Stock market trading is a term used to explain or describe the action of buying and selling the share or stock of publicly traded shares of different companies worldwide.
Most shares are bought and sold (traded) on stock exchanges.
It is here where the price of a share or stock is set according to the demand there is for a particular share of a company.
Not so long ago these exchanges were physical locations where the buying and selling was carried out on a physical trading floor.
Nowadays the buying and selling of shares is done through a network of computers where trades are made instantly and electronically.
As with the buying and selling of anything, there is a skill.
You win if you buy low and sell high.
You lose if you end up buying high and sell low.
Stock market trading can be profitable or it can cost you a lot of money.
And believe it or not making a profit is largely a matter of choice. The choice is whether you choose to learn how to do it right or take the approach that you’ll just give it a go!
It’s important to develop the habits of successful traders, and strive to put the odds in your favor by using a proven and tested stock market trading system.
The purpose of a stock market trading exchange is to facilitate the exchange of a company’s shares between buyers and sellers. It matches buyers of a particular share with sellers of that particular share. Just imagine how difficult it would be to buy or sell shares if you had to find them yourself.
An important point to make with stock trading is, that you need to distinguish between the primary market and the secondary market of company shares.
The primary market is where shares are created by the company while, in the secondary market, investors trade in previously-issued shares without the involvement of the issuing-companies.
It is this secondary market that people are referring to when they talk about the stock market. It is important to understand that stock market trading of a company’s stock does not directly involve that company.
A share is a unit of ownership in a particular enterprise. When you buy a share you become a part-owner of that business this is know as being a shareholder.
Shares are also known as equities or securities.
A Share has a “nominal” price – at which it was originally set for the IPO (initial price offer). It also has a market price, which is the current price it is trading at. You’ll find these prices quoted in most newspapers, in specialist magazines and of course on the internet.
In stock market trading you hold or dispose company’s shares.
By holding stock, you share in the success or failure of the company you have invested in through dividends or capital growth, the better a company does the higher the investment returns.
Stock Market Trading For Dividends
A dividend is a payment made to shareholders out of company profits it is a bit like interest paid on cash and for those seeking income to choose companies paying out high dividends is a good strategy providing the company is stable and will be around for a long time. BP, for example, has a long history of paying out excellent dividends.
Capital Growth Stock Market Trading
Capital growth occurs when a rise in the share price gives you the opportunity to sell your stock at a profit through trading. Capital growth is not like interest and is not certain. It depends on the demand for the shares, which can be affected by a number of factors. Inside and outside a business. Company’s share rise and fall almost everyday.
There are many aspects that effect the price of stocks and shares and that is why it is important to fully understand stock market trading before you invest.