Investing 101

**Market order** - an order to buy or sell shares at the market’s current trading price. This kind of order usually ensures execution, but the price is not guaranteed. For example, a trader may get his/her order executed, but pay a few cents more per share than what was reported when the trade was executed. This kind of order is appropriate when an investor wants to execute a trade immediately, no matter the small difference in cents of the share price. Market orders can only be placed during market hours. If a market order is placed after markets are closed, it will only execute when the market opens next, which will result in the share price being different from the previous day’s market close price. 

**Limit order** - an order to buy or sell shares with a limit on the maximum price an investor is willing to pay or the minimum price a seller is willing to accept (“limit price”). When buying a share, an order could be executed below the limit price and for a seller, the order could be executed above the limit price. For the order to be filled, the investor must input the specific number of shares and the price. However, there is no guarantee of execution. For example, if the stock reaches your inputted limit price, your order may not be filled if orders ahead of yours limit the availability of shares at the limit price. Thus, orders are executed on a first come, first served basis. A limit order is appropriate when an investor believes they can enter a position at a price lower than - or exit a position at a price higher than - the current market price. 

**Stop order** - an order to buy or sell shares at a specified price once the share has traded at or through the stop price. First, the investor must input the order with the amount of shares and the stop price. If the share reaches the stop price, the order becomes a market order and gets executed at the next available market price. If the share does not reach the stop price, then the order is not executed. Sometimes referred to as a “stop-loss,” this kind of order protects an investor’s unrealized gains or minimizes their potential losses. After entering a position, an investor can choose to put a stop loss above the market price (to protect their gains) or a stop loss under the market price (to minimize their losses). By doing this, an investor protects their position and reduces their volatility risk (explained later). 

**Pop Quiz!**

Kate works at a jewelry company and trades TSLA shares on the side. She wants to enter an order that will allow her to exit her position without needing to constantly look at her brokerage account. What order is most appropriate? 

1. Stop order
2. Limit order
3. Market order 

_Answer: Kate would want to input stop losses on her position so that her brokerage account can automatically exit her TSLA position once she makes an unrealized gain or to minimize her losses should the share price crash._ 


So you know which position you want to get into but you're not sure how? 

Trading Orders

Trading

## TL;DR

- How much do you want to invest? 
- Which brokerage do you want to open an account with?
- What are you investing in?
- What is your investment style? 

## How do I start?

Now that you’ve decided to start investing, the first thing you need to do is decide how much to invest. If you’re earning a monthly salary, how much do you want to allocate to your investments every month? If your employer offers to match your 401(k), how much will you contribute? Consider your investment horizon and goal, then walk backwards to calculate how much to invest monthly or annually. As a rule of thumb, you should invest at least 10% of your annual income. 

After you’ve allocated your funds, it’s time to open an investment account. There are a lot of different brokerages which you can use but you should consider the best one for your needs. If you’re starting from scratch, Robinhood might be a good place to start because of its easy user interface. If you’re more experienced, then Interactive Brokers might be the correct brokerage for you. It really depends on you. Make sure to research the brokerage’s fee structure. Once you’ve decided your brokerage, set up an account and connect your bank account to the platform. 

Now you have a brokerage account with some money - this is where the fun starts. It’s time to choose what you want to invest in. Based on your risk profile and characteristics, choose investments which you are comfortable and passionate about. Once you know what you want to invest in, you have to think about your investing style. If you’re investing for the long term, then accumulate a good amount of investments. But if you’re investing for a short time, the maximum time you’ll hold an investment may be 1 month. Again, it really depends on you. 

Once you are able to answer all the above questions, you’re ready to dive into the exciting world of investing. 

Starting to Trade

TL;DR

How do I start?

Trading Orders