In this first part, we’ll examine some personal reasons for selling a stock. The second part of the series will focus on more market-driven reasons for selling. However, there will be some overlap between the two.
Risk Tolerance Reached
You bought a company that looked like a steady growing concern, but instead it has turned out to be a roller coaster ride. For whatever reason, this stock is just too volatile for your nerves. Dump this firecracker and replace it with a stock that will let you sleep at night.

You Need some Cash
An unexpected major bill can sabotage anyone’s budget. Using a stock, especially one that is underperforming, to solve a financial emergency is another reason to sell. However, take a close look at your personal finances. An emergency cash fund that is not tied up in investments is recommended to avoid, except in extreme cases, liquidating stocks to pay bills.

Moral, Ethical Conflicts
More and more investors are becoming concerned about the social, environmental, ethical and moral standards of the companies they own. You may decide that a company you own has practices or products that conflict with your social, religious or moral beliefs. There is no better reason to sell if that is important to you.

The Grass is Greener
This overlaps with market reasons to sell, but there is nothing wrong with dumping an underwhelming stock for a company that offers better returns. The danger here is that active trading can generate significant transaction costs and taxes, both of which eat into any potential gain. Look (and think) before you leap.

You’ve Reached your Goal
It worked. Your plan to reach that financial goal, whether it was retirement or getting a child to college, is finally here. Now is the time to start systematically liquidating those stocks you’ve tagged for this goal. If you have been trading, make sure you have owned the stock at least one year before selling so it falls under long-term capital gains tax rules.

Online stock trading sites offer investors access to a variety of tools and research that just a few years ago were only available through full service brokerage accounts.
There are many online stock trading sites to choose from, but narrowing down the field may seem time consuming and overwhelming.

Here are thirteen of the top-rated online stock trading sites that continually show up on just about every list of the best.

Ultimately, your choice is a personal one based on a number of factors and how you rank them in importance.

Not every online stock trading site on this list will work for you because some are stronger in one area, while weaker in another.

All of these sites encourage you to browse through their pages, although some parts will be off limits unless you have an account.

Here are online stock trading sites you should consider:

Charles Schwab

Schwab is the granddaddy of discount brokerage and is carrying this tradition to its online offering - although it is looking more like a traditional brokerage all the time. It offers its own research and clients can work with an investment advisor or Schwab will manage their account for them.
E-Trade

E-Trade gets high marks for its range of offerings including banking and mutual funds. The company has absorbed several other brokerage firms and is now a significant player in the online stock trading market. Like its competitors, active traders get lower rates on their trades.
Fidelity

Fidelity shows up at the top or near the top of almost every ranking of online stock trading brokers. They are not the least expensive, but top most lists in customer satisfaction. Fidelity is known for its research and investors can talk to advisors face-to-face at one of the many Fidelity investment centers.
Firstrade

One of the advantages of a brokerage account is consolidating your investment activity in one account cutting down paperwork. Firstrade topped a survey by Kiplinger as the online stock trading broker offering the most no-load mutual funds without a transaction fee.
Muriel Siebert

Muriel Siebert may not have the marketing muscle of other online stock trading sites but it is a solid brokerage house worth your look. The company receives high marks for customer service and research. The fee structure is straightforward and easy to understand.
OptionsXpress

Despite its name, this online stock trading site offers accounts that trade just about any type of security you want including options, stocks, mutual funds, exchange traded funds, futures and more. This site is easy to use and gets to the point. Not the cheapest, but tops in functionality.
Scottrade

Scottrade’s claim to fame is superior customer satisfaction as noted in J.D Power and Associates survey of online brokers. Commissions are on the low side and transactions are processed quickly.
TD Ameritrade

TD Ameritrade is another brokerage that is the result of mergers (Ameritrade was one of the merged companies and it has been around for a number of years). The company has a large selection of mutual funds and is noted for its responsiveness to customer inquiries.
Thinkorswim

This is a newcomer to the online stock trading scene, but worth checking out if you’re interested in something different. The site is not like any of the others, but Barron’s gives it extremely high marks, so despite its quirkiness, there’s plenty of substance.
TradeKing

TradeKing is the online stock trading site to checkout for low cost trading. This is their thing and SmartMoney.com, Barron’s and Kiplinger all agree. If you are looking for the best prices on trades, this is the place to start.
Vanguard

Vanguard made a name for itself at the low-cost leader in mutual funds. Vanguard is a solid company that excels in providing value to their customers and in consolidating investments in a brokerage account.
Wall Street-E

Wall Street-E combines low commissions with a broad range of web-based services to appeal to investors who want an integrated approach to investing and banking. The company offers a variety of online banking products and other services that will appeal to those who want to see their whole financial picture.
Wells Fargo

The financial services powerhouse Wells Fargo has an online stock trading site that fits it image of comprehensive services. You are offered five different levels of accounts depending on whether you want a strictly independent trading account or a version of their managed accounts. Investors looking for a single place to find all their financial services will find Wells Fargo a good place to start.

Margin Accounts

Margin accounts allow you to do just what I told you not to do with credit cards – borrow money to buy stocks, although under much more favorable conditions.
A margin account allows you to borrow up to 50% of the value of the stock from your broker when you make a purchase. For example, if you want to buy $10,000 of stock, you could write a check for $10,000 or with a margin account, write a check for $5,000, and borrow $5,000 from your broker.

By borrowing one-half the value of the stock, you can multiply your profits dramatically. Here’s how that works: If the price of the stock doubles to $20,000, your investment in the margin account ($5,000) has actually increase four fold.

With a margin account, you can make your money work harder, also known as using leverage and own more stock. However, there is risk. If the value of the stock falls instead of rises, your broker will issue a “margin call.” A margin call usually comes when the value of the stock falls below the value of the money lent to you by the broker. However, some brokers may have different thresholds for margin calls.

