Understanding Stocks

62 UNDERSTANDING STOCKS
market account to buy 100 shares of Bright Light for $21.00 a share.
The brokerage also deducts a commission of $9.99. Congratulations!
You are now a Bright Light shareholder.
If Bright Light goes up a point, you have what we call a paper gain
of $100. Not a bad way to make a living, is it? Now you can go to the
beach or to work and watch your money make money. Instead of your
working for your money, your money is working for you.
Order Routing: How Your Order Is Sent
As mentioned earlier, if you chose to buy a NYSE stock, the order is
routed to a specialist on the exchange, who fills your order electronically.
If you buy a Nasdaq stock, a market maker will also handle the
order electronically. More than likely, no matter which stock you
choose, your order will be routed to an ECN (electronic communication
network), where it will be matched electronically.
As an investor (not a day trader), you care only that your order is
executed quickly and for a reasonable price. Some online brokers who
cater to day traders offer “price improvement,” which means that their
software will find the most competitive price. There is also special trading
software that allows you to specify who will handle your orders.
This software, called Level II, allows you to see the names of all market
makers, specialists, and ECNs. Then you can pick the most competitive
price.
Unless you are an experienced trader or the software is provided
for free, there’s little reason to install Level II software. In most cases,
your online broker will route your order to an ECN, where it will be
handled as efficiently as possible. The best time to evaluate how
quickly your broker handles your orders is during a fast-moving market.
The best brokers are efficient under all market conditions.
Note: The best time to place an order is after 10:00 a.m. Eastern time.
The reason is that professional traders and institutional investors often
use their own money to force prices in the direction they want them to
go. Often, the market moves aggressively in one direction, only to
reverse course an hour later. In general, if you are new to the stock