds to clear. How long you'll have to wait depends on the brokerage and the method you selected to fund the account. When it's time to make a trade, the specifics of each brokerage's online trading interfaces vary; however, the basic approach is rather universal.

Step 6

Go to the trading page of your brokerage account. Alternatively, you can look up a stock you are interested in trading and select to trade that security.

Step 7

Input the ticker symbol of the stock you wish to buy. Most online brokerages allow you to look up the ticker symbol using the company's name. Type in the number of shares you wish to purchase. It will have to be a round number. Choose from the most common types of trades most investors make -- a market or limit order. Brokerages fill market orders as soon as possible at the best price possible. With a limit order, you set a price and your brokerage will not buy the stock at a price higher than your limit. The inverse holds true for a sell order.

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