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Internet Stock Brokers: Discount in Price and Service

Aug 17, 2007
In addition to money, you need a broker in order to play the penny stock trading game. Your broker will be your lifeline as well as the person that you have allowed the privilege of buying and selling stocks on your behalf. He or she will create an account into which you will deposit money. This account works very much like a bank account with the added benefit of containing stocks and bonds as well. The proceeds from sales of stock will go into this account and the money to purchase new stocks will be taken from this account.

There are two types of brokers full service brokers and discount brokers. Full service brokers offer financial investment strategies, portfolio assistance, and investment advice among other things.

This level of service in the game of stock trading however comes at a great price and that price comes in the form of a sizeable commission or transaction fee. If you are trading penny stocks, the fees for a full service broker will negate any benefit you would receive from using their services.

Discount brokers on the other hand can answer specific questions you have about investing but won't provide quite the level of customer service. One thing that most people find infinitely enjoyable about discount stockbrokers and doing the research and playing with the nifty computer programs and analysis that most discount brokerages allow their clients to have access. People like being able to make buy orders from the comfort of their homes at any hour of the day. They also can much better appreciate the price of $10-$20 per trade much more than upwards of $100 that many full service brokers charge.

Once you've decided on your broker and have taken care of the basics of getting your account in order and funded you will be read to trade. This process should take no more than 3 days.

The basics of trading consist of buy orders and sell orders. The most important thing about issuing a buy order is to make sure you have the money in your account to cover not only the order but also the transaction fees. There are essentially five things that must be included in the buy order:

1) The ticker symbol.
2) The market where the stock is being traded.
3) The number of shares you wish to buy.
4) The price you are willing to pay (if you do not specify a price the purchase order will be made at the available asking price - this is not recommended).
5) The amount of time you want your offer to stand.

Sell orders are very much the opposite of buy orders. You state that you wish to sell your stock, the price you wish to receive, and the ticker symbol, the exchange, and the amount of time you'd like your offer to stand.

Investors often enter a bid price when buying stocks and an ask price when selling. If your bid price meets the ask price of another, then a transaction can be made. There are often many standing orders of multiple prices available at any given time. However, when you check the stock quotes they will only show the highest buy and the lowest sell rather than showing all points in between. Stocks are sold with a 'best price' priority this means that stocks are sold to all with the higher buy orders first, and then trickle down to the lower buy orders. If your buy order (or sell order) was placed at the same price as other buy orders, those will be sold in the order they were received.

As a result of the ranking order, people often find that only part of their order gets filled for a certain price. If part of your buy order was filled early in a given day you may want to adjust your offer so that the remaining order may still be filled that day at a slightly higher price (while paying only one broker commission). If the order takes several days in order to be filled there will be a broker fee each day that a transaction occurs.

You will need to check with your specific broker about his or her policy on cancellations and order changing. In most cases orders can be cancelled or changed but there may be a fee involved.
About the Author
Learn more about internet stock brokers and how to trade online by visiting http://www.1source4stocks.com
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