Do you have a brokerage account? Many set up investment accounts and proceed to only buy and sell shares of mutual funds. And let me say that there’s nothing wrong with that at all. Mutual funds provide diversification, active management, and easy liquidity. But let’s say you’re ready to dip your toes in the waters of investing in individual stocks. First, do your research. And by this I mean much more than just listening to what some screaming guy on TV tells you to buy. Do you know how trading works? I used to think there were two kinds of trades; buy and sell. And on some level I guess that’s true – there are many ways to go about achieving those buy/sell results. I promise, we’ll get into more sophisticated types of trades in the next post. For now, let’s focus on the simplest type of trade order, the market order. A market order instructs your broker to buy or sell shares of a stock at the best current market price. Now would be a good time to point out that, at any given time, there are two distinct prices for any given stock. They are known as the bid price and the ask price. The bid price represents what people are offering to pay for shares of a stock, while the ask price indicates what sellers of the shares are willing to accept for those shares. For an example let’s say a particular stock is trading at $75.00 bid - $75.50 ask. If you place a market order to buy 100 shares you’ll pay $7,550 plus commission. If you were trying to sell 100 shares via a market order, you’d receive $7,500 minus your commission. I know it seems confusing. Why do we need two different prices? Well the economic laws of supply and demand create the spread between the bid-ask prices, and they are the forces that move markets – including stock markets.