Ask The Expert
Tips of the TradePlace trades, get quotes, read news and set alerts quickly and easily by simply moving your mouse over a symbol in the Scottrade Trading Site. Throughout your account, you can click on symbols to go to a Detailed Quote view, but you can also run your mouse over a symbol for quick links to other actions.
Place your mouse over the symbol, and you'll see task links pop up. Left-click on the task of your choice to initiate the action you selected.
Customize your option chains by changing the background color of each individual column. Simply right-click on the column's heading. A "Configure Color" window will populate that will allow you to select from a variety of colors.
You can apply unique colors to each heading. Select "Clear" if you want to remove the color from that column, or "Clear All Colors" to remove the color selected for all columns.
Trading for Beginners
By Kim Gibas, Scottrade Senior Branch Manager, Delafield, Wis.
Placing your first trade can be very intimidating for beginners. After you fund your account and pick out your stock, now what? How do you read a quote? What is a ticker symbol? What is meant by order types? These are some common questions asked by first-time online investors that I would like to answer.
Understanding the Quote
A quote represents the highest selling price and the lowest buying price at that point in time. The basic components of the quote are: Ticker Symbol, Name of the Company, Open, Bid, Ask, Last Trade or Price, and Volume. As we go through the different components of a basic quote, look for corresponding images taken from the Quick Quote tool located in the bottom left area of your Scottrade account.
The ticker symbol is composed of an arrangement of letters that represent a publicly traded stock on a stock exchange. Ticker symbols can range from one to five letters, and each publicly traded company has a unique symbol. View Graphic 
The opening price represents the price the stock traded upon the opening of an exchange on a given trading day. The opening price may not be identical to its closing price from the previous trading day due to various factors such as afterhours trading, news, investor confidence, or a variety of other reasons. View Graphic
The textbook definition of bid price is the price a buyer is willing to pay. If you currently own the stock being quoted, you would look to the bid price to see what price you could potentially receive per share if you sold the stock. So, the bid price to you, the investor, would be the selling price. View Graphic
The textbook definition of ask price is the price a seller is willing to accept. If you would like to purchase the stock being quoted, you would look to the ask price to see what price you would potentially pay per share to buy the stock. So, the ask price to the investor would be the buying price. View Graphic
The last trade or price of a stock could be either a buy or sell transaction. It does not have to be one or the other, just where the stock traded last. View Graphic
The volume is the amount of shares that have traded in that particular day. Trading volume that is higher or lower than average (more people are buying or selling than on a typical day) is usually due to outside factors, such as positive or negative news about the company. View Graphic
Determining the Number of Shares to Purchase
When placing a buy order, the number of shares must be entered into the Stock Order Entry form under the Trade tab. The following examples will illustrate to how to calculate the number of shares you are willing to buy based on the total amount of money you plan to invest in a particular stock.
Example 1: The stock price is $10.00 and the commission is $7.00, and you are investing $1,000.00
$1,000.00 - $7.00 = $993.00 (This number represents the total amount you want to invest minus the commission.)
$993.00 / $10.00 = 99 shares (This number presents the maximum number of shares you can buy at $10.00 per share.)
Example 2: The stock price is $0.75 and the commission is $7.00 + 1/2% of your total principal you want to invest. You are investing $1,000.00. Please note that the added commission of 1/2% of the total amount invested (principal) is only applicable if you are purchasing a stock priced less than $1 per share, also known as a "penny stock".
$1,000.00 X 1/2% = $5.00 (This number represents a 1/2% of principal.)
$5.00 + $7.00 = $12.00 (This number presents the total commission.)
$1,000.00 - $12.00 = $988.00 (This number represents the total amount you want to invest minus the commission.)
$988.00 / $0.75 = 1317 shares (This number presents the maximum number of shares you can buy at $0.75 per share.)
Understanding Market & Limit Orders
After you've determined how many shares you are able to purchase with your available funds, you will need to decide which type of order you would like to place. Order types range from very simple to very complex, and the two most common order types are market orders and limit orders.
A market order can be used on both buy and sell orders. The market order guarantees an execution but does not guarantee a price. If the market moves up or down while you are placing your order, your trade may execute for a slightly different price than the bid or ask you saw quoted.
Buy Market Order Examples:
Scenario: The ask price for stock XYZ is $10.00.
Example 1: The investor places a buy market order for 100 shares of XYZ while the market is open.
Strategy: The investor understands his/her order will be executed and anticipates their order will be executed at or around the ask price of $10.00.
Example 2: The investor places a buy market order for 100 shares of XYZ while the market is closed.
Strategy: The investor understands his/her order will be queued for the next business day. This order will be executed when the market opens the following morning, but the investor does not know what price he/she will pay.
Sell Market Order Examples:
Scenario: The bid price for stock ABC is $9.50.
Example 1: The investor places a sell market order for 100 shares of ABC while the market is open.
Strategy: The investor understands his/her order will be executed and anticipates their order will be executed at or around the bid price of $9.50.
Example 2: The investor places a sell market order for 100 shares of ABC while the market is closed.
Strategy: The investor understands his/her order will be queued for the next business day. This order will be executed when the market opens the following morning, but the investor does not know what price he/she will receive for the shares.
A limit order can be used on both buy and sell orders. The limit order allows you to set a price, and if the stock reaches or surpasses that price, your buy or sell order will be executed for the limit price or better. If not, your order will not execute.
Buy Limit Order Examples
Scenario: The ask price for stock XYZ is $10.00.
Example 1: The investor places a buy limit order for 100 shares of XYZ at $9.00 limit price per share.
Strategy: The investor does not want to pay more than $9.00 per share for this stock.
Example 2: The investor places a buy limit order for 100 shares of XYZ at $10.00 limit price per share.
Strategy: The investor does not want to pay more than $10.00 per share and does not want to risk paying more by using a market order.
Example 3: The investor places a buy limit order for 100 shares of XYZ at $10.15 limit price per share.
Strategy: The investor is willing to pay $10.15 per share or lower. This strategy might be used when there is heavy volume in your stock. This order will execute similar to a market order up to the price of $10.15 per share.
Sell Limit Order Examples
Scenario: The bid price for stock ABC is $9.50.
Example 1: The investor places a sell limit order for 100 shares of ABC at $10.00 limit price per share.
Strategy: The investor does not want to sell their stock for anything less than $10.00 per share.
Example 2: The investor places a sell limit order for 100 shares of ABC at $9.50 per share.
Strategy: The investor does not want to sell their stock for lower than $9.50 per share and does not want to risk selling the stock for less by using a market order.
Example 3: The investor places a sell limit order for 100 shares of ABC at $9.00 limit price per share.
Strategy: The investor is willing to sell their stock down to the prices of $9.00 per share. This strategy might be used when there is heavy volume in your stock. This order will execute similar to a market order down to the price of $9.00 per share.
If you have questions about stock quotes, market and limit orders or how to place stock orders at Scottrade, contact your local branch office.
The material in this article is for information purposes only and its use does not guarantee a profit. Investors should fully research any security before making an investment decision. Securities are subject to market fluctuation and may lose value.
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| Options Order Entry & Research |
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