I'm new at this. Checked the FAQs and don't see an answer to my question...

After I put in my buy order, if the price goes up and I'm now spending more than I have in the account, what happens? Since it's an IRA ($2,000 limit) I wouldn't be able to add more. Is it safer to leave a buffer in the account for later? How much?

Thanks. Denise

After I put in my buy order, if the price goes up and I'm now spending more than I have in the account, what happens? Since it's an IRA ($2,000 limit) I wouldn't be able to add more. Is it safer to leave a buffer in the account for later? How much?

Be very careful of course. Here's what I did.

Divide available cash by 4. That's how much you allocate for each stock. Figure out which 4 stocks you'll buy. Then sort them in price order, highest to lowest. Buy the first 3 with market orders, as many whole shares as that cash portion allows. (For instance, $500 per stock, and one of them is at 144, means 3 whole shares of that one, with $68 left over.) Oh yeah, don't forget about allowing for commissions.

Wait long enough for the dust to settle. Some brokerages will display the remaining cash in your account almost immediately; others you'll have to wait overnight. I generally come back in an hour or two to do the 4th one.

Then recalculate how many whole shares you can buy of the 4th stock (the lowest priced one). You'll probably be able to afford 1-2 more shares because of the spare cash amounts left over from the other purchases.

Now if it's cutting it REAL close (say, it'd leave you with only $10 or so if the trade goes through) you may wish to consider a limit order. Otherwise go with a market order. These stodgy old Dow-30 stocks do not jump in price too quickly during the couple of minutes it'll take to log in and do the trade.

Generally, be real happy if it left you with less cash than 1 share's worth of the 4th stock. You're doing great. If you have more cash than that left over, it's not the end of the world. (If it left you overdrawn, that's the time to be worried.)

Ann Coleman (I think it was her) created a wonderful tool that does for you automated what the previous replier spelled out manually. It's called the Foolish Buy Calculator. Check the calculator section or do a search on the words. I used it for my IRA account and it's WONDERFUL.

What I did on my last trade was make the trade a limit order near the max amt I could afford and still stay within my IRA account (remember to figure in the commissions!) I ended up with enough money in my account to have purchased one more share, but I don't mind--better than to be overdrawn.

DFF

well, i remember my first couple of trades. i won't bore you with the sad details, but i have learned the hard way:

Only Use Limit Orders.


i can only hope others may benefit from my mistakes!!!!


-megeranski
:-)

What I did on my last trade was make the trade a limit order near the max amt I could afford and still stay within my IRA account (remember to figure in the commissions!) I ended up with enough money in my account to have purchased one more share, but I don't mind--better than to be overdrawn.

---

What happens when the limit order doesn't go through? Do you still have to pay a commission, or is it like it never happened?

Thanks,

Peter Avalos
Newbie Fool

Pavalos asked..

"What happens when the limit order doesn't go through? Do you still have to pay a commission, or is it like it never happened?"

No commision unless a trade is made. Some discount brokers charge more for a limit order and many of them do not allow GTC (Good 'til Cancelled).. most are limiting them to GTC or GF60 (Good for 60 days) which ever occurs first.

BGP