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How to Buy Stock Online

Step-by-step guide to online stock trading

Buying stock with an online broker is easy - but you do need to know a few points before pulling the trigger on your online trade. Here are some pointers to get you started.

Anatomy of a Stock Quote

When you pull up a stock quote, the first thing you'll notice is that "quotes" include several numbers: the closing price, the last trade price, and the bid and ask.

Let's look at fictional company ABC. Assume that the last trade was 84.77, but the price at the last trading session's close was $84.12. Meanwhile, the bid and ask are $84.76 and $84.79. What's the real quote then?

The bid price, or bid, refers to the price at which you can sell stock; the ask price, or ask, is the price at which you can buy stock. You'll see there's a 3-cent difference between these two numbers in the example above; that's called the spread. The specialist for ABC on the New York Stock Exchange makes its money on the spread.

To Your Online Brokerage!
Login to your Ally Invest account to start placing your trade. Let's say you're an ABC buyer, so you'll be purchasing at the ask price of $84.79. Now what?

Start by choosing Buy and entering your ticker symbol (or looking it up, then entering it): ABC. Enter the number of shares you want to buy, too.

You have a few more choices to make as you tee up the trade ticket. First, are you entering a market or limit order? A market order says you want to buy ABC at the best available stock market price, whatever it is. This is usually the fastest way to place your stock trade. If you're stock investing for the longer term and not too concerned with market timing, that might be fine for your needs.

Of course, if you were trading a fast-moving penny stock, or if there's suddenly a big run in IBM shares, that could get expensive. To lock in your stock price, you may prefer entering a limit order (a limit order may not guarantee an execution). For a limit order, you specify the price at which you want to buy ABC; if your discount broker can get you a better price on this buy, you'll be fine with that, too.

You can even get really fancy and opt for a stop order. A stop order tells the market: if ABC trades at or through a certain price, trigger my order to go. You can enter a plain-Jane stop order, that "triggers" a market price after your stop is reached, or you can enter a stop limit order. In that case, the order gets activated when your stop is reached, then gets entered automatically as a limit order.

You can also specify the duration of your order: a day order expires at the end of the current trading day, while a GTC is Good 'til Canceled.

If you really want to get specific, you can qualify your order, too: AON stands for All or None, meaning you want your full share quantity filled or no shares at all.

Make your choices, and then click to submit your order and start investing. That's it!