Stock trading is something that is not everyone's cup of tea. Whoever has told you that is wrong. Let me tell you something I know for sure. I'm a journalist and I had no clue about commerce up until five years back. At that point I had heard that a friend of mine had managed to make herself a million dollars just by stock trading.
And I thought, WOW! That is some amazing source of income out there! I need to know how to do it. And guess what? I learnt how to! But I can tell you this. In order to find out how stock trading is done, and how to do it right, more importantly, you need to have a whole lot of patience.
Stock Market
The first thing you need to know about stock trading is the stock market. What really, is a stock market? It is basically a forum which allows you to facilitate exchange of security between buyers and sellers and therefore also reduces the risk of making investments. I mean think about what a hard time you would have trying to sell shares if you had to go from door to door, looking for a buyer?
Now the market is divided into two sub markets. The primary market and the secondary market. The primary market is basically where the securities are created by means of an IPO and the secondary market is where investors trade in previously issued securities - all without any involvement on the part of the issuing companies of course. It is the secondary market that we have come to understand as the stock market and it is here that all the stock trading takes place.
Methods of Stock Trading
Now the next thing you need to learn is how you can trade stocks. There are basically two methods to exchange stocks - one is on the floor and the next - a more recent development - is by electronic means.
Basically trading on the floor, in the New York Stock Exchange is what we have come to understand thanks to a million movies - there are images of hundreds of people rushing about, waving at each other and shouting figures at each other and of course looking up stuff on their computers. What trading involves is a sequence of the following steps:
* You direct your broker to buy a certain number of shares of a certain company.
* This order is sent to the floor clerk (from the broker's firm) who is at the exchange.
* The clerk then goes about looking for someone who has a hundred of the desired shares to sell.
* The two negotiate the price of the shares and then shake on it.
That's just about it!
Electronically of course things become much simpler; you just need to use electronic markets to find a buyer and seller match, rather than the via media process of using a trader. This process brings you one step closer to the stock trading process and is much more efficient. So what form of stock trading are you going to choose?
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Author: Silas Reed
Tags: Stock Market, Stock Trading, Forex Market, Equity Market, FX
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