Wednesday, September 2, 2009

Buying Shares

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Before I start buying shares, I've got to continue my look at how the stock market has been performing lately. If you remember from my previous posts, if the market is in a downtrend there is a 3 out 4 chance that your stock will go down. Today in looking at the three major indexes, the S&P 500, the Dow and the Nasdaq Composite all three finished lower than yesterday. The volume for the New York Stock Exchange was lower than yesterday as well but higher than the daily average volume. The Nasdaq volume was lower than the day before and also lower than the daily average.

If I want to buy shares today, my first question would be did it matter that NYSE volume was down from yesterday but still higher than the average daily volume? When I saw that, the first place I checked was the IBDtv Market Wrap. They did not highlight that fact. So, I guess that we can conclude that the market while down, did not count as a distribution day because volume was lower on all three exchanges than the day before. And, evidently that's what matters most when you fine tune your stock market investing rules.

A distribution day is one where the index moves lower than the day before on volume higher than they day before. My next question that I'll need to confirm was does it matter if volume was higher than the day before but lower than the average daily volume for it to count as a distribution day. I am going to say that it probably doesn't. That it will still count.

What that means for us as investors is that the market is still on the same course as the day before. According to the Investor's Business Daily Big Picture column the uptrend in the stock market today is under pressure. So, I am cautious about moving forward about what shares to buy now.

But the point of today's post on Stock Market Investing Today is to talk about how to buy shares. Most of us that manage our investments buy shares online through our online broker. In my case, I use Optionsxpress.com. Buying shares online is really easy these days and once you have done it, you'll see just how easy it is. What's harder than buying shares online is actually pick the stock you want to buy.

In future lessons, once we get a greater understanding of how the overall market is performing, we will discuss what to look for. These lessons will focus on a stocks most important fundamental which is a company's earnings and sales. In addition, you don't want them to have a debt problem.

Anyway, once you pick a stock that you want, you have to figure out how many shares to buy. In the past, brokers always recommended that you buy and sell shares in what are called round lots or in amounts of 100 shares because the commission worked out in your favor. It was more cost effective. Don't be afraid to buy stocks and shares in odd lots of some other number. What's important is that you choose the best shares to buy for your portfolio.

I know at Optionsxpress, I can choose to buy a certain dollar amount of a stock instead of choosing a number of shares. All I do is list the dollar amount. To get practice on how to buy and sell shares, you should use a stock simulator to help you get the hang of it. In most cases, you'll enter what's called a market order which means that the shares are bought the moment the order is executed. In addition, the order usually will be good til cancelled.

Below is a video that walks you through the virtual simulation that they provide on Optionsxpress on buying shares.

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