Your first order
A walkthrough for your first purchase, with the checks to make before submitting. Meant for a demo account or a very small real amount.
Step one: decide beforehand what you're buying and why, and write it down. Two sentences are enough. If you can't do that, the purchase isn't due yet.
Step two: choose the venue and the order type. For a start, a limit order slightly above the current price. That way you know the most you'll pay, while still getting filled with high probability.
Step three: check four things in the preview. Is it the right security? Is the share count right, not the euro amount? Is the order type correct? And how big are the displayed costs relative to the order size?
Step four: submit, and then do nothing. Check in the evening what got filled and at what price. Log it in your journal. The purchase itself is the least important part of the whole process.
A limit order slightly above the current ask combines a strong likelihood of execution with a ceiling on price. The chosen distance should be based on the current spread, typically in the same order of magnitude. Too tight a distance causes non-execution; too wide defeats the point of the limit.
For small order values, the ratio of fixed costs to order size is the key metric. A five-euro order fee equals five percent on a hundred-euro order and 0.25 percent on a two-thousand-euro order. That ratio implies a sensible minimum order size above which fixed costs stop dominating.
After execution, check the confirmation: filled quantity, execution price, all fees, and the venue. Comparing the execution price against the reference price at the moment of execution is the only robust measure of a provider's actual execution quality, and is more informative across several orders than any marketing claim.
Summary
- Write two sentences justifying the purchase before you make it.
- In the preview, check the security, share count, order type, and costs.
- For small orders, fixed costs dominate.
Did you get it?
Why a limit order slightly above the current price?
It combines a high likelihood of execution with a ceiling on the price.
What's the main problem with small orders?
Fixed costs make up a large percentage of the order value.
How do you check execution quality?
By comparing the execution price against a reference price at the moment of execution, across several orders.
Related
- Order typesStage 1
- Understanding the trading interfaceStage 1
- Setting a stop-loss correctlyStage 1