investing
Stock trading basics
August 15, 2018

A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

When businesses are looking to expand, execute a large project, pay off expenses or raise funds for any reason but find themselves short on cash, they can turn to the market to raise money. One of the ways private businesses can obtain funds is by going public and selling shares of their company through an initial public offering (IPO). By going public, companies collect money from selling their own shares to investors and using the proceeds as needed for their business. Once the IPO is completed, shares trade freely among investors on a stock exchange.

Generally, if investors believe a certain company will perform well, there will be a demand to buy their shares and less supply to sell, and in that case, the value of the stock will increase in value. On the other hand, if investors believe that a particular company will underperform, there will be more supply than demand for the stock since fewer people are interested in purchasing that particular investment, and the stock will decrease in value.

Let’s make it easier to understand by using an example:

Company ABC Inc. is looking to borrow $25 million to expand their business across North America. ABC is not interested in taking a loan from the bank as they do not want to carry an obligation to repay a loan. After reviewing all options, ABC has decided to raise the required capital by going public and issuing shares of its company through an IPO.

Through an investment bank, ABC decides to issue 250,000 shares at $10 per share to collect the needed amount of $25 million. [$25,000,000 (capital needed) / $10 (value per share) = $250,000 shares].

Paul believes ABC will perform well in the next couple of years, so he decides to participate in the IPO and invest $5,000 in the stock which allow him to obtain 500 shares [$5,000 (amount invested) / $10 (IPO-value per share)] = 500 shares].

Five years later, ABC consistently increases their revenues and profits as Paul expected, so the value of the shares rises to $25 per share. In this scenario, Paul makes a total profit of $7,500 [$15 (profit per share) x 500 (number of shares sold)].

  • Questrade Trading

    To place a stock trade on Questrade Trading:
    1. Log in to Questrade Trading
    2. In the top right corner, click Buy/Sell to open the order entry tab
    3. Enter the symbol or name of the stock you're looking to trade
    4. Enter the details of your trade (See explanation below)
    5. Click Buy or Sell
    6. Depending on your order entry preferences, an order confirmation window will appear
    7. Review your order and when you’re ready click/tap Send Order
     
    User-added image

    Breakdown of the order entry tab:
    ColumnDescription
    SymbolLookup the symbol or the name of the company you would like to trade and tap the Circular arrow to get quotes in real-time (applies to certain exchanges only)
    Quantity Enter the number of shares you want to trade
    Order typeSelect the type of order you want to use. To learn more about the different order types, click here
    DurationSelect a duration to specify how long the order should remain active. For more information om durations, click here

  • IQ Edge

    To place a stock trade on IQ Edge:
    1. Log in to IQ Edge
    2. In the left corner, click Order entry to place an order
    3. Enter the symbol or name of the stock you're looking to trade
    4. Enter the details of your trade (See explanation below)
    5. Click Buy or Sell
    6. Depending on your order entry preferences, an order confirmation window may appear
    7. Review your order and when you’re ready click Send Order
     
    User-added image


    Breakdown of the order entry tab:
    ColumnDescription
    SymbolLookup the symbol or the name of the company you would like to trade and tap the Circular arrow to get quotes in real-time (applies to certain exchanges only)
    Quantity Enter the number of shares you want to trade
    Order typeSelect the type of order you want to use. To learn more about the different order types, click here
    DurationSelect a duration to specify how long the order should remain active. For more information om durations, click here

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