What is Stock Trading?

The stock market serves as an important vehicle for companies to raise funds. When an investor buys shares of stock they are becoming a part owner of that company, but unlike owning real estate, such an investment is liquid in that such ownership can be sold usually quite easily and quickly. What is stock trading? Stock trading is the name given to the actions of the participants who buy and sell stocks. There are many different ways to do a stock trade, as outlined below:

  • Market Order – the simplest order; it involves putting in a buy or sell order for a specific number of shares or total investment amount to be placed at whatever price is in affect when the order is executed
  • Limit Order – with this type of order you dictate the limit at which to affect the execution with the order not being executed if the condition set is not met
  • Sell Short Order – this type of order is used when you anticipate a stock price will fall; you must have margin privileges to be able to sell short
  • Bracketed Order – much like a trailing stop order but you set an upper limit
  • All-or-none Order – placing an order in which your total order must be executed or none of it will be; used when investor wishes to have all shares done at one price rather than spread over a period of time and at different prices; can only be done with a limit order, not a market order.
  • Stop Order / Stop Limit Order – A stop order converts to a market order when the price is reached; a stop limit order converts to a limit order when the stop price is realized.
  • Day Order/GTC Order/Extended Hours Order – these are options when you place your order that tell your broker how long it is to run; a day order is till end of trading day – GTC stands for good-till-canceled which will continue till filled or you cancel 9up to 60 days) – Extended Hours are trades placed between 8 p.m. and 8 a.m.  Most orders are usually day orders or GTC orders.

While some stocks when purchased are those newly offered by the company, in most cases when an investor makes a stock purchase through the stock market they are obtaining shares previously owned by other investors.