When you get a margin call, you have two options: You can deposit cash into the account to raise the value above the amount you borrowed or you can sell the stock immediately and pay off the loan. Some brokers may not give you the option of depositing cash, they may liquidate your position for you when the stock falls below a certain price.

Discretionary Account

Discretionary accounts give a broker or financial adviser the right to buy and sell stock without notifying you. If a broker wants this authorization, go find another broker. Unless you trust a broker or financial adviser with your life, never give anyone this type of control over you finances – it is the equivalent of a blank check.
There are circumstances when these types of accounts are appropriate; however, for most of us they are not only inappropriate, but also hazardous to our financial well-being.

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Before you can begin trading stocks, you must open an account with your broker. Depending on what type of stockbroker you choose, opening an account can range from a very personal to very impersonal process.
There are several different types of accounts that most brokers offer in addition to the level of service you receive from the different types of brokers. First, let’s look at how the two basic different type of brokers set up accounts and then we’ll look at the different types of accounts.

Full-service Broker

A full-service broker will want to sit down with you and your spouse or partner and go over your financial situation in some detail. He or she will want to know about any debts, cash in the bank, any stock or mutual funds you own, retirement plans, insurance, home ownership, kids, and so forth.
It’s not that they are nosey – they are required to gather this information before they can make recommendations to you regarding investments. In the business, it’s called, “know your customer.” If a broker makes an inappropriate investment recommendation to someone because he or she did not take the time to find out all about the customer’s financial circumstances, the broker can face severe penalties.

This is one of the services you buy with the commissions you pay a full-service broker – recommendations that are appropriate for you individual financial situation. Many investors consider it money well spent.

Discount/Online Brokers

Discount and online brokers offer no advice and make no recommendations; therefore, setting up accounts with them is far less personal. There are still forms to fill out and questions to answer, however no one is going to come to your house and look at your checkbook.
You are on your own in determining if stock is right for you. Some particular types of investment (options, futures, and other high-risk investments) require you to certify that you are a knowledgeable investor, able to understand the risks associated with the product.

Account Types

There are several types of accounts that most brokers offer. They include:
Cash Accounts
Margin Accounts
Discretionary Accounts
There may be others that are particular to individual brokerages, but they will be variations of one of these three.

Cash Accounts

A cash account is the simplest type of brokerage account and the first one you will open.
Online and discount brokers will most likely require you to make a deposit with enough money to cover your trade before they will open your account. Many will place this money in an interest-bearing account until you are ready to trade. When you place a buy order, the broker transfers the money to the brokerage account to cover the trade.

When you sell a stock, the broker will deposit the proceeds in the account (unless you instruct them otherwise), so cash is available for the next purchase.

With a full-service broker, you may have three days to pay for your purchase depending on the broker’s policy. Trades must be paid for or “settle” within three days. This is called the “settlement date” and if you are a good customer with good credit, a full-service broker will give you those days to pay.

Some brokers allow you to pay for trades with a credit card, however unless you can pay off the balance as soon as you get the statement, don’t even think about doing this. No stock can overcome the 19% interest credit cards charge.

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Trade means to buy and sell in the jargon of the financial markets. How a system that can accommodate one billion shares trading in a single day works is a mystery to most people. No doubt, our financial markets are marvels of technological efficiency.
Yet, they still must handle your order for 100 shares of Acme Kumquats with the same care and documentation as my order of 100,000 shares of MegaCorp.

You don’t need to know all of the technical details of how you buy and sell stocks, however it is important to have a basic understanding of how the markets work. If you want to dig deeper, there are links to articles explaining the technical side of the markets.

Two Basic Methods

There are two basic ways exchanges execute a trade:

1. On the exchange floor
2. Electronically

There is a strong push to move more trading to the networks and off the trading floors, however this push is meeting with some resistance. Most markets, most notably the NASDAQ, trade stocks electronically. The futures’ markets trade in person on the floor of several exchanges, but that’s a different topic.

Exchange floor

Trading on the floor of the New York Stock Exchange (the NYSE) is the image most people have thanks to television and the movies of how the market works. When the market is open, you see hundreds of people rushing about shouting and gesturing to one another, talking on phones, watching monitors, and entering data into terminals. It could not look any more chaotic.

Yet, at the end of the day, the markets workout all the trades and get ready for the next day. Here is a step-by-step walk through the execution of a simple trade on the NYSE.

You tell your broker to buy 100 shares of Acme Kumquats at market.
Your broker’s order department sends the order to their floor clerk on the exchange.
The floor clerk alerts one of the firm’s floor traders who finds another floor trader willing to sell 100 shares of Acme Kumquats. This is easier than is sounds, because the floor trader knows which floor traders make markets in particular stocks.
The two agree on a price and complete the deal. The notification process goes back up the line and your broker calls you back with the final price. The process may take a few minutes or longer depending on the stock and the market. A few days later, you will receive the confirmation notice in the mail.
Of course, this example was a simple trade, complex trades and large blocks of stocks involve considerable more detail.

Electronically

In this fast moving world, some are wondering how long a human-based system like the NYSE can continue to provide the level of service necessary. The NYSE handles a small percentage of its volume electronically, while the rival NASDAQ is completely electronic.
The electronic markets use vast computer networks to match buyers and sellers, rather than human brokers. While this system lacks the romantic and exciting images of the NYSE floor, it is efficient and fast. Many large institutional traders, such as pension funds, mutual funds, and so forth, prefer this method of trading.

For the individual investor, you frequently can get almost instant confirmations on your trades, if that is important to you. It also facilitates further control of online investing by putting you one step closer to the market.

You still need a broker to handle your trades – individuals don’t have access to the electronic markets. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order.