Education Center

Email this page to a friend | Print

Trading

Buying or Selling Stocks

Buying or selling stocks isn't hard, but the process has its own rules, its own distinctive language and a special cast of character.

Brokerage House

To buy or sell a stock, you have to go through a brokerage house, an investment firm that is a member of a stock exchange. Only a stockbroker approved and registered with the Securities and Exchange Commission of Pakistan (SECP), which regulates the investment industry, handles your deal.

| Back

Broker

Though a broker is generally recognized as someone who buys and sells stocks, the financial markets use other, not so widely recognized, job descriptions to identify the various ways securities change hands and the people who get the job done

Brokers act as agents to execute buy and sell orders from the investing public.

| Back

Dealers

Dealers are people or firms that buy and sell securities as principals rather than agents, making their money on the difference between the cost of buying and the price for selling.

| Back

Investment Bankers

Investment bankers, or under-writers, buy new issues directly from corporations and sell them to individual and institutional investors.

| Back

Traders

Traders, also called registered or competitive traders, buy and sell for their own accounts.

People who buy and sell for broker/dealers or financial institutions are also called traders.

| Back

Round Lots

Usually you buy or sell stock in multiples of 100 shares, called a round lot. Small investors can buy just a single share, or any number they can afford. That's called an odd lot. Brokers often charge more to buy and to sell odd lot orders.

| Back

Placing an Order to Buy or Sell

When you tell your broker to buy or sell, you're giving an order. A market order tells your broker to act now to get the best buy or sell price available at the moment. Or you can give your broker more specific guidelines.

If you think the price of a stock you want to buy is going down, you can place a limit order. That way your broker will buy only when the price falls to the amount, you've named.

Similarly, if you own a stock that's rising in value, you can place a limit order to sell. That means your broker will sell only if and when it climbs to the pre-established price.

Finally, if you own a stock that is declining in price, you might want to place a stop loss order. That tells your broker to sell if the price falls to a certain level, in order to prevent further losses.

| Back

Timing Your Orders

Orders can specify time limits as well as price limits. When you give a stop order or a limit order, your broker will ask if you want it to be Good Till Cancelled (GTC) or a day order. A GTC stands until it is either filled or you cancel it. A day order is cancelled automatically if it isn't filled that day.

| Top

Email this page to a friend | Print