How to Trade Stocks: Orders, Costs and the Spread

How to trade stocks is mostly a question of what happens after you press the button. Your order goes to a broker, which may send it to an exchange, to another venue or to a wholesaler that fills it itself. What you pay, how fast you are filled and what happens when the price jumps all depend on choices you may not know you made.

What happens to a stock order after you place it?

The course follows one order from end to end: the broker’s checks, the routing decision, the venue’s matching rules, the fill report and the settlement two systems later. Once you have seen it once, order types stop being a menu and become tools you choose for a reason.

Which order type should a new trader use?

It depends on what you care about more, the price or the fill. Market orders fill but can fill badly; limit orders protect the price but may never fill; stop orders become market orders at the worst moment. The course has you place each type in a simulated account and record what happened.

How much do trading costs really take?

The bid ask spread is the price of trading immediately. The ask is where someone will sell to you now; the bid is where someone will buy from you now. Every trader who crosses it pays it, twice per round trip, and most never write it down.

More than most traders think, and in proportion to how often they trade. A cost of a few hundredths of a percent is nothing to an investor and everything to a day trader who trades twenty times a day. The course has you log every cost of your simulated trades for weeks and add it up.

Who is this course for?

Anyone starting the trader path, and experienced traders who learned on one broker and want to understand the plumbing. It needs no programming and no prior knowledge.

What you will be able to do

• Explain how an order travels from your broker to an exchange or another venue and back.
• Choose the right order type for a stated goal and describe how it can fail.
• Calculate margin, buying power and the cost of a short position.
• Adjust a position correctly for dividends, splits and other corporate actions.
• Keep a trade record that supports your tax return in your country.
• Measure the quoted and effective bid-ask spread of an instrument from its quotes.

Syllabus, module by module

1. Exchanges and venues

   Listed exchanges, alternative venues and wholesalers, and who is on the other side of your trade.

2. Brokers and accounts

   Cash, margin and retirement accounts, payment for order flow, and what investor protection covers.

3. Order types

   Market, limit, stop, stop-limit, trailing and bracket orders, time-in-force and when each misbehaves.

4. The spread

   Bid, ask and mid; quoted versus effective spread; why spreads widen at the open, the close and on news.

What every course contains

Every paid course comes with the first seven and the certificate, whichever level it sits at. The proctored exam and the credential come when the course is taken as part of a Certificate, Diploma or Fellowship. Everything is self-paced: the material is yours to study in any order, at any hour, for the whole of the license.

1. Workbooks. Written to train the thinking patterns and the important concepts of the course, with worked problems and the reasoning behind each answer, so that you learn to think the way the subject is thought.
2. Audio edition. Focused, well-presented recordings with explainers and examples of the material, made to be interesting, relevant and entertaining, so that the general subject can be learned away from the desk.
3. Notes. Pre-produced notes with every fact the course relies on, written out in full, so that nothing has to be transcribed from the films or the audio.
4. Cheat sheet. One sheet with every important learning concept of the course on it, to keep beside you during the work and to revise from before the exam.
5. Named sources. Every fact in the notes names its source, the paper, the book or the dataset, for anyone who wants to dig in further.
6. Explainer films. Focused films, in the style of the sample films on the catalog page, that walk through the most difficult concepts of the course with visual explanations of a high standard.
7. Transcript. A full transcript of every film and every audio recording, searchable and quotable.
8. Proctored exam. Taken as part of a Certificate, Diploma or Fellowship, the course ends in a proctored multiple-choice questionnaire, with a pass mark of 60% and three retakes included. A course taken on its own is assessed by its coursework and has no exam.
9. Verifiable certificate. A certificate of completion that a third party can verify: an employer sends the code on it to the credentials office and receives written confirmation of the course, the date and the result.
10. Credential of the program. The Certificate, Diploma or Fellowship of the program, track or path the course belongs to, awarded when every course in it is passed. Which one depends on the program you choose.

How the certificate is earned

Unit quizzes and two graded problem sets: an order-handling case and a full account statement you reconcile by hand. On a pass you receive the Course certificate in How to Trade Stocks, issued by the Institute with a verification code. A course taken as part of a Certificate, Diploma or Fellowship ends in a proctored online exam with a pass mark of 60%. The fee includes three retakes; each attempt after that carries a reduced proctored exam fee. A course taken on its own is assessed by its coursework and has no exam. Read how certification works.