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How to Buy Stocks Online

Purchasing stock is exciting—you become a partial owner in a company that you love, you can gain dividends, you can vote on important corporate decisions and (hopefully) you can sell your stock at a profit in the future.

Day trading has become a common hobby, and with the spread of the internet, almost anyone can purchase stocks and bonds from the comfort of his or her own home. Learn how to make your first trade and begin investing in the American stock market.

Luckily, it’s not too difficult. Just follow this guide and you’ll be on your way to trading stocks in no time.

Step 1: Choose a broker

Before you decide which stock you want to purchase, you need to choose a broker. A stockbroker is your ticket to purchasing the equities you want. You’ll need a broker to coordinate transactions on your behalf.

Most brokerage firms offer online stock trading platforms so you won’t have to make your way to Wall Street to find the broker that’s right for you. Some of the biggest names in online stock trading include TD Ameritrade, E-Trade and Ally Invest, all three of which are good choices for beginning stock traders.

There are a number of factors to consider when choosing between brokers, including minimum account balances, commissions, educational offerings, and customer service hours

Here are a few of our favorites:

Broker Best For Commissions Account Minimum Choose your platform
Ally Investment
  • Active traders
  • Beginners looking to start trading
  • Low fees
  • Penny stocks
$4.95 volume discount available $0
Get started securely through Ally Investment's website
1 Minute Review

If investors are on the hunt for a bargain broker, Ally Invest could be the one. With low commissions across the board, Ally Invest (formerly TradeKing) stops potential investors in their tracks with its especially low mutual fund commissions. Commissions on stocks and ETFs are notoriously inexpensive as well, and for more active traders or those with larger account balances, commissions can dip as low as $3.95 per trade.

Pros
  • Volume discounts available
  • Among the lowest fees in industry
  • Good for every experience level
  • Excellent customer service
Cons
  • No commission free ETFs
  • Lacks physical locations
Current Promotion

$3.95 per stock trade for Active Traders at Ally Invest

eTrade
  • Mobile traders
  • Traders looking for research and data
  • Investors looking for retirement planning guidance
$6.95 for fewer than 30 trades/quarter. $0
Get started securely through eTrade's website
1 Minute Review

E-Trade is best known for its user-friendly browser, desktop and mobile trading platforms and its extensive research and educational information. E-Trade may not have the lowest commissions compared to discount online brokers, but customers certainly get their money’s worth from E-Trade’s comprehensive offerings.

Pros
  • Extensive resources
  • Full banking services
  • Easy-to-use platforms
Cons
  • Limited access to ETrade Pro
  • Higher commissions than discount brokers
Current Promotion

60 days of commission-free trades with deposit of $10,000 or more

TD Ameritrade
  • Beginner investors
  • Advanced traders
  • Investors who want portfolio-building advice.
$6.95 $0
Get started securely through TD Ameritrade's website
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Pros
  • Superior technology
  • No account minimum balance
  • Excellent customer support
  • Premier data and news partnerships
Cons
  • Slightly higher commissions
  • Can be for more advanced users
Current Promotion

Trade commission–free for 90 days & get up to $2500

Step 2: Understand order types

There are a number of different types of stock orders you’ll need to understand before you make your first purchase. When you buy your first stock, your broker will ask you which type of order you’re looking to place. Two of the most common stock order types include:

Market orders fulfill a request to buy a particular stock as soon as possible at the cheapest available price. You know what you want, and you want it now. If you place a market order “after hours” (typically after 4 P.M. EST unless it’s a holiday) the order will be filled at the opening price the next day.

Limit orders are a request to buy a given stock, but only when and if the price of the stock falls to a predetermined price. You can place a limit order in advance but remember that there is no guarantee that the order will ever be filled (for example, if the stock fails to drop to the requested price).

Though there are other types of orders that can be used when buying and selling stocks, chances are high that you will be using market orders and limit orders exclusively until you get the hang of trading.

Different types of orders. Source: WallStCollege.com
Different types of orders. Source: WallStCollege.com

Step 3: Choose a stock you’d like to buy

Now comes the fun part—deciding which stocks you want to purchase. Browse through your broker’s trading platform and review your options. Don’t let the massive number of available equities overwhelm you.

First, try researching companies that you know and enjoy to get a hang of reading charts and reports. Don’t feel pressured to find the next Amazon.com—instead, buy into a company that you’d like to own a part of.

When you’ve found a stock you like, look up the company’s annual report. You’ll want to invest in a corporation that you believe has strong leadership and a solid plan for the future.

Step 4: Decide on the number of shares you’d like to buy

Some beginning traders feel like they need to make a massive purchase to negate their broker’s commission fees.

However, you should never financially exert yourself or buy more than you can afford in order to save money. Starting small (even as small as a single stock) can be a great way to get into the market and feel what it’s like to go through the ordering process.

Step 5: Place an order

The specific steps that you’ll need to go through to make your first purchase will vary depending on your broker’s platform, but you can generally expect to choose your order type and the number of shares you’re looking to buy, confirm your purchase with your broker and see your equities arrive in your portfolio in a matter of hours.

Final thoughts

Though most investors dream of raking in the millions trading stocks, the truth is that it can take years to reach this level of success. Many are unprepared to deal with the rough patches that come along with a fickle market, so it’s important that you never invest more than you can afford. Don’t feel intimidated by the massive amount of information overloading your senses—at its core, purchasing and selling stocks is a relatively simple process that has become easier with advanced automation.

Ready to get started and make your first trade? Check out our list of the top penny stocks you can invest in for under $1 or take a look at our news dashboard so you can make smarter money moves.