Share Applications and Brokerage Accounts Overview

Study Notes

When you decide to buy or sell shares of publicly traded companies, you'll typically use a share application through a brokerage account. This article will help you understand the connection between share applications and brokerage accounts, and how they work together to facilitate your investment activities.

Brokerage Accounts

A brokerage account is a financial account that provides an easy and secure way for you to invest in the stock market. Brokerage firms such as Fidelity, TD Ameritrade, and Charles Schwab offer these accounts, which allow you to buy, sell, and hold stocks, bonds, and other securities.

When you open a brokerage account, you provide your personal information, such as your name, address, and Social Security Number, and agree to the brokerage's terms and conditions. You'll also need to fund your account, which can be done by transferring money from a bank account, selling securities, or receiving a transfer from another brokerage account.

A share application is a request to buy or sell shares of stock through your brokerage account. The application process is usually straightforward and can be completed online or by phone. Here's a brief outline of the steps involved in a share application:

Identify the security: Choose the specific stock, mutual fund, or exchange-traded fund that you wish to buy or sell.
Choose a method: You can submit your share application online, through your broker's mobile app, or by calling the broker's customer service.
Provide order details: Specify the number of shares you want to buy or sell, the price at which you want to buy (bid price) or sell (ask price), and any additional instructions such as a stop-loss order or limit order.
Submit the application: Once you've provided all the necessary information, submit the order to your broker.

Share applications typically require a minimum purchase amount, which varies depending on the brokerage firm. Most firms also charge a fee for each transaction; however, some platforms offer free trades or discounted trading for certain types of accounts.

Types of Orders

When submitting a share application, you can choose between different types of orders, each with its unique characteristics.

Market Order: In this type of order, you buy or sell the stock at the best available price in the market at the time of the order. The order is guaranteed to be executed, but there's no guarantee about the price.
Limit Order: A limit order allows you to buy or sell a stock at a specific price or better. If the market price reaches or falls below your limit price, the order will be executed. If the market price doesn't reach your limit price before the order expires, the order will be canceled.
Stop-loss Order: A stop-loss order automatically sells a stock when it reaches a specific price. This type of order helps to mitigate losses by preventing further price declines.

Execution

Once you submit a share application, your broker or a financial intermediary will attempt to execute the order on your behalf. The execution price may differ from the price you specified in your order due to market fluctuations.

After the order is executed, the shares are credited to your brokerage account, and you become the legal owner of the shares. You can track the progress of your order and view the transaction details through your brokerage account.

Share applications and brokerage accounts make it easy and convenient for individual investors to participate in the stock market. By understanding the process and the order types available, you can make informed decisions and manage your investments effectively.

Description

Learn about the connection between share applications and brokerage accounts, how they facilitate investment activities, and the different types of orders you can submit. Understand the process of opening a brokerage account, funding it, and executing share applications.