Tuesday, October 9, 2012

Your Very First Trade! (PART II)

Welcome back! This is a continuation of my previous post.

Hope you have your list of companies handy and are ready to go!

So, once you are ready to "play" this is what the screen will look like when you first sign in:

Click on “Trade”. This is how the Trade Screen looks like:

Trade Type: For now lets stick with the basic you will either BUY or SELL.
Symbol: Bring out your list of stocks and type your first ticker symbol where it says "Symbol".
Ticker Symbol: Is basically an abbreviation company’s use for trading purposes. It is usually the company’s initials or some variation thereof. You can easily find any company’s ticker symbol  anywhere on the web. IE: You can Google “coca cola ticker symbol” (or any company name) and the answer will pop right up. I also like using Yahoo Finance. It’s pretty simple to use; just type out the company’s name on the search tab and yahoo will provide you with not only the ticker symbol but a whole page of company information.
Shares: How many shares do you want to buy? When you type in the ticker symbol you will notice the current stock price of the company will pop up. Lets say the price of the stock price for company X is $50 and you have $1,000,000 to invest. Lets say you want to put $25,000 of your 1 million in company X. Simple math tells us:

25,000/50= 500 shares (after you make this purchase you will have $975,000 left over).

OR since we are just practicing you can just type out any number that comes to mind for the number of shares “100”, “300”, whatever you want. Keep in mind some brokerage firms allow you to buy fractions of shares. For example, you can buy 3.4 shares of a stock while others won’t allow that. If you type out a random number and updown gives you an error message just make sure the number is divisible by the amount of money you have available for trading.

Order Type:

The site will give you 3 options: Market Order, Limit Order, and Stop Order. For simplicity purposes lets focus on Market and Limit for now (will explain the purpose/importance of stop order on a future post. REMEMBER: We are going step by step here!).
Market Order: Choose this option if you want the shares to be purchased and the current real time price of the stock. If the shares are trading at $50.15 per share it will buy it at that price (or cheaper, if possible).
Limit Order: If you want to set a specific price choose this option. For example, lets say the company is trading at $50 but you want to buy it cheaper, like when it hits $45, for example. All you need to do is type “45” in that box. When the company reaches that price that you specified the website will automatically buy it for you at that price.
When trading on a real brokerage platform you’ll have options within limit order called “day trade” and “good until cancelled”. I will explain these further when we go in to opening a real brokerage account during the course of the blog. For now, Updown keeps it simple and just provides the option of “today”. Leave that as it is and click on TRADE NOW. You can also click on PREVIEW FIRST before executing the trade and it will show you how much the trade will cost + commission costs.
Commission Costs: Keep in mind that real online brokerage firms where you invest for yourself (including this virtual one) charge commission fees for each trade that you make (this is partly how these online brokerage firms make money). Some can charge you $4.95 per trade and some may charge you $10 (or more) etc. depending on which brokerage firm you use. In the case of updown.com the commission they charge is $10 per trade which means that when you buy, they charge you $10 and when you sell they again charge $10 for an overall trading cost of $20 (this is in addition to the cost of the shares you are buying). Obviously, doesn’t matter much here because you’re using fake money. However, when we get in to real trading I will go in to different brokerages and their costs.
NOW--- Go practice!!!! $$$

On my next post:
Some trading examples, how exactly you make money from trading, should you hold something for the long term or short term, how uncle sam comes in to play among interesting points. Also, as always-- if there is anything you'll like me to write a specific post on please email me or comment below.

Happy investing!