Stock trading for beginners.
Stock or share represents ones ownership of a company or a corporation. Depending upon the number or percentage of shares you hold, your role will be determined inside the company. When you have shares in small number, your role will be limited to an investor. If you hold a higher percentage of share, then you might be invited for a higher position.
As far as the stock trading is concerned, almost all the company trade their shares using online platforms and exchanges. In olden days, when these shares were traded, the practise was to give a certificate as a proof of ownership.
What is the point in trading stocks?
As I previously said, stock represents ownership of a company, so whenever the company makes profit, you will be awarded a part of profit depending upon the number or percentage of stocks you hold. Sometimes the profit is fixed as a certain percentage which is called dividend.
But you must remember that its upto company to share the profit as it is a general practise of most of the corporates to reinvest the profit and increase the share value instead of paying the dividend. This increase in share value is to further increase the confidence of the share holder and new investor.
The process involved in stock trading is quite simple. If you are buying a 1000 shares of a company for GBP1 and imagine it raises to GBP2, the amount you get back is GBP2000. So the profit you made is GBP1000. Remember, there will be some deductions for brokerage and when you use different currency while investing.
What is the way to trade stocks?
Most of the share traders use portfolio, which is nothing but the list of shares of different companies that you think is good to invest. It might not be something new. You must have watched a screen where you see the share price going green and red every second.
Next thing you must know is the ticker. Ticker is the shortform of a company, which is a unique identification of a company’s share in a particular stock exchange. Other thing you would see are three value against the share. The top price denotes the buying price of the share, the middle one indicates the average price of share and the bottom price indicates the selling price of the share.
Next thing to identify in the listing is the high price which means the highest price reached by the share on that day and low price which indicates low price. Some listing also indicates 52 week high price and low price which is an extra indication of the share’s performance.
You will also find some huge numbers like 250000 which indicates the volume bought and sold. If you carefully analyse you will be able find the close relationship between the volumes of stocks traded and the investors confidence.
Also you can find the previous day close price of the stock and the day’s opening price of the stock. These two price gives a clear indication of how the investors behaviour has changed and if you see a huge difference between these two prices, you must be aware that there is a potential release of news which might have a huge impact in the future of the share price.
You must also learn to follow the stock charts as you can grasp the past datas (upto 5 years) about a share and its behaviour. Also one important thing in stock trading is to be upto date with news. News like floods, riots can terribly alter the share price, depending upon the industry of the share. So vigilance is a