How to buy stocks online
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With the recent spike of the Dow Industrial Average, are you worried that you are missing the one of the lifetime chance of stock market? But don’t know how to start? In this tutorial, I will explain the details of how to buy stocksonline.

Stock trading is not easy and it requires your time, money, and attention. Especially, if you are going to maintain your portfolio by yourself, you will need to study and read news daily. But stock trading is one of the investment methods with high ROI (return on investment) rate. And it pays off your hard work.

Hello, my name is Chris. I have started stock trading about 3 years ago. I am not an active or day trading stock trader but I learned many valuable lessons. I will try to explain what I learned about stock trading during the past 3 years.

Now, are you ready to buy some stocks? First step is to select which stock brokerage service to use for buying stocks.

Which brokerage service should I use?

Full-service brokers provides stock advice and alert to the customer when to buy or sell their recommended stocks. You can use Full service brokers. Commissions are typically based on a percentage of your purchase (or sale) price. They are very expensive charging $100 or more depending on which firm or which professional advisor you are using.

Discount brokers is the ones providing services at the lower price. They charge about $10 or $20 for a trade of 1,000 shares or less, or about one-third the price of full-service brokers on average.

Online brokers is services provided through Internet Website. You can buy or sell the stock by yourself. Therefore, you will need to research which stock to buy. The fee is varying from $0 to $15 a trade, this is the cheapest method of all.

Online brokerage service is good because you are in full control of the stocks portfolio. You can buy or sell any stock any time you want. You have all the latest stock price information at hand. You can compare and research company news and information pretty easily.

But the decision of which brokerage service to use should be made according to your needs. If you want to invest in stock market but want professional advice, you should look into Full-service brokers. To get a report on any broker, call the National Association of Securities Dealers at 800-289-9999. But if you want to start and have full control by yourself and you already know which stock to buy, you should go for the online brokerage service.

Personally I like to have full control so I like the online brokerage service. I will concentrate on how to buy stocks online using online brokerage service.

Practice Account

Before actually signing up for the real account, I highly recommend you to practice with virtual stock trading account. There are lots of free virtual stock trade practicing online services out there, but you can try for example. It’s fairly easy to start investing and get a feel of how the trading works. They initially give you virtual money of 1 million dollars. Also, if you score better than the S&P 500, you will earn some real money every month. Check out Yahoo Fantasy Finance

Create the free account, research and buy some stocks, practice until you are comfortable and have confidence with your decision. Then you are ready for some real trading.

Signing up for online brokers

There are many brokers out there, but Optionhouse is the one with the lowest trade commission! Optionhouse charges only $3.95 per trade. That’s pretty cheap compared to other big brokers. You need to start with $1000 in your trading account, but you will need some money to start investing anyway. Account creation process is pretty smooth , but not easy as creating a usual free email account and it involves several steps. There are two major data submission processes that you need to be prepared.

First, your personal information. The required information is basically the same as when you sign up for a bank account. You will need to provide your name, address, phone number, date of birth, and Social Security Number too. I felt a little bit of uneasiness giving away my social security number, but this is required since they are required to report your trading history to the IRS at the end of the year. Yes, you will need to report your trading history in your tax returns. And if you have earned any money from trading, you will need to pay taxes. Basically this is just like opening a bank account that you have to provide them the social security number. And this is done over 128 bit SSL connection, so you don’t have to worry about the security.

Second, you will need to transfer money from your other checking or savings account to the trading account. So that you can buy stock with that money. Most of the online brokers have direct deposit service. Once you confirm the banking account is yours, you will be able to transfer money in and out of your bank account to the online broker account. In order to confirm, you can give them the password of your bank account for quick confirmation, or wait several days for them to deposit random amount of money to your bank account, and then let them know the actual amount to confirm the ownership. Since I was uncomfortable providing the online access information of my bank account, I chose the second option and waited two or three days. The confirmation process may take some time, but once it is setup properly, money transfer is very easy and you can trasfer money at any time.

So the whole process may take 3 or 4 days to complete. Once the account is ready and the money is deposited to the broker account, you are ready to buy some stocks.

Check out Online Brokers Comparison chart

Selecting which stocks to buy

Maybe this is the most difficult part of the stock buying process. If your friend gave some inside company news and you already know what to buy, then you can skip this section.

Research is the most difficult, time consuming process. That’s why many investors rather depend on the professional stock advisor and use full-service brokerage services. However, I believe it is much better to have full control of your portfolio and be able to make decision fast.

First, you will need to watch the financial news closely and search for the bad news. Why the bad news and not the good news? The basic stock trading strategy is buy low , sell high. You won’t get anywhere when the stock is already hitting the ceiling. You will need to buy QUALITY stock when they are at their lowest price range. Many people get emotional and jumpy when bad news come out and selling the stocks. But as the life itself is just like a boat in the wild sea, the stock price is sometimes down but they will get eventually back to high prices as long as the company is solid.

Also, you will need to learn how to read technical indicators. There are popular RSI(my favorite) and MCAD. I use RSI 7 (Relative Strength Index for 7 days) method which I learned from Mr.Bill Cara ( a successful stock trader who shares valuable information in his blog ). When all monthly, weekly, and daily RSI7 are below 30, it is interpreted as OVER-SOLD condition. And when the values are coming back over the 30, it is called accumulation zone which means that you should start buying the stocks. In the contrast, when all RSI7 values are over 70 , it is called OVER-BOUGHT condition. When the RSI7 values headed below 70 , it is called distribution zone which means you should start selling the stock.

