The Truth Behind Stock Market Trading

If you happen to watch a business show or business news on TV, you’d probably hear words or phrases like “stock market,” ‘trading,” “stocks” or “stock market trading.” What are these things and what is their significance? To answer your questions, here’s an overview on what stock market trading is.

Definition

In simple terms, stock market trading is the voluntary buying and selling or exchange of company stocks and their derivatives. Stocks refer to the capital raised by a corporation by means of issuing and sharing shares. These are traded in a stock market just as commodities like coffee, sugar, wheat and rice are traded in a commodity market. The physical or virtual (as trading may take place online) marketplace for trading shares on the other hand is called stock exchange.

Trading Process

Stock market trading takes place as one sells his stocks and as the other buys them. Usually buyers and sellers of stocks meet in stock exchanges and there they agree on the price of the stocks. The actual stock market trading happens on a trading floor–the one usually shown on TV when news on stock market trading are reported. Here investors raise their arms, throwing signals to each other. That auction-like picture of a stock market trading is the traditional way stocks are traded. It’s called “open outcry” since the traders cry out their bids.

Key Players in Stock Market Trading

Stock market trading participants vary from persons selling small individual stock investments to institutions trading collective investments, hedge funds, pension funds, mutual funds, etc. Big investors can be banks, insurance companies and other huge companies.

Importance of Stock Market Trading

Stock market trading is required to foster economic growth. It does this by helping companies raise capital or by helping them handle their financial problems. Stock market trading helps ensure that the capital is saved and is invested in most profitable business. Moreover, stock market facilitates the transfer of payments between traders.

Online Stock Market Trading

With the emergence and popularity of the Internet, almost everything can now be done conveniently online. You can go shopping online, join conferences online, read news online and communicate with business partners wherever you are. Even stock market trading can now be done virtually and this has made entering into a business much easier for anyone interested. Aside from conducting stock market trading over the Internet, you can also conveniently check status of your investments online.

The benefits of online stock market trading are just endless. Aside from the above mentioned, choosing where to invest is also much easier online. You can find virtually all kinds of stocks over the Internet; however, it would be best to invest in stocks with moving prices to ensure profitability in the long run.

Disadvantages of Stock Market Trading

One of the greatest drawbacks of stock market trading, whether online or not, is its lower leverage compared to other forms of trading like Forex trading. Also, you cannot easily short sell stocks as it takes time for stock prices to go up. This means that increasing your profit may also take time.

Day Trading in the Stock Market – Is it Really Worth It?

If you are looking for fast profits, fast rush of adrenaline and fast market movements, then you should look into day trading stock market. You can make a profit in just a few minutes within the day even from just a few cents in up movement.

You will enjoy the adrenaline rush of being part of one of the most exciting and noisy market in the world. You must be on top of the market trends because they move so fast and your money may very well go down the drain in a blink of an eye. Day trading is only for those of the strong of heart, mind and nerves.

If you want to develop the characteristics of a successful day trader, you should avail the demo account trading offered by most online brokers. This way, you will have a taste of the ins and outs of day trading before placing your precious money at stake in the stock market.

You will soon discover that the number one rule for success in day trading stock market is to choose the most liquid stocks. Basically, this means stocks that have plenty of buyers and sellers that allow for fast movements in your position, either going in or going out.

It is also important to calculate the difference between the lots. The general rule is that if the difference is pegged at 15 percent minimum, you should consider buying at the bid price. If you are selling, make sure to sell at the asking price once the order is filled.

You may also choose stocks based on market depth through the NASDAQ level 11 quote. You will then be able to view the market makers with the best buy and sell offers as well as the quantity related thereto.

You may have noticed that keeping track of the prices is an important part of day trading stock market success. Most day traders will check prices anywhere from 6-10 times daily, preferably through the use of a personal computer with a fast web connection. Your decisions will then be informed and updated.

Your stockbroker should also be on top of things. You want fast and easy connection to his phone line just in case you want to buy or sell certain stocks. In many ways, a good broker relationship will spell the difference between losses and profits for the day.

Indeed, success in day trading in the stock market can be an easy thing to accomplish. You just need to learn all you can, trade on the highly liquid stocks and keep your broker.

Online Stock Trades – Stock Market Day Trading Tips

The most important basic principle of stock market day trading is simplicity. Whenever the purchasing price is lower than the selling price, you can earn profit from the investment. While this is the theory that can be easily understood, the whole process becomes complicated when comes to practice. Read on the find out some useful tips on making your stock market day trading as successful as possible.

Tips #1: Understand your market:

The best practice of successful day traders is specializing on and getting to know intimately a small number of stocks. Many experienced day traders trade the Standard and Poor 500 index almost exclusively unless there is a remarkable opportunity that should not be missed out. By doing this from time to time, after a while, you will have the natural intuition which enables you identity The Meal, Ready to Eat – the correct timing to do trading.

Tips #2: Prepare for the day:

To be an excellent day trader, you have to do adequate homework and decided at which point should you sell and buy a share of stock. Of course, there are a lot of online resource which provides you information about the open, low and yesterday close price. This information gives you some ideas on the point to place a stop loss option and good place to make profits. Bear in mind that while taking the advice from professionals is helpful, the risk and return on investment is literally out of anyone’s control; hence, think objectively when you are analyzing the market. To summarize, prepare for the day and you will get to know the boundaries for your day trading on that particularly well.

Tips #3: Follow your plan:

Once you have a strategy in mind, stick to it. Otherwise, you might have increase the probability of failing in an investment.