How To Make Money In The Stock Market For Dummies

How to Buy and Trade Stocks

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With stocks at historic highs, many individuals are wondering if the time is right to make their first foray in the stock market. The truth is, there is a high number of great stocks to buy today. However, you might be unsure how to begin. This guide shows you how to buy stocks, where to buy them, and some criteria you can use to determine if you should be buying the stock.

Buying Stocks Through a Broker

The first step in buying a stock is to understand what a share of stock represents. A share of stock represents ownership in a publicly traded company. The company draws its capital from the market. In exchange, stockholders own claims to profits as well as enterprise value of the business.

You can buy a share of stock, or multiple shares from a stock broker. American stock brokers include:

TD Ameritrade
Charles Schwab
Merrill Edge
Interactive Brokers

You should create an account with a broker, then fund the account. Finally, when you are ready to buy, place your first buy order through the broker's website.

Buying Dollar and Penny Stocks

While stocks for companies like Apple and Berkshire Hathaway trade for hundreds or thousands of dollars, you can buy stocks for much less than that. Dollar stocks and penny stocks are stocks that trade at very low prices. This makes it easy for an investor without much risk capital to buy a stake on a small budget.

Some dollar stocks in the market include:

LBCC - Long Blockchain
NAUH - National American
REXX - Rex Energy

Investing in dollar and penny stocks is riskier than regular stocks since these small companies tend to not be as well-capitalized as larger companies.

Best 5 Stocks to Buy Now

Beginner investors often want to know what is the list of hot stocks to buy. A list of the best 5 stocks to buy now would likely include some of the major companies making the headlines these days:

Apple
Amazon
Google
Walmart
Bank Of America

Nonetheless, rather than buying stocks blindly, you should carry out your own research. Trading information and tips are no use in the absence of solid knowledge of the market.

A general rule you will see touted by seasoned investors is to buy low and sell high. Despite the seeming simplicity of the rule, this is quite hard to do in practice. The main cause is that there is no floor in the market where you know for sure what is a low price for a stock. Even if you think you're buying a stock at a low price today, it can open tomorrow at an even lower price than you bought for. As a result, you can lose money quite easily if your analysis is wrong.

Buying Internet Stocks

Stocks from web and internet companies are popular with investors. Internet stocks have seen tremendous growth over the last decade of the technology boom and many investors expect the trend to continue. Some of these stocks include

Netflix
LinkedIn
Twitter

To buy Netflix stock, you will need to know the particulars about Netflix. Netflix stock has the symbol "NFLX" but without the quotes. You can search for this symbol inside your brokerage account and place a buy order when you are ready to buy.

Types of Stock Orders

When buying stocks through brokers, there are a couple of options for issuing your buy or sell orders. Let's say you are trying to buy Tesla stock. Tesla has a stock symbol of "TSLA."

The first way to buy Tesla through your broker is to place what's known as a market order. In this case, you enter in the stock symbol and then select the option to buy Tesla at the market price. Typically, market orders are executed very fast, allowing you to have the stock almost instantly.

You can also place a stop order for Tesla stock. With a stop order, you place an order to buy when the price reaches a certain point higher than where the stock is trading at present. This lets you confirm, for example, that the stock is trending higher before you get into a stock position.

Trading Pre-IPO Stock

While most stock you trade will be post-IPO, you also have the option to buy pre IPO stock. This stock is seen as riskier than stock in the open market. You would essentially be buying stakes of equity in a pre-IPO startup or private company. To buy equity in these companies, you can talk to company founders at pitch events and negotiate an equity investment with them.