Buying Shares = Trading Money for Assets

Buying shares is when investing gets real. Up to this point, you've just done a lot of leg work.

You've stabilized your personal finances and planned out your investments.

You know what you want to buy, and why you want to buy it.

You've figured out how many shares you want to purchase (using position sizing).

You're ready to put your money where you mouth is (so to speak).

It's time to trade; trade that hard earned money for shares of your selected investment.

Placing Buy Orders

When you log into your brokerage account to buy shares, you'll see something like this...

Screenshot of Fidelity's Order Screen

Or like this...

Screenshot of TDAmeritrade's Order Screen

Even after you've figured out all the hard stuff, you still have a lot of choices to make.

How do you want to buy the shares? Do you want to enter a market order? Or a limit order? How about a stop order? Maybe a stop limit? How long do you want the order to be "open"? Only for today? Or do you want it to remain active until you say so? Any special instructions?

Knowing "what" to buy is over. Now you'll learn "how" to buy shares on the open market.

Invest Safely Dollar Sign Callout

Safe Investing Tip:
Buying shares of a mutual fund is more straightforward, because mutual funds are only bought and sold at the end of a trading day. The closing price is the price you get, period.


3 Types of Buy Orders

There are 3 main types of orders you can place in the market when buying shares though your brokerage.

  1. Market Orders
  2. Limit Orders
  3. Stop Orders

Market orders are submitted "as is", meaning that you get whatever price is assigned when you order is submitted. When you place a market order, you to buy or sell shares immediately, which is the next available price. As soon as the order is processes, it is going to be filled (as long as people are trading your investment).

For more information, check out my page on placing market orders.

Limit orders put a price restriction on the order, meaning that the price you pay must be equal or better than the price you specify with the order. When you place a limit order, you are specifying the highest price you are willing to pay or the lowest price you are willing to sell. Your order will be executed at your requested price or better if possible.

For more information on placing limit orders, click here.

Stop orders are the most stringent orders. they only become orders after a price has moved past the threshold you specify.

Visit my page on placing stop orders.

Order Duration

When buying shares, you can specify how long to keep the order active. You can place a "Day Order", which means that the order will remain active until the end of the trading session during which it was entered. If you specify Good to Canceled (GTC), you want the order will remain open indefinitely, until either you close the order, or it is executed.

Quantity Instructions

All or None (AON) - Buying shares with an "All or None" order means that your entire order must be executed at the same time, or it does not get executed. For example, if you were buying 1000 shares at $50.00, the order would only execute if all 1000 shares could be purchased at $50.00. The larger the order, the more likely it will be split between different prices. This is where the concept of an order book needs to be explained.

Fill or Kill (FOK) - A "Fill or Kill" order means that you want to buy shares IMMEDIATELY. If the order cannot be filled immediately, in its entirety, it is automatically canceled.

Conditional Orders, Contingent Orders, and Special Instructions

Depending upon your broker, you can specify several special instructions that will affect how your order is placed.

For more information on placing conditions on your orders (called contingent orders), click here.