Also many people use the 200 day, 50 day, 10 day moving average value to decide when to buy the stock. For example, in a bull market, you buy the stock if the stock price is below 10 day moving average since the price tends to go up, it is a good idea to use 10 day instead of 50 day.

If you don’t have any clue which stock to research. Take a look at my RSI7 page where all the current monitoring stock symbols are listed. They are all quality stocks suggested by Mr. Bill Cara.

How to Buy Stocks Online

Once you are ready and know which stock to buy, you can buy the stock during the regular hours and during pre-market/after hours. Regular market hours are from 9:30 AM to 4:00 PM EST. Pre-market hours are from 8:00AM to 9:30 AM EST. Ater hours market are from 4:00 PM to 8:00 PM EST.

It is said that you should wait until 30 min after the market opening to see the markets trend because right at the beginning of the market , it is possible that the prices fluctuate especially there was special news in the morning. Also you can participate in the Pre or After hours market without any restriction, but beware that there are not many people trading at this hour, so you should only trade if you know what you are doing.

Now login to your online broker account. Here is a typical trading screen. Once you log in click on the ‘Trade’ Tab. You will be enter the order information in this page. You should select whether you want to buy or sell . And number of shares and stock symbols. Then, you will need to select the Order type. The options are Market, Limit, and Stop. These are important terms, so I will explain.

  • Market: When you enter a market order you are buying the stocks at the current available price at the time you enter the trade. Your order will be executed immediately at real time prices. But since you don’t have the control, sudden spike or drop of the price will cause unexpected results.
  • Limit: With limit method, you can specify the price you want. It is highly recommended that you use this method instead of Market order since you can have the full control on the price. However, limit order or stop order are not guaranteed to be executed. If the prices do not match, the order will not be executed during that day.
  • Stop: This is something like a trigger that will buy or sell the stock at the market price when the stock reaches the stop price. This is usually used to protect the gains.


I usually use Limit order type. Also many people suggest to set a stop loss to sell stocks about 10% lower level, but there is some risk on setting stop loss when the market is highly volatile. The price can drop temporarily and can come back by the next minute.

Also you need to remember that sometime the money that you can use to buy stocks is limited. It takes 4 days (need to confirm exact days) to clear money when you sell stocks, these amount become unsettled funds during that 4 days. Although you can buy different stocks with this unsettled funds, you will not be able to sell the new stocks until the funds become settled. So if you are thinking of short selling stocks, do not jump in while the funds are unsettled.

Somethings to remember

1. Only invest the amount of your extra saving that you are comfortable with.
If stock trading affects your life in any way, you should stop trading. Do not over invest of your money. It’s always possible that anything can happen.

2. Do your homework and Do not get emotional.
Do your homework and do not trade until you are confident before making any decision. Many traders become emotional and sell their stocks when the price is at the lowest level. And buy the stocks when the price is hitting the ceiling. Eventually they will loose all their investment if they keep doing this. You should set a plan and make a decision according to your plan.

3. Tax report – Wash Sale.
What’s wash sale? If you are trading once in a while, maybe this will not be your concern. However, it’s important to know. Wash Sale is a Stock sale item which you lost money but you can’t report as loss in the tax report if you bought the stock again 30 days before or after the sale. This is one of the IRS rule, so make sure you remember this rule. If you trade very often and sold out your negative performing stocks, do not buy the same company stock again within 30 days if you want to report the loss in your tax report.


I think the most difficult process in buying stock is to decide which company stock to buy. It requires time and money for the research and you need to learn how to read market. But if you are prepared and have a proper investment plan, it is highly rewarding investment strategy. And online stock brokerage services will make it easier for you. If you believe that you want full control of your money, I say you should go for the online brokers. Don’t hurry, take your time. After all, it’s your money.

Good luck everyone.
How to buy stocks online

I recommend Optionhouse. They provide quality trading platform with the lowest fee per trade $3.95.

Online Brokers Comparison

  • Trade Commissions
  • $3.95
  • $4.95
  • $7.50
  • $9.99
  • Options Trade Base
  • $8.50
  • $4.95
  • $7.50
  • $9.99
  • Options Per Contract
  • $0.15
  • $0.65
  • $0.50
  • $0.75
  • Broker Assisted
  • $3.95
  • $19.99
  • $7.50
  • $54.99
  • Margin Rates
  • 4.00% or lower
  • 7.20%
  • 7.50%
  • 7.49%
  • Minimum Deposit
  • $1,000.00
  • $0.00
  • $2,000.00
  • $500.00
  • Trader Community
  • Yes
  • Yes
  • Yes
  • Mobile Trading
  • Yes
  • Yes
  • Yes
  • Virtual Trading
  • Yes
  • Yes
  • Yes
  • Yes
  • Education Center
  • Yes
  • Yes
  • Yes
  • Yes
  • International Trading
  • Yes
  • Trade Commissions: Fees that online broker will charge you per trade.
  • Broker Assisted: The charge fee for the trade done by an actual person (broker) over the phone.
  • Margin Rates: This is rate of the Margin account. Margin account is higly discouraged. It is simply borrowing money from the broker to buy stocks.
  • Minimum Deposit: Minimum amount of deposit to open an account. Usually you don’t need to deposit any money, but eventually you will need to do the actual stock trade. Most of the brokerage service provide free online money transfer (ACH) services. And the process is very secure,too.

*Updated June 2012. Please check with each broker for the latest information.