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Frequently Asked Questions (FAQs) on Stocks

1. What is a margin account?

2. My broker quoted a stock as 10 bid and 10.25 asked. What does that mean?

3. My broker asked me if I wanted to enter a market order or a limit order to buy a stock. Can you define these terms?

4. Is there a way to enter a limit order that will be good for more than a day if my doesn't reach the price I'm looking for?

5. Is it true that a stop order to sell my stock will protect me from heavy losses?

1. What is a margin account?
   Margin account allows you to pay for part of the cost of buying stock with money that you, in effect, borrow from your broker. You use the account to buy on margin, sell short, or day trade.  To use the account to buy on margin, you must have a balance of cash and securities equal to 50% of the purchase you wish to make.
   
   When you buy on margin, you pay interest on what you borrow but don't have to repay the loan until you sell the stock — ideally, at a large enough profit to cover the interest. If the value of the stock that you bought on margin declines, and you don't have enough assets in your account to cover the margin requirement, you may get a margin call requiring you to deposit more money or securities to maintain your margin requirement. If you don't, your positions will be liquidated. Learn more on Margin Trading.
    
2. My broker quoted a stock as 10 bid and 10.25 asked. What does that mean?
   The bid is the highest price anyone is willing to pay for a security at a particular time. When you want to sell a stock at the market, you will be executed at bid price. The asked is the lowest price anyone will accept to sell shares. When you buy a stock at the market, you will received the prevailing asked price.
    
3. My broker asked me if I wanted to enter a market order or a limit order to buy a stock. Can you define these terms?
    

   Market order - An order for stock that is executed at the current price of the stock when your order is received. Market order is executed immediately at the best possible price available and the transaction is usually completed within a minute. But if a stock is moving up rapidly, you may end up paying more than you expected. If you are selling, a plummeting stock price could cost you a good deal of money.   Limit order - When you give your broker an order to buy or sell a stock when it reaches a certain price or better. For example, if you place a limit order to buy a certain stock at $20 a share when its current market price is $23 a share, your broker will not buy the stock until its share price is $20 or lower. Or if you want to sell it at $20 and the market price is $18, your order will not be executed unless the stock reaches $20 or better. Limit order guarantees the price you will buy or sell a security at.

4. Is there a way to enter a limit order that will be good for more than a day if my doesn't reach the price I'm looking for?
   You can ask your broker to issue a good 'til canceled (GTC) order. When the security reaches the price you've indicated, the broker will execute the trade. This order stays in effect until it is filled, you cancel it, or the brokerage firm's time limit on GTC orders expires. Your order will remain on the floor of the exchange until you get your price. A GTC, also called an open order, is the opposite of a day order, which is only good for that day.
    
5. Is it true that a stop order to sell my stock will protect me from heavy losses?
   A well-placed stop order will give you some protection in your stock position. This order instructs your broker to buy or sell a security once it trades at a certain price, called the stop price. Stop orders are entered below the current price if you are selling and above the current price if you are buying. For example, if you owned a stock currently trading at $35 a share that you feared might drop in price, you could issue a stop-loss order to sell if the price dropped to $30 a share to protect yourself against a larger loss. Once the stop price is reached, your order becomes a market order. If the price drops very quickly, and other orders have been placed before yours, the stock could actually end up selling for less than $30. A stop order does not always get you out at a price you might expect, but it will get you out.
   
   If you don't want to sell it for less than $30, you can place a stop-limit order. With a stop-limit order, your order becomes a limit order instead of a market order once the stop price is reached.

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1. Spend less than you earn! People who spend every penny they make usually end up going broke.......
2. Take enough risk on the money you save! Playing safe by putting your money under the mattress or in a savings account will not make you wealthy..

Remember that..... Fully one-fifth of humanity, some 1.3 billion people, struggles to survive on less than $1 per day. About 40% of humanity survives on less than $2 per day. More than a billion people around the world will go to bed hungry tonight. Life expectancy in some 32 countries is less than 40 years. If you have a few extra dollars in your pocket (you don't have to be a millionaire to make a difference), please share some of your financial good fortune with others who are in great need.

Think About It...  Being in the 'now' brings a freedom, unlike living in the past or in the future, which is a kind of imprisonment. This isn't a kind of a denial where you pretend life doesn't have problems. Life is full of problems, but most of those stresses and failures are reliving old hurts or worrying about future concerns. -- Carl Honore

When you 're diagnosed with cancer, you start to bargain with God: "Let me get through this, and I'll take better care of myself. I'll get my priorities in order. I'll learn to live every day to the fullest." Isn't it sad that you have to get sick before giving yourself permission to live life to the fullest? -- Robert Schimmel Look at Life in different & Positive ways