How to Buy a Stock: Accounts, Orders, and What Happens After You Click Buy

To buy a stock, you open an account with a registered brokerage firm, move money into it, look up the company’s ticker symbol, and place an order that the broker sends to the market. A few days of paperwork and a few minutes of clicking are all it takes, but each step involves choices that affect your costs, your taxes, and your risk.

In short: individuals cannot buy shares directly on an exchange. You need a broker, a firm registered to trade on your behalf. You open an account, fund it, choose a stock by its ticker symbol, and enter an order that says how many shares (or how many dollars’ worth) you want and what price you are willing to pay. The trade is then settled, which means cash and shares formally change hands, one business day later in both the US and Canada.

This article covers the mechanics. It does not recommend any broker, stock, or strategy.

Step 1: Decide what kind of account you need

Before you pick a firm, decide what the account is for. The account type often matters more than the stock you buy, because it controls how your gains are taxed.

Goal	United States	Canada
General investing, no tax shelter	Individual or joint taxable account	Non-registered (cash) account
Retirement, tax-deferred	Traditional IRA, or a 401(k) through an employer	RRSP
Tax-free growth	Roth IRA	TFSA
First home	(no direct equivalent)	FHSA

Each registered or retirement account has contribution limits and withdrawal rules that change over time. For the Canadian accounts, see Canadian registered accounts explained; US retirement accounts have their own article in the Accounts & Taxes section.

You will also be asked whether you want a cash account or a margin account. In a cash account you can only buy with money you have deposited. A margin account lets you borrow from the broker against your holdings, which magnifies both gains and losses. For a first purchase, a cash account is the simpler choice; the risks of borrowing are covered in margin trading explained.

Step 2: Choose a registered firm

What to check, without naming names:

Registration. In the US, broker-dealers register with the SEC and are members of FINRA. You can look a firm up on FINRA BrokerCheck. In Canada, investment dealers are regulated by the Canadian Investment Regulatory Organization (CIRO) and the provincial securities commissions, and the CSA’s National Registration Search lists registered firms.
Investor protection membership. US broker-dealers are generally members of the Securities Investor Protection Corporation (SIPC). Canadian investment dealers regulated by CIRO are members of the Canadian Investor Protection Fund (CIPF). More on what these do below.
Total costs. Commissions, account fees, currency conversion fees, and the quality of trade execution. “Commission-free” does not mean free; how stock brokers make money explains where the revenue comes from.
Service model. A self-directed (in Canada, “order-execution-only”) account means you make every decision and the firm does not assess whether your trades suit you. A full-service or advised account costs more and comes with recommendations.

Step 3: Open the account

Opening an account means answering “know your client” questions. Expect to provide:

Legal name, date of birth, address, and a government ID.
A Social Security number or taxpayer ID (US) or a Social Insurance Number (Canada, required for accounts that earn taxable income).
Employment, income, net worth, investing experience, and your goals and risk tolerance.

Regulators require firms to collect this information to verify identity, prevent money laundering, and (where advice is given) assess suitability. Canadian residents who plan to buy US-listed stocks will usually also sign an IRS Form W-8BEN, which certifies foreign status so that US withholding tax on dividends is applied at the treaty rate rather than the default rate.

Step 4: Fund it

Most firms accept electronic bank transfers, wire transfers, and transfers of an existing account from another firm. Bank transfers can take a few business days to arrive and may be “on hold” for a short period even after they show in your balance. If you plan to buy stocks priced in another currency, check how and when your money is converted.

Step 5: Find the stock

Every listed stock has a ticker symbol, a short code such as a few letters, that identifies it on its exchange. Company names are not unique and tickers can be confusingly similar, so confirm three things before you trade: the exact company name, the exchange (for example NYSE, Nasdaq, or TSX), and the currency.

The quote screen will show a bid (the highest price someone is currently offering to pay) and an ask (the lowest price someone is currently offering to sell at). If you buy immediately, you will usually pay the ask. The gap between the two is a real cost, explained in the bid-ask spread explained.

