How Does Buying And Selling Stocks Work – In recent articles we have covered how to open your account with Interactive Brokers, how to fund your account and how to convert to different currencies. Now you are ready to buy and sell or trade stocks at Interactive Brokers.
Before trading on these exchanges, you need to know the mechanics behind how they work.
How Does Buying And Selling Stocks Work
A few years ago, I wrote a comprehensive article explaining how to buy and sell stocks, bonds, REITs and ETFs in Singapore.
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You need to have some understanding of what you are trying to do. Are you buying a 3 day or 2 year term company? Or you are selling a company that has gone bankrupt.
Interactive Brokers is a broker and stock exchange is a place that shows the current market price of the companies you want to buy and sell.
You may want to buy exchange-traded funds (ETFs) listed on the London Stock Exchange from time to time. These ETFs allow you to own a basket of stocks at a low cost. Owning an ETF is a very easy way to diversify, earn returns, and prevent a handful of stocks from permanently damaging your capital.
Some time ago, I wrote an article examining whether the historical performance of these two ETFs differs. It provides more information about these two ETFs.
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For others, you may be interested in owning large businesses around the world, such as Tencent listed on the Hong Kong Stock Exchange, Aden listed in the Netherlands, or PayPal listed in the US.
For illustration, I will use the iShares Core MSCI World UCITS ETF or IWDA as an example.
For most of us, we will trade through the Interactive Brokers mobile app (available on the Apple App Store or Google Play). But if you want to use interactive brokers on your desktop, you can do the same.
If you have an ETF or stock that you want to buy, you’ll need to find the stock first.
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On most mobile app screens, there is a magnifying glass icon. By clicking on it, you can search for securities.
In this case, we are interested in IWDA, so we search with the ticker IWDA. We have come up with two entries. What we want to buy is IWDA which is listed on London Stock Exchange or LSE.
Interactive brokers will show you some details about the securities you want to buy. You can scroll to view.
When the market is open, you can see the BID and VRA prices and the number of shares in the BID row and VRA queue.
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BID queues are people queuing up to buy IWDA. ASK queues are people queuing up to sell to IWDA.
The best way to think about bid and ask queues is to use the Ascendas REIT illustration in my previous article. Currently, Ascendas REIT is trading at $2.41. You may choose to buy at $2.41, but there are many people who are only willing to buy at $2.39, $2.38, $2.35.
At some point, someone will get impatient and decide to sell at $2.40 instead of where they are lined up.
This means that if you want to buy IWDA, you can choose to buy at $61.00 or $61.29 or at any price.
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But if nobody wants to sell you, you won’t get 10 shares of IWDA at that moment.
One thing to note is that the current price of $61.21, the BID and the ASK price of $61.00 and $61.29 are not real time prices.
To get real-time prices, you need to pay a monthly subscription to get real-time prices for some exchanges.
This may seem like a deal breaker, but it’s rarely a problem for most of us.
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You must enter #1 Quantity, #2 Order Type, #3 Price, #4 Execution.
By default, Interactive Brokers sets your order type limit and time-in-effect day. In the quantity gray area, it shows you approximately how much this order will cost ($6,130).
To know at what price to queue your bid, you need to know the price at which IWDA trades.
IBKR offers eligible customers the opportunity to receive a real-time price quote for a single instrument on demand. The service, called “Select Quotes,” differs from traditional quote services by offering continuous streaming and real-time price updates. Snapshot offers are offered as an affordable option for customers who do not shop regularly and do not want to rely on delayed offers1 while ordering. Further details of this service offer are given below.
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You can check snapshot costs for various exchanges here. It is USD0.03 for most exchanges and USD0.01 for US exchanges.
If you click on the word snapshot under ASK, IB will remind you that they charge a small fee for each snapshot request.
So, instead of $61.00 and $61.29, the live bid and ask are $61.24 and $61.28. The current traded price is $61.21. This allows you to make better decisions.
At the bottom is a calculator-like button. If you click on the button, it will show you a preview of the order. You can see the estimated commission range and how much the total transaction will cost.
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This is a compliance message informing you that you are submitting an order without market data on this instrument.
Just make sure you know the price you want to buy when you enter it.
Another compliance notice is to inform you that IB has placed a ceiling and floor on orders due to regulatory obligations. The explanation is below:
If you go to your menu (top left with three lines), then orders and trades, you can see how your order is progressing.
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In this screenshot you can see that my limit order is still not executed. 0 out of 10 quantity filled.
If you click on the Handler tab, you can review the trades on different days.
I won’t go through the selling process because it will be the same as buying, except you click the sell button and enter the quantity and price you want to sell.
Interactive Brokers is a good affordable, financially strong brokerage platform that can be the default broker to hold your long-term investments. You have access to over 150 global exchanges including exchanges like Singapore, USA, Hong Kong, London, Europe and Canada.
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You will enjoy cheap commissions and minimal recurring platform fees or maintenance fees. Convert your money into various currencies at near spot rates by paying a fixed fee of USD 2.
To get started or to get to know Interactive Brokers, check out my previous articles on How to Invest with Interactive Brokers. I hope the guides will make your life and investment experience easier and clearer.
How safe is it to keep your money with Interactive Brokers? Things they do better than other brokers.
How safe is it to keep your money with Interactive Brokers (2)? Financial strength of the IB during the recent banking crisis and during the major financial crisis
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I have invested in a diversified portfolio of exchange-traded funds (ETFs) and stocks listed in the US, Hong Kong and London.
My broker of choice for trading and holding my investments is Interactive Brokers. Interactive Brokers allows you to trade in US, UK, Europe, Singapore, Hong Kong and many other markets. Options too. No monthly minimum charges, very low currency exchange fees, very low commissions for different markets.
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Kyith is the owner and sole author of Investment Mots. Readers tune in to Investment Motes to learn and build stronger, more solid asset bases, how to have a passive investment strategy, invest in REITs and the nuts and bolts of active investing.
Kyith worked as an IT Operations Engineer from 2004 to 2019. He currently works as a Senior Solutions Specialist at an insurance start-up Havend. All views expressed on Investment Mots are their own and do not represent the views of Providence.
His investment broker of choice is Interactive Brokers, which allows him to invest in securities from various exchanges around the world at very low commission rates, close to the spot rate.
Hi Keith, How is the execution speed for buying and selling US stocks in Singapore? I am an active day trader from Italy, and was wondering if IB is good for my purposes. Thank you!
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@Kyith, thanks for your reply, just checked IB and for my day trading purpose I need market depth (level 2) for NYSE-NASDAQ-AMEX stocks and the price is 60$ a
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