Alright — so you want to take the plunge into the world of online brokers. You want to buy shares online. No problem.
This was a predicament that I was in not too long ago, so I’m well positioned to help you out.
In pursuit of that goal, I’ve written up the following step-by-step guide. If you follow along to the end, you’ll have 1) signed up to an online broker and 2) successfully executed your first online trade. After that, the world is yours for the conquering.
Let’s get to it, then.
Pinpointing The Best Online Broker: TradeKing
There are two types of people in this world: satifiscers and maximizers. When a satifiscer goes to the store to buy a blanket, they’re looking for one that is good enough. When a maximizer buys a blanket, they want the best one. Troublingly, satisficers tend to be happier.
I saw “troublingly” because I’m an unabashed maximizer. If it’s not the core of my personality, it’s close. I have to look at every option and pick the best for money. It’s a compulsion. Maybe I’d be happier without it, but I can’t stop.
The implication: Before I chose an online broker for my money, I did research. A lot of research. I’m talking Woody Allen levels of neurosis here.
Now you get to benefit from my neuroticism.
There was one metric that I was really concerned with: trading costs. If you’ve been following the site for a while, you know that I hate fees. They are, if not the devil, a member of his inner sanctum. Over the long run, when it comes to investing, fees can cost you hundreds of thousands of dollars. Whisked away, out of your pocket, and into those of some fat cat, financial guru somewhere.
Think of it this way: Imagine that you go to buy a stock. You’re going to invest 500 dollars in this company. With a real life broker, one you call over the phone, it might cost you $50 or more.
That means that you’ve just lost 10% of your money. In a year, if your investment does well and is up by 11%, you’ll only be breaking even.
The more trades you make, the more this fee is magnified.
If you sign up with E*Trade, it’ll cost you $10 per trade. With a low-cost broker, like TradeKing — my ultimate choice — trades are less than half that: $4.95.
If you do 100 trades per year, that’s a $500 advantage for TradeKing.
And, ultimately, online brokers are commodities. They’re less like perfume and more like gasoline. Each service does the same thing, so why wouldn’t you buy the cheapest one?
So, for the rest of the tutorial, I’m going to assume that you don’t enjoy frivolously pissing money away, and instead are planning on trading with the lowest cost broker around, TradeKing.
Oh, and one other reason I chose TradeKing: no account minimums. You can open account with one dollar or one hundred thousand.
So let me show you how to open an account.
TradeKing’s Onboarding Process
The process of signing up for a TradeKing account is fairly painless. You start at this page:
Click on the “Start Trading” button, and you’ll find yourself transported to the signup process:
I ended up choosing “individual account” here. You can always change it later — TradeKing allows you to have multiple types of account unified behind one main login.
This dialogue just asks questions about earnings, tax brackets, and trading experience. The blurb at the top mentions that they have to ask for this, because regulation.
The process says this is ostensibly an application, but my account was approved instantly, with any human approval. This is in contrast to ally bank, where the application eventually forced me to call their staff, after which I later received a rejection letter. So, yeah. Fuck ally bank.
But that’s it. Now the account is set up, and you just need to transfer funds to it.
When you first log in, you’ll be created with a dialogue like this:
After you click that, you’ll have a dialogue where you need to enter your bank’s routing number and your checking account number. Both of these can be found at the bottom of any check associated with that account:
Once that’s done, TradeKing will demand a picture of one of your checks and of your photo ID:
What The Online Research Tools Look Like
During your wait for your funds to transfer, you’re probably going to want to poke around the site. I’m two steps (at least) ahead of you.
Here’s the main screen when you pull up a stock:
- Pros of the main chart: looks appealing and you can zoom in to different timescales, along with an indicator of trading volume.
- Cons of the main chart: technical analysis is useless so you can’t determine whether or not to buy based on it alone.
Favorite part of this view: Over on the sidebar, important financial information is highlighted.
If you like what you see, you’re probably going to want to dig in further still. Not a problem:
The view of financials here is on par with Google Finance, which was my preferred tool before switching to TradeKing. You can also click through on the sidebar to read any of the company’s SEC filings — stuff like the last 10k. Reading enough of those will teach you more about business than any MBA program.
You can click through at the top to view the corporation’s balance sheet and cash flows.
On the other hand, if you’re that strange breed who believes in technical analysis, TradeKing has built its own, free-to-use platform tailored for you:
Finally, one of the more interesting available views, you can see what a company’s insiders — CEO, director, etc — are up to. Have they been buying? Selling off?
There’s a lot more than this available, but I’ll let you explore on your own. By now, your funds ought to be available, which means that you can now actually, you know, buy shares online.
Executing Your First Trade
Actually purchasing shares of a stock, thanks to modern technology, is monstrously easy. It ought to be, given that this is where platforms like TradeKing make their money — the more you trade, the more they make. Sort of like how Amazon implemented one-click purchases to make impulse buying a breeze.
To purchase a share, you first need to navigate to the trading view. To do so, click Trading > Order Status > Regular Hours Trading.
As you can see in the screenshot above, I’ve funded my account with a lavish 20 dollars, and for the purpose of this demo, I’m buying one share of AFOP. (Note that it is usually a bad idea to buy only one share of a stock.) With a market cap around 240 million, these shares can sometimes be pretty thinly traded, so I’m using a limit order. I’m basically saying: I’ll buy at $13 dollars or less, but no higher.
This is in contrast to a more standard market order, which says “buy at whatever price available.” That’s a fine option on giant stocks, like Apple or Microsoft, but dangerous on smaller ones.
Once that’s done, you click “Preview Order,” which brings you to…
So, what are you waiting for? Stop procrastinating and put that money to work. 1 percent of trading days account for 95% of all gains.
Don’t miss out! Use your money to make more money. Sign up for a TradeKing account today.