MarketShots
Search00 XP1

Module 4 of 6 in Stock market foundations

How buying and selling works

Investing compared with trading, market, limit and stop-loss orders, bid and ask prices, spreads, trading costs and taxes, and market capitalisation.

Lessons
7 ready
Time
About 49 minutes
Module test
10 questions from a bank of 54, pass mark 80%

7 lessons in this module. Progress is saved in your browser as you go.

0 of 7
Start with: Investing compared with trading

This module is about the mechanics of a trade and the numbers on a stock quote. You will see how investing and trading differ in purpose and risk, how market and limit orders behave, why the price you pay can differ from the last traded price, and how to work out what the whole company is valued at.

By the end of this module you should be able to

  • Compare investing and trading in time horizon, method, costs and risk.
  • Choose between a market order and a limit order and predict how each will be executed.
  • Explain how stop-loss orders are triggered and why they cannot guarantee an exit price.
  • Read a bid and an ask, calculate the spread, and explain why liquidity matters.
  • Add up the charges on a trade and describe how gains on listed shares are taxed.
  • Calculate market capitalisation and explain what it does and does not say about a company.
  • Read the main numbers on a stock quote and explain what they do and do not show.

Lessons in order

  1. Investing compared with trading7 min
  2. Market orders and limit orders7 min
  3. Stop-loss and stop-limit orders8 min
  4. Bid, ask, spread and liquidity6 min
  5. Trading costs and taxes on shares8 min
  6. Market capitalisation6 min
  7. Reading a stock quote7 min
  8. Module test: How buying and selling works10 questions

Module test

10 questions, chosen at random from a bank of 54 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.

Go to the module test Practise first

This module builds on

Key terms in this module