Step 6: Place the order

An order ticket asks for:

Action: buy.
Quantity: a number of shares, or at some firms a dollar amount.
Order type: the two basic choices are a market order (fill now at the best available price) and a limit order (fill only at your price or better).
Time in force: usually “day” (cancel at the end of today’s regular session if not filled) or “good till cancelled.”

Then you review the estimated cost and submit. The broker routes the order to an exchange or another trading venue, and you receive a fill confirmation, often within a second for a widely traded stock. The order types, and what can go wrong with each, are covered in stock order types.

Fractional shares

Many firms now let you buy part of a share, for example $100 of a stock that trades at $400, giving you 0.25 shares. Fractional shares let small amounts be fully invested. Some things to know: not every stock or firm supports them, they are often executed in batches at the firm’s discretion rather than instantly, and fractional positions may not be transferable to another broker (some firms sell the fraction and send cash instead). Read the firm’s fractional-share disclosure.

A worked example

Suppose you have $500 to put into a hypothetical company, Maple Widgets Inc., which trades on a US exchange. The quote shows:

Bid: $42.31
Ask: $42.37

Whole shares with a market order. $500 divided by $42.37 is 11.8 shares, so you can buy 11 whole shares. Cost: 11 x $42.37 = $466.07, leaving $33.93 uninvested. If the market moves before your order fills, the price could be a little different.

Fractional shares. If your firm supports dollar-based orders, $500 buys about 11.80 shares at $42.37.

The spread cost. If you sold the 11 shares a moment later at the bid of $42.31, you would get $465.41, or $0.66 less than you paid, with no change in the stock’s value. That is the round-trip cost of crossing the spread, about 0.14% here.

A Canadian buying a US stock. If your account holds Canadian dollars, the firm converts them before buying. Assume an exchange rate of 1.38 CAD per USD and a conversion spread of 1.5% (an illustrative figure; firms set their own). Buying US$466.07 of stock would cost about C$643.18 at the mid rate, plus about C$9.65 in conversion cost. Do the same conversion again when you sell and the currency cost can easily exceed the commission. Some Canadian firms offer US-dollar accounts to reduce repeated conversions.

After you click buy

Confirmation. You will get a trade confirmation showing the price, quantity, fees, trade date, and settlement date. Keep it; it is the start of your cost basis for tax purposes.
Settlement. In both the US and Canada, most stock trades settle one business day after the trade date (T+1). Until then, the trade is executed but the cash and shares have not formally changed hands. See how a stock trade settles.
Where your shares are held. Almost all retail shares are held in “street name”: the broker’s records show you as the owner, while the shares are registered through a central depository (DTC in the US, CDS in Canada). You still receive dividends and generally can vote through the broker.

What protection you have

	SIPC (US)	CIPF (Canada)
Covers	Customer cash and securities if a member firm fails and they are missing	Customer property if a CIRO member firm becomes insolvent and cannot return it
Limit	Up to $500,000 per customer per separate capacity, including up to $250,000 for cash	Up to C$1 million per account category (for example, general accounts combined, retirement accounts combined)
Does not cover	Losses from a fall in market value, or bad investment choices	Losses from a fall in market value, or bad investment choices

Neither scheme insures you against a stock going down. They protect against the firm itself failing and your assets going missing.

What can go wrong

The wrong ticker. In March 2020, the SEC suspended trading in a dormant over-the-counter company called Zoom Technologies, ticker ZOOM, partly because investors were confusing it with Zoom Video Communications, which trades on Nasdaq as ZM. Always check the company name and exchange.
A market order in a thin or fast market. Market orders guarantee a fill, not a price. In a stock with few shares on offer, or right at the open, the fill can be well above the last price you saw.
Trading before your deposit settles. Selling shares bought with money that has not yet arrived can trigger restrictions in a cash account.
Currency costs you did not notice. For Canadians buying US stocks, conversion costs can quietly outweigh everything else.
Buying a stock instead of a plan. Owning a single company concentrates risk. Many people’s first purchase would be better understood as a learning exercise than a portfolio.

The short version

Buying a stock takes an account at a registered firm, money in that account, a correctly identified ticker, and an order. The decisions that matter most come before the order: which account type you use, which firm holds your money, and what the trade really costs once spreads and currency conversion are counted. After that, the mechanics are routine, and the trade settles one business day later.