What is the actual process to buy shares?
1. First of all you need to deposit some funds in a brokerage account.
2. You then use your brokerage account to obtain a quote for the stock that you are interested in (you can do this online or over the phone), they then send a request of to the market maker.
3. The market maker (firms that quote the buy an sell price of a stock) then issues you with a buy (ask) price and sell (bid) price for your chosen share.
Note: The difference between the bid and ask price quotes is where they make their money.
4. You then send an order to the market, from your brokerage account, detailing the stock you want to buy, how many shares you want of that stock and what price you are willing to pay for the stock.
5. If the price you set meets the quote the market maker has set then you will enter the trade!
Note: You will be charged a fee of around £8-12 UK and $2-8 US depending on which broker you use, this fee covers the purchase and sale of a share. Also, whether you buy 1, 100, or 100,000 shares, you will get charged the same fee. Brokers charge you per transaction and not by how many shares you buy.
For the cheapest US broker check out OptionsHouse.
The five steps make it sound slightly more difficult than it actually is and often, the process of buying a share, is very quick! Especially if you use market orders.
Why not practice buying shares buy registering for a free practice/virtual trading account at ADVFN.
