Beginner's Guide To Charles Schwab Online Brokerage - Trading
Although Schwab has evolved to become much more than just an online trading system, it has retained its robust trading capabilities. While not the least expensive online trading platform available, the trade fees on Schwab are reasonable, particularly considering the other tools the system offers. In this section, we will examine how to use Schwab to trade various asset classes, including: stocks, bonds, mutual funds, and futures and options. We will also take a look at how to utilize some of the trading tools Schwab offers, such as the watch list.
Stocks and ETFs
It is quite easy to trade stocks and ETFs on Schwab. There are several ways to begin entering a trade. If you already own the security that you are interested in buying or selling, you can go to your portfolio holdings screen and under the "next steps" tab for the security in question you can choose to execute a trade. Another way to begin trading is to pull up a quote for the security on the bottom of your screen.
SEE: Building An All-ETF Portfolio
Along with information such as the bid price and ask price and daily volume, you'll also find a choice to buy or sell the security. Finally, you can go to the trade channel of the website which will then give you options for trading any type of security you might be considering. Regardless of how you choose to begin a trade, you have your choice of order type such as "market order," "limit order" or "stop order."
Because trading bonds is usually driven by what is available for purchase as much as by what you are looking to buy, the process for trading bonds is a little bit different than for trading stocks or ETFs. The best place to begin is by entering the "bonds" section of the trade channel of the website. There are then two main ways to look for bonds that you're interested in purchasing.
When you first enter the bonds section, you'll see a matrix of fixed income yields by asset class and maturity. If, for example, you're looking for a Treasury bond with a two-year maturity, then you would click on that part of the matrix, and if you are looking for an "A-rated" 10-year corporate bond, then you click on that part of the matrix. Doing this will bring you to a new page that lists all of the bond offerings that meet your criteria. You can then choose which one you are interested in purchasing, click on the appropriate issue and execute your trade. Once you click on the buy tab for the bond you want to purchase, you'll be given a choice to specify what quantity you are looking to purchase, as well as whether you want to enter a limit or market order.
SEE: 3 Bonds You May Have Never Heard Of
If you have a more specific idea of the type of bond you're looking for, instead of using the matrix, you can go to the "find bonds" area of the website. This function offers a variety of drop-down menus that allow you to set parameters for the type of bond you're buying. Once you've chosen the various criteria, a list of offerings that meet your specifications will pop up and you can then choose the bond you wish to purchase.
One other difference between trading bonds on Schwab and trading stocks on Schwab is that with stocks, the process of buying and selling is identical. However, when it comes to bonds, you will follow a different process if you wish to sell your bonds than you did when you wanted to purchase them. While you can electronically execute your orders for purchases, sales are not automatically executed. Instead, you submit a bid request, and then have a choice of whether or not to accept the bid prior to executing the trade.
The process for trading mutual funds is very similar to that of trading stocks and ETFs. The difference is that while orders for stocks are executed immediately, and you have the choice of what type of order to put in, mutual funds orders are executed at the end of the day and there is no choice of entering a limit or market order. With mutual funds, Schwab also gives you the option of specifying your purchase amount in either shares or dollars, and you can decide whether you want capital gains and interest distributed to you or directly reinvested in shares of the fund.
Finally, you can choose to make a one-time purchase of the fund or to enroll in an automatic purchase plan in which you buy a set dollar amount of the fund on a regular basis. (Note: automatic purchase plans are great tools for dollar cost averaging into an investment, as well as for bringing discipline to the investment process. Automatic purchase plans also often allow you to begin with an initial investment of less than the usual required fund minimum which can be helpful on funds with large initial purchase requirements.)
SEE: How To Pick A Good Mutual Fund
Futures and Options
Although you can trade options directly through your traditional Schwab account, advanced users of futures and options may want to consider signing up for a separate "options Xpress" account. Options Xpress is a firm that Schwab recently purchased to enhance its futures & options capabilities. Now part of Schwab and accessed through the Schwab website, options Xpress is a dedicated futures & options provider that offers online users a suite of research and trading tools dedicated specifically to the futures and options markets. Some of the tools users will find include: the ability to calculate option values based on their own assumptions of the variables, the ability to track the "Greeks" in real-time, and the ability to easily enter complex trades involving multiple options contracts.
SEE: Options On Futures: A World Of Potential Profit
|Figure 10 - Schwab: Options Xpress Page|
Schwab also offers several tools that can make your trading a little bit easier. One of the best is the "watch list." This function allows you to set alerts and monitors for transactions that you might be interested in at a certain price. Schwab will then alert you if the security reaches the price you are interested in. Another tool you will likely use is the "order status" function. This is where you can go to see if the trade you entered has been executed, and if so, at what price.
SEE: 5 Rules For Picking Great Day Trade Entries
If you are an active trader, you might also be interested in Schwab's tools that are specifically dedicated to this subset of the investing population. Active traders at Schwab can sign up for "StreetSmart Edge" or "StreetSmart Pro". These advanced trading platforms require a software download, but once installed provide users with packages of market monitoring, charting, and order entry systems designed specifically for active traders.
|Figure 11 - Tools For Active Traders|
This Beginner's Guide has provided an overview of the Schwab website and its capabilities. The website is reasonably easy to navigate, and readers of this guide should now be able to log onto the system, access their accounts, research potential investments, procure advice, and execute trades. While this guide has provided a valuable starting point, as with any system, you're likely to find that the more that you use Schwab, the easier it is to navigate the site and quickly find what it is you are looking for.
An option contract in which the underlying asset is a bond. Other ...
Annual income (interest or dividends) divided by the current ...
A type of exchange-traded fund (ETF) that exclusively invests ...
A bond that is issued for less than its par (or face) value, ...
In options trading, an order to sell an option that you own and ...
A debt investment in which an investor loans money to an entity ...
Find out who Charles Schwab's main competitors are and how they stack up. Learn the information you need to make informed ... Read Answer >>
... Read Answer >>
... Read Answer >>
The confusing terminology mentioned in the question deals with entering and exiting option orders. In review, there are two ... Read Answer >>
On May 1, 1975, there was no lightning, white calves or other omens to mark the moment when brokerages switched from fixed ... Read Answer >>
To answer this question, let's look at a few different situations. You bought a stock for $10 but want to be able to protect ... Read Answer >>