Have you ever thought about taking control of your investments and navigating the stock market yourself? Fidelity Investments, a leading brokerage firm, provides a powerful and user-friendly platform for both novice and experienced investors. This comprehensive guide will walk you through the process of trading on Fidelity, from setting up your account to executing your first trade, and everything in between!
A Deep Dive into Trading on Fidelity Investments
Fidelity offers a robust ecosystem of tools, research, and support to help you make informed trading decisions. Whether you're looking to invest for the long term or engage in more active trading, understanding the platform's functionalities is key.
Step 1: Embarking on Your Fidelity Journey – Opening an Account
So, are you ready to open the door to a world of investment possibilities? Let's get started!
Sub-heading: Choosing the Right Account Type
Before you can place your first trade, you'll need a Fidelity brokerage account. Fidelity offers various account types to suit different needs:
Individual Brokerage Account: This is the most common type for personal investing.
Retirement Accounts (IRA, Roth IRA, etc.): Designed for long-term savings with tax advantages.
Custodial Accounts (for minors): For parents who want to invest for their children.
Specialized Accounts: Options like joint accounts, trust accounts, and more.
For most individual investors looking to trade stocks and ETFs, a standard Individual Brokerage Account is the ideal choice.
Sub-heading: The Account Opening Process
Opening an account with Fidelity is generally a straightforward online process:
Visit the Fidelity Website: Navigate to Fidelity.com and look for the "Open an Account" option.
Select Your Account Type: Choose the brokerage account that best fits your goals.
Provide Personal Information: You'll need to provide details like your Social Security number, address, employment information, and investment profile. Fidelity is required to verify your identity.
Review and Sign: Carefully review all the disclosures and agreements, then electronically sign your application.
Funding Your Account: Once your account is approved (which often happens instantly online), you'll need to fund it. This can be done via:
Electronic Funds Transfer (EFT): Linking your bank account for easy transfers. This is typically the most convenient method.
Bank Wire: For larger or expedited transfers.
Check Deposit: Mailing a check.
Transfer from another brokerage: You can often transfer existing investments from another brokerage to your new Fidelity account.
Remember, Fidelity typically has no minimums to open an account and no account fees for retail brokerage accounts, making it very accessible.
Step 2: Funding Your Account and Understanding Your Buying Power
Once your account is open, the next crucial step is to get some capital into it.
Sub-heading: Transferring Funds
As mentioned above, EFT is the most common and convenient way to fund your account.
Log In to Your Fidelity Account: Access your account on the Fidelity website or mobile app.
Navigate to "Transfers" or "Move Money": This section will allow you to initiate deposits.
Link Your Bank Account: If you haven't already, you'll be prompted to link your external bank account using your bank's routing and account numbers.
Initiate a Transfer: Specify the amount you wish to transfer from your linked bank account to your Fidelity brokerage account.
Sub-heading: Understanding Buying Power
After your funds arrive, you'll see your "buying power" update. This represents the amount of cash available in your account to place trades.
Cash Account: With a cash account, you can only trade with the funds you have available. Trades in a cash account settle in T+1 (Trade Date + 1 business day) for stocks, ETFs, and options. This means the funds for a purchase are debited and for a sale are credited one business day after the trade. It's important to be aware of settlement times to avoid good faith violations if you plan to trade frequently.
Margin Account: If you apply and are approved for a margin account, you can borrow money from Fidelity to buy securities, leveraging your investments. This comes with significant risks, as losses can be magnified, and you may be subject to margin calls. It's generally recommended for experienced investors who fully understand the risks involved.
Step 3: Researching and Identifying Investment Opportunities
Now for the exciting part – finding what to trade! Fidelity offers an impressive array of research tools.
Sub-heading: Utilizing Fidelity's Research Tools
Fidelity's platforms (website, mobile app, Active Trader Pro) provide extensive research capabilities:
Stock, ETF, and Mutual Fund Screeners: These tools allow you to filter investments based on specific criteria like industry, market cap, performance, dividend yield, and analyst ratings.
Analyst Reports: Access independent research and ratings from various sources like Thomson Reuters, Zacks, and more.
