There is plenty of information available on the World Stock Exchange website under EDUCATION which will get you started with how to trade, but I thought I would give some outsider views on this, the most fundamental part of the stock exchange.
As I mentioned in my previous lessons (1 and 2), I am assuming no prior knowledge by the reader so some of you may find this extremely boring, but for the benefit of those who have not come from RL financial background, I offer these tips to get you started on the way to a successful portfolio and hopefully help you steer clear of any common pitfalls.
Ok, let’s get onto the site and logged in. (note, from here on in the links will access the https:// areas of the site, so they may fail or display incorrectly if you are not logged in)
Once you are logged in you can access the following:
Step 1: Click through to TRADING ROOM
You will see an area called “Your Watch List” and some headers. There is also a drop down list containing the listed companies (in alphabetical order) and 2 buttons “Add to Watch List” and “Trade”
If you have used this area before, no doubt this list will already be populated.
TIP: I would suggest that you take the time to use the “Add to Watch List” for companies you are interested in. This list will be saved for when you log on next time and provides quick access to the stocks.
Step 2: Select a company from the list.
For this exercise we will use the bellwether Hope Capital Limited (HCL).
Step 3: Click “Trade” button.
You will now be taken straight through the companies pages to the “Order Entry” page. This is where you can buy and sell the companies stocks or bonds.
You will notice at the top of this page is you Linden and WIC balances, your current holdings in the stock (in this case will be 0 unless you already own HCL shares…shame on you if this is the case!).
Further down the page will be some tables. The first table shows the current highest “BID” order, the current lowest “ASK” order, the previous “LAST” order filled and the “CHANGE” that this last order was from the previous.
The next table show the last 10 trades completed. This is an essential place to help you decide on the price you wish to buy or sell the stock.
The next area is where it all happens; here you enter your “Market Order” or “Limit Order” for the stock. I will explain what these mean shortly.
Finally, the last two tables show the lists of Top 10 open “Buy Orders” (the bidders) and “Sell Orders” (the askers).
Ok, so what do all these terms mean. I know they are a little confusing, but trust me, you will get the hang of it really quickly.
Let’s start with the quick and easy one; “Market Order”. If you place a market order, you are simply stating that you would like to BUY or SELL shares at whatever the market will currently offer you. It will be the most immediate trade as while there are open orders, your market order will fill these.
For example; MARKET BUYING – you want to buy 100 shares.
Enter the information like this: (don’t worry, you won’t buy any just yet)
Action: “Buy”
Currency: “Linden”
Shares: “100”
Click “Get Estimate” button
You will be taken to the “Market Order Estimate” screen.
Now you will notice that the “total cost” has been entered for you. Take note of this number. At the time of writing this, the amount is “82.00”
Now, click back (warning: if you click “submit” you WILL buy the shares!!).
Take a look at the 1st open “Sell Order” (Ask). As long as this order if for more than 100 shares, then these are the shares you were about to buy. The price for me is $L0.82 (0.82 x 100 = $L82.00)
Similarly for MARKET SELLING – you want to sell 100 shares.
Enter the information like this: (don’t worry, you won’t buy any just yet)
Action: “Sell”
Currency: “Linden”
Shares: “100”
Click “Get Estimate” button
You will be taken to the “Market Order Estimate” screen.
Now you will notice now though, that the total is separated into “Gross Income”, “Commission”, “Total Income”. The WSE commission at the time of writing is 3% on each “sell”. So you do not pay the 3% on the buy orders, only the sell orders.
Take note of the number in gross income. At the time of writing this, the amount is “73.50”
Now click back (warning: if you click “submit” you WILL sell the shares, if you own them of course)
Take a look at the 1st open “Buy Order” (Bid). As long as there is more than 100 shares here, then this is the order you will sell them to. For me: $L0.72500 (0.725 x 100 = $L72.50)
Ok, so that’s market orders. Now we take a look at the trickier, but more controlled “Limit Order”.
Placing a limit order will allow you to set the price you want to BUY or SELL the shares at. These will go into the open orders list and as someone else decides on that price or the price you set becomes the market price (ie: the number 1 in the list), these will be filled.
For example; LIMIT BUYING – you want to buy 100 shares at $L0.60.
Obviously, if you could buy and sell at what you wanted immediately, it wouldn’t be a market. (…it would be communism!) But if you feel that the stock is overpriced, you can set a limit to BUY the stock and you won’t end up paying more than what you think it is worth.
Enter the information like this: (don’t worry, you won’t buy any just yet)
Action: “Buy”
Currency: “Linden”
Shares: “100”
Limit Price: “0.60”
Click “Get Estimate” button
You will be taken to the “Limit Order Estimate” screen.
Now you will notice that the “total cost” will be what you want it to be; $L0.60 x 100 - $L60.00.
Similarly for; LIMIT SELLING – you want to sell 100 shares at $L0.90.
If you feel that the stock is under priced at the current market rate, you can set a limit to SELL the stock at a price you want to get and you won’t end up selling it “short”.
Enter the information like this: (don’t worry, you won’t sell any just yet)
Action: “Sell”
Currency: “Linden”
Shares: “100”
Limit Price: “0.90”
Click “Get Estimate” button
You will be taken to the “Limit Order Estimate” screen.
Now you will notice that the income again is split up to show you the commission and the “total income” will be as you set it; $L0.90 x 100 = $L90.00.
Finally, we will take a closer look at the Top Open Orders lists. This only shows the top 10 Buy and Sell orders, so make sure you can see some distinct numbers in the No# columns as sometimes day traders will put 1 or 2 shares in at similar prices to flood this list. This is silly and very annoying!
The difference between the number 1 Bid and the number 1 Ask price is referred to as the spread. The smaller the spread, it is said, the more “efficient” the market is. You can read more about this here.
There are some large spreads on the WSE and trading in and around these will return you some nice profits. Just make sure you factor in the 3% sell commission and any fees you are incurring getting money in and out of the market.
If you have any questions or want to point out any of my short-comings here, please leave a post or as always you can contact myself or any member of our team in-world via IM or catch up with us at WSE Trade floor, level 3, Hope Capital.
I am taking some time away from the educational entries to concentrate on our up and coming MARKET-INDEX and TRADE-TOOLS that we will be launching and releasing to investors…so keep your eyes and ears peeled!!
Sincerely,
Logansan Oh
- CEO, Chairman – S&W Assets and Funds Management
