INVESTING MECHANICS
Entering and exiting a trade
Choosing an order type is only half of it. Here's what happens between deciding to trade and actually holding the position — including what buying on margin adds to the picture, and how fractional shares have changed the entry point.
From decision to position
The order types article covered what each choice on the order ticket does — market, limit, and stop. Entering a trade layers a few more decisions on top of that: how many shares (or how much of a share), which account the trade is coming from, and whether that account allows the trade being placed. Exiting a position later uses the exact same toolkit in reverse — a sell order, built with the same order-type choices already covered.
None of this changes based on whether the trade is a purchase or a sale. What changes is what's being confirmed on the ticket, and that's worth slowing down for.
Reading the ticket before it's submitted
Every order ticket confirms the same handful of details at the moment it's submitted, not after: order type, quantity, price (if a limit or stop is set), how long the order stays open, and — for anyone with more than one account at the same broker — which account it's being placed from.
WHY IT'S EASY TO MISS
A pre-filled default is one of the more common ways a trade doesn't do what a self-directed investor intended — an order duration left on "day" when the plan was to leave it open longer, or a trade placed from the wrong account after switching between a registered and non-registered login. The order ticket is the last checkpoint before a trade becomes real. Reading it over fully, every field, before pressing submit, catches most of what would otherwise need to be undone afterward.
Bid-ask spread and liquidity
Every security has two prices moving at once: the bid, the highest price a buyer is currently offering, and the ask, the lowest price a seller is currently willing to accept. The gap between them is the spread. On a heavily-traded stock or ETF, that gap is often a cent or two — barely noticeable. On a thinly-traded security, the spread can be wide enough to matter.
A market order doesn't fill at the last-traded price — it fills at whatever price is currently available on the other side of the trade. Buying fills at the ask, selling fills at the bid. In a liquid market that's rarely different from the last trade. In a thinly-traded stock, or during a fast-moving market, it can be noticeably worse, especially on an order that's large relative to typical trading volume for that security.
This is part of why the order types article draws a line between market and limit orders: a limit order sets a ceiling on what's paid or a floor on what's accepted, specifically as a guard against this gap. A market order trades certainty of execution for uncertainty of price; a limit order does the reverse.
Fractional shares: a smaller entry point
Buying an individual stock used to mean buying in whole-share units — a stock trading at $3,000 a share meant a $3,000 minimum just to own one. A growing number of self-directed brokers now allow buying a dollar amount instead of a share count, splitting a single share into fractions to fill the order.
This is more established at U.S. brokers than at Canadian ones, and availability varies by platform and sometimes by the specific security — some brokers support fractional shares on individual stocks but not ETFs, or the other way around. Fractional positions can also come with restrictions that a whole share doesn't: they may not be transferable in-kind to another broker, and voting rights tied to the fraction can work differently depending on the platform.
Fractional-share support and restrictions differ broker-by-broker for both Canada and the U.S and changes often and varies by platform. Verify availability, conditions and claims before opening an account with any broker or platform.
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The practical effect is a shift in framing: instead of asking how many shares a given amount of money can afford, fractional shares let the question become how much of a position is wanted, independent of the share price.
Buying on margin
A margin account lets a self-directed investor borrow money from the broker, using securities already held as collateral, to buy more than the cash on hand would otherwise allow. It's a separate account type from a standard cash account, and it changes both the mechanics of placing a trade and the risk sitting underneath it.
How it works
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A margin account requires its own approval and agreement, on top of the standard account-opening process.
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Brokers set an initial margin requirement — the minimum percentage of a purchase that has to come from the investor's own funds, with the rest borrowed. A common historical benchmark is roughly 50%, though the exact figure is set by the broker and by regulation, and varies by security.
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A maintenance margin requirement applies afterward — a minimum percentage of equity that has to stay in the account relative to the value of the borrowed position.
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If the account's equity falls below that maintenance level — typically because the value of the securities held has dropped — the broker issues a margin call, requiring additional funds or securities to be added, or selling holdings to bring the account back into line.
VERIFY FIRST: Current initial and maintenance margin percentages differ by broker, by security, and by regulator (IIROC in Canada, FINRA/Reg T in the U.S.) — don't make assumptions, confirm current regulations with your broker.
The risk
Borrowing to invest amplifies outcomes in both directions. A leveraged position that rises produces a larger gain relative to the investor's own capital than the same trade made with cash — but a position that falls does the same thing in reverse, and can erode that capital far faster than an unleveraged position would.
Two things about margin don't show up in a cash account at all. Interest accrues on the borrowed amount for as long as it's outstanding, which is a running cost layered on top of the investment itself. And a margin call can force a sale at the worst possible moment — during a market decline — locking in a loss the investor might otherwise have been able to wait out.
Which accounts allow it
Margin trading is generally available only in a standard, non-registered brokerage account. Registered accounts — RRSPs and TFSAs in Canada, IRAs in the U.S. — are typically restricted from margin borrowing under the rules governing those account types, though the specifics and any partial exceptions vary by country and by account.
VIRIFY MARGIN eligibility rules for registered accounts (RRSP, TFSA, RESP) in Canada and for IRAs and other retirement accounts in the U.S. — including any partial or "limited margin" exceptions some U.S. brokers offer on retirement accounts.
Exiting a position
Selling out of a position draws on the same order-type toolkit as buying into one — a market sell for speed, a limit sell to set a minimum acceptable price, or a stop to trigger a sell if a price is reached. The same habit of reading the ticket in full applies in reverse: it's what confirms whether the shares being sold are coming out of a margin position, where proceeds may first go toward an outstanding loan balance, or out of a straightforward cash holding, where they don't.
Settlement timing: when a sale becomes usable cash
A trade executing and a trade settling are two different moments. Execution happens the instant a buyer and seller are matched — that's what fills the order. Settlement is the actual exchange of cash and securities behind the scenes, and it happens on a delay.
The standard settlement cycle in both Canada and the U.S. is one business day after the trade date, referred to as T+1. Selling a position doesn't make the proceeds usable the moment the sale executes — the cash settles the next business day. Buying something new with proceeds that haven't settled yet can trigger restrictions in a cash account, since the funds aren't technically available until settlement completes.
VERIFY WITH YOUR BROKER their settlement policy and any cash-account restriction rules. Confirm whether margin accounts are treated differently for this purpose.
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This is a minor detail day-to-day, but it's the kind of thing that surfaces the first time a self-directed investor sells one position and tries to immediately use the proceeds to buy another — the money looks present in the account, but isn't fully settled yet.
Where this fits on the path
The order types article explained what each choice on the ticket does. This one is about what happens around the moment of pressing submit and after — the details worth checking first, the price impact liquidity can have, the smaller entry point fractional shares now allow, the added layer of mechanics and risk that comes with borrowing to buy, and the delay between a sale executing and its proceeds actually being usable.