News and Market Insights: Stay updated with real-time news feeds, market commentary, and sector analysis.
Charting Tools: Use interactive charts with various technical indicators (moving averages, Bollinger Bands, etc.) to analyze price trends and patterns.
Watchlists: Create customized watchlists to monitor the performance of securities you're interested in.
Take your time exploring these tools. They are designed to help you make informed decisions rather than simply guessing.
Sub-heading: Developing Your Trading Strategy
Before placing any trade, it's crucial to have a clear strategy. Consider:
Your Investment Goals: Are you saving for retirement, a down payment, or short-term gains?
Your Risk Tolerance: How much risk are you comfortable taking?
Time Horizon: Are you a long-term investor or a short-term trader?
Diversification: Don't put all your eggs in one basket. Spread your investments across different asset classes and sectors.
Step 4: Placing a Trade – The Order Ticket
This is where you execute your investment decision. The trading interface is intuitive, but understanding the options is vital.
Sub-heading: Navigating the Trade Ticket
Select Your Account: On the trade ticket, first choose the account from which you want to place the trade (e.g., your individual brokerage account).
Enter the Symbol: Type in the ticker symbol of the stock, ETF, or mutual fund you wish to buy or sell.
Choose Buy or Sell: Select whether you intend to Buy (go long) or Sell (go short, if allowed on margin, or sell existing shares).
Sub-heading: Understanding Order Types
This is a critical decision, as it dictates how your trade will be executed.
Market Order:
Description: Executes immediately at the best available current market price.
Pros: Quickest way to get into or out of a position.
Cons: You don't control the price. In fast-moving markets, the executed price might be different from what you saw just moments before.
When to use: When execution speed is more important than price, especially for highly liquid stocks.
Limit Order:
Description: Allows you to specify the maximum price you're willing to pay when buying, or the minimum price you're willing to receive when selling. Your order will only execute at that price or better.
Pros: Guarantees a specific price or better.
Cons: No guarantee of execution. If the market never reaches your limit price, your order won't be filled.
When to use: When price control is crucial, and you're willing to wait for a specific price.
Stop Order (Stop Loss Order):
Description: Becomes a market order once a specified "stop price" is reached.
Pros: Can help limit potential losses.
Cons: May execute at a significantly worse price than your stop price in volatile markets (known as "slippage").
When to use: To protect profits or limit losses on an existing position.
Stop Limit Order:
Description: Similar to a stop order, but once the stop price is triggered, it becomes a limit order instead of a market order.
Pros: Combines loss limitation with price control.
Cons: No guarantee of execution if the market moves past your limit price quickly.
Sub-heading: Time-in-Force Options
This determines how long your order remains active in the market.
Day: The order will remain active only until the end of the current trading day. If not executed, it expires.
Good 'til Canceled (GTC): The order remains active for an extended period (typically up to 180 calendar days on Fidelity) or until it's executed or you manually cancel it.
Sub-heading: Quantity and Preview Order
Enter Quantity: Specify the number of shares or the dollar amount you wish to trade. Fidelity offers fractional shares for many stocks and ETFs, allowing you to invest a specific dollar amount instead of buying whole shares.
Preview Order: Always preview your order before placing it. This summary will show you all the details of your trade, including the estimated cost (or proceeds), commissions (though most US online stock and ETF trades are $0 commission on Fidelity), and potential impact on your account.
Place Order: If everything looks correct, confirm and place your order.
Step 5: Monitoring Your Trades and Portfolio
Placing a trade is just the beginning. Effective monitoring is crucial.
Sub-heading: Tracking Order Status
After placing an order, you can check its status on the "Orders" page within your Fidelity account.
Pending: Your order has been placed but not yet executed.
Partially Filled: Part of your order has been executed.
Filled: Your entire order has been executed.
Canceled: Your order was canceled (either by you or by the system, e.g., a Day order at market close).
Sub-heading: Reviewing Your Portfolio
Fidelity provides a comprehensive portfolio view that allows you to:
View Holdings: See all the investments you own, their current market value, and your cost basis.
Track Performance: Monitor the gains and losses of your individual holdings and your overall portfolio.
Access Account Activity: Review past trades, dividends, and other transactions.
Set Alerts: Configure alerts to notify you of price movements or other important events related to your holdings.
Step 6: Managing Your Investments and Further Actions
Investing is an ongoing process.
Sub-heading: Selling Investments
The process for selling a security is very similar to buying:
Navigate to the Trade Ticket: Select the "Sell" option.
Enter the Symbol: Input the ticker symbol of the security you wish to sell.
Choose Order Type and Quantity: Select your desired order type (Market, Limit) and the number of shares you want to sell.
Preview and Place Order: Review the details and place your sell order.
Sub-heading: Rebalancing Your Portfolio
As your investments grow and market conditions change, your portfolio allocation might drift from your original targets. Periodically rebalancing helps maintain your desired risk level.
Sub-heading: Understanding Fees and Commissions
While Fidelity offers $0 commissions for online US stock, ETF, and options trades (with a per-contract fee for options), it's important to be aware of other potential fees:
Mutual Fund Transaction Fees: Some non-Fidelity mutual funds may have transaction fees.
Margin Interest: If you use a margin account, you will pay interest on borrowed funds.
Regulatory Fees: Small fees imposed by regulatory bodies on certain transactions.
Broker-Assisted Trades: Trades placed with the help of a Fidelity representative may incur higher commissions.
Always review Fidelity's commission and fee schedule for the most up-to-date information.
Step 7: Utilizing Advanced Features (Optional)
For more experienced traders, Fidelity offers advanced tools.
Sub-heading: Active Trader Pro®
This downloadable platform provides real-time data, advanced charting, customizable layouts, and sophisticated trading tools, ideal for active traders.
Sub-heading: Options Trading
Fidelity allows options trading, but it requires a separate application and approval process due to the increased risk involved. There are different "tiers" of options trading approval based on the complexity of strategies you wish to employ.
Sub-heading: Fidelity Basket Portfolios
This feature allows you to create and manage a basket of stocks and ETFs as a single investment, offering a streamlined approach to building diversified portfolios.
10 Related FAQ Questions
Here are 10 common questions about trading on Fidelity, with quick answers:
How to open a brokerage account with Fidelity?
To open a brokerage account with Fidelity, visit their website (Fidelity.com), click "Open an Account," and follow the online prompts to provide your personal information and select your desired account type.
How to fund my Fidelity account?
You can fund your Fidelity account by linking your bank account for Electronic Funds Transfers (EFT), initiating a bank wire, mailing a check, or transferring assets from another brokerage firm. EFT is typically the easiest.
How to buy stocks on the Fidelity app?
To buy stocks on the Fidelity app, log in, navigate to the "Trade" section, enter the stock's ticker symbol, select "Buy," choose your order type (e.g., Market or Limit), specify the number of shares or dollar amount, and then preview and place your order.
How to sell stocks on the Fidelity app?
Selling stocks on the Fidelity app is similar to buying: go to the "Trade" section, enter the ticker symbol of the stock you own, select "Sell," choose your order type, enter the quantity, and then preview and place your sell order.
How to choose the right order type on Fidelity?
Choose a Market Order for immediate execution at the current price, or a Limit Order to control the price at which your trade executes (but with no guarantee of execution).
How to set up a watchlist on Fidelity?
You can set up a watchlist on Fidelity by logging into your account, navigating to the "Watchlist" section, and adding the ticker symbols of the securities you wish to monitor.
How to find research and analysis on Fidelity?
Fidelity provides extensive research and analysis tools on its website and platforms, including stock screeners, analyst reports, news feeds, charting tools, and market insights, all accessible within your account.
How to check my trade history on Fidelity?
You can check your trade history by logging into your Fidelity account and navigating to your "Account Activity" or "History" section, which will display all your past transactions.
How to contact Fidelity customer service for trading help?
You can contact Fidelity customer service 24/7 via phone (800-343-3548), live chat on their website, or through their social media channels for assistance with trading or account-related queries.
How to withdraw money from my Fidelity account?
To withdraw money from your Fidelity account, log in, go to the "Move Money" or "Transfers" section, and select the option to withdraw funds to your linked bank account.