| The Nature of Stocks and Their Markets | | | | keep your order good for just that trading day, or have |
| Stock Brokers | | | | it good every trading day until it expires on the date |
| Besides money, the only thing you need to start | | | | you specified, which may be weeks later. |
| investing is a stock broker. Your broker will be the | | | | Thus, an example order you might enter would be; "I |
| individual or organization that have execute your buy | | | | wish to buy 6000 shares of Lore Diamonds, ticker |
| and sell orders. They will have an account for you | | | | symbol LOR, at 19 cents or less. The stock is on the |
| which is just like a normal bank account, except that it | | | | Vancouver exchange, and I want this order to stay |
| can contain not only cash, but stocks and bonds as | | | | active until Friday of this week." |
| well. Money from the sale of shares will go into this | | | | If the price of LOR hits 19 cents or less, your broker |
| account, and cash to buy shares will be taken from | | | | should acquire the shares for you. You will find that |
| this account. | | | | 6000 shares of LOR have been added to your |
| There are two types of stock brokers which you can | | | | account, and the money for them has been taken out |
| choose between, full service and discount. Each has | | | | (6000 shares * $0.19 = $1140 + commission fee). |
| advantages and disadvantages, as discussed below. | | | | Sell Orders |
| Full Service Stock Brokers | | | | A sell order is simply the reverse process of buying. |
| Full service brokers will give you advice and | | | | Make sure you know how many shares you have in |
| investment recommendations. However, they do have | | | | your account when selling a stock. Tell your broker; "I |
| very high commission fees and are usually only | | | | wish to sell the 6000 shares of Lore Diamonds from |
| suitable for investors who have a great deal of money | | | | my account. The ticker symbol is LOR, and the stock |
| to invest and who do few trades. For penny stock | | | | is on the Vancouver Stock Exchange. I want to sell at |
| investment, the frequency of trading and the small | | | | 24 cents or higher, and keep the order good for the |
| amounts of capital per trade make full service brokers | | | | day." |
| inappropriate, because their commission fees will be | | | | If the price of LOR hits 24 cents or higher, your shares |
| too high. You may be required to pay as much as | | | | should be sold and the money from the transaction |
| $100 or more to have your full service broker buy you | | | | (6000 shares * $0.24 = $1440 - commission fee) |
| some shares, and just as much again when you sell. | | | | deposited into your account within three days, ready to |
| Discount Stock Brokers | | | | be used in another purchase. |
| Discount brokers can answer any investment | | | | Special Trading Notes |
| questions you may have, but they offer fewer | | | | When trading on an exchange, investors either enter a |
| personalized services for their clients, such as making | | | | bid price (if they are buying) or an ask price (if they are |
| stock recommendations or giving you portfolio advice. | | | | selling). When a bid and ask price meet at an agreed |
| These are the brokers you see on television, | | | | price, a trade takes place. In other words, if you are |
| advertising $10 or $20 a trade commission fees. When | | | | willing to pay 24 cents per share for a stock, and |
| you buy or sell stock, you will be required to pay this | | | | someone is willing to sell shares of the same stock for |
| lower commission rate, and can therefore keep more | | | | 24 cents, you will exchange the shares for the cash. |
| of your own money in your pocket. | | | | At any one time there are usually several buy orders |
| As well, with discount brokers you can often monitor | | | | and sell orders all at different prices for a given stock. |
| your account and execute trade orders from your | | | | However, when you check a stock quote you will only |
| computer or through an automated telephone system. | | | | see the highest bid price and the lowest ask price, |
| With the computer system you are able to see all of | | | | representing the most that investors are willing to pay |
| your open buy orders, check market indexes and get | | | | for the shares, and the lowest price at which |
| stock price quotes. On-line discount brokers are best | | | | shareholders are willing to sell, respectively. |
| for anyone investing in penny stocks, as you are able | | | | Due to the 'best price' priority, your order to buy stock |
| to check prices anywhere there is a modem, and as | | | | will not get filled until all buy orders of a higher price are |
| many times as you like throughout the day. | | | | filled first. Similarly, your sell orders will not get filled until |
| When you've chosen which broker you want to | | | | sell orders of a lower price are filled. |
| establish an account with, simply contact them and | | | | For orders to buy (or sell) stock that are entered at |
| they will help you fill out any forms and set up your | | | | the same price as other similar orders, preference will |
| account. You generally will need an initial deposit of | | | | be given by the exchange in the order in which they |
| cash. Getting your account running and ready for | | | | were received. |
| trading is simple and should not take more than three | | | | Unfilled Orders |
| days. | | | | Due to the above mentioned ranking order, and the |
| Buy Orders | | | | often light volume of shares trading, you may not |
| When you want to acquire shares of a stock, you | | | | always get your order filled. You may put in an order |
| give your broker a buy order. Make sure you have | | | | to buy at a certain price, and find that the shares did |
| enough money in your account to cover the cost of | | | | not trade at that price during the duration of your order, |
| the shares, as well as the commission fee. You will | | | | and therefore you did not make the transaction. There |
| need to know the following; | | | | will be no broker fee when no trade takes place. |
| 1. The ticker symbol of the stock (i.e.- COMX is the | | | | Partial Fills |
| ticker symbol for Comtrex Systems) | | | | You may also find that you got your order partially |
| 2. The market the stock is trading on (i.e.- NASDAQ) | | | | filled. You may want 8000 shares of a stock, but only |
| 3. How many shares you want to acquire. This is also | | | | get 2000. This is because only 2000 shares were |
| referred to as the volume. With penny stocks you | | | | available at the price you had stipulated. This applies to |
| should always buy in multiples of 1000 shares, as you | | | | both buying and selling. If you notice that this may be |
| may be otherwise subject to extra commission | | | | the case mid-day, you can respond by adjusting the |
| charges from your broker. | | | | price of your order to ensure you trade all the shares |
| 4. The price you are willing to pay for the shares. A | | | | you want. You will not get an extra commission for |
| 'market' order means you are willing to pay the best | | | | that. However, if your order spans several days and is |
| available price at the time. A 'limit' order means you will | | | | partly filled on more than one day, you will get a |
| specify a price which you are willing to pay, and your | | | | commission charge from your broker each day you |
| trade will only take place if shares reach that price. | | | | trade shares. |
| We strongly suggest the use of limit orders, to | | | | Canceling and Changing Open Orders |
| increase you control over the transaction and to avoid | | | | Buy and sell orders can be canceled or changed |
| price volatility. | | | | during their duration. Consult your broker for more |
| 5. The duration of your order. For example, you may | | | | information about changing open orders. |