How to Place Your First Stock Trade

Trading platforms can be intimidating screens the first few times you get to the point of actually entering an order. Suddenly you’ve got real money on the line, the quotes are flashing, and you’re confronted by choices with terminology you’ve never heard before. We’re going to try and ease the process a little more here.

One of the hardest things for a beginner to wrap their head around is the stop price. It can be very confusing.  To clear up that confusion, let’s take a closer look at the terminology and how it applies to a real trade.

Here is an example of a trade alert that we would send out to our subscribers. If you are a subscriber you would receive an alert that looks something like this:

Bought 10% size of ERX @ $22.55
Target @ $25.00
Stop @ $22.00

Bought 10% size of ERX @ $22.55

Here’s exactly what we mean by this. When we say 10% size, this is an indication of how much of our trading portfolio we are allocating to this one trade. So, if we were doing this trade, and had a $20,000 account, we would buy $2,000 worth of ERX. Since the price is $22.55, we would buy $2,000 / $22.55 = 88 shares. There is no need to be so specific, so we’d round it to 90.

Now let’s take a look at a typical trade entry screen. This is how it looks in eTrade:

You can see the first thing we do is enter the Symbol, ERX.

Then we are asked the Order Type. Buy, Sell, Sell Short, and Buy to Cover. These are often also called, in order, Buy to Open, Sell to Close, Sell to Open, Buy to Close. Let me just say right here that at Wanderer we’re never going to use Sell Short (Sell to Open) or Buy to Cover (Buy to Close).

The only options we will need to know are Buy (Buy to Open) and Sell (Sell to Close). All Buy to Open means is that we are opening a new trade in ERX. And all Sell to Close means is that we are selling something we already own, so we are closing it.

So, select Buy, and enter our Quantity of 90 shares.

Next up is the Price Type. Again we are confronted with a bunch of choices that we do not need. With Wanderer trades, when we are buying we only need to consider two of these choices, Market or Limit.

Market means that we do not choose a price, eTrade will simply buy our 90 shares at whatever the Ask price is when we click the Send button. On our trade entry screen it will be showing us the current Bid and Ask prices. Bid is the current best price that someone is willing to pay for the stock, and Ask is the current lowest price that someone is willing to sell the stock at. Let’s say the screen shows Bid $22.55 and Ask $22.57. If we were to choose Market, then we would immediately buy 90 shares for $22.57. It would be instantaneous.

Limit means that we do choose a price. When we choose Limit another box will pop up where we can type in the price we are willing to pay (our Bid). Enter $22.55 and we’ll then just have to wait and hope that the stock’s Ask ticks down a couple of pennies.

The last option will be the Term, or Duration. we want to choose Good for Day, meaning if our order doesn’t get filled today we want it to be canceled.

That is all there is to Buying a stock/etf with us. It’s that easy. Next we just go to our portfolio page and confirm that our order has been filled and the shares are in our account.

Target @ $25.00

This is the price that we are shooting for with this trade. We want to see ERX go up to $25.00. If we wanted to place our sell order right now we could.

To do this we simply place a new order to Sell, choose Limit as the type, and enter a price of $25.00. Because the current price is only $22.55 our sell order can be accepted, but it won’t be filled until the price climbs to $25.00. However, since this is unlikely to happen in the same day, we need to also choose Good for 60 Days or Open under the Terms box. The terminology will vary a bit for each platform, but it should be pretty clear how to make the order remain Open beyond one day.

Stop @ $22.00

More important than getting our Target Price order placed, is entering a Stop. The stop order is what is going to protect us from losing a bunch of money when we aren’t looking.

What a Stop means is that if the stock price goes down, our sell order will trigger when it gets to a certain level. We can’t just place a Sell Limit order at $22.00 right away, because the current price is $22.55. If we were to place a Sell Limit order right now, we would immediately be filled at $22.55 (the highest price someone was already willing to pay, the Bid). To avoid selling immediately, we set a Stop order.

So for this order we choose Sell as our Order Type, enter our Quantity, and then under Price Type we will choose Stop on Quote. This can also be called Stop, or sometimes Sell Stop.  We will then be prompted for a Stop Price. Here we would enter $22.00. And then remember to choose Good for 60 Days or Open under Terms.

What we have done now is placed an order that will trigger the instant another trade is made at $22.00. The system will then automatically sell our 90 shares at the market (the best bid price). With a liquid ETF like ERX this will probably be at $22.00 or maybe $21.99.


And that is the basics of a Wanderer Financial Trade Alert, and how we place our orders. In the next post I will run through this again a little quicker, and with an option for OCO, which means one cancels other, that allows us to place both a Sell Order and a Sell Stop Order at the same time. But for now, this is really all you’d need to know in order to follow along with one of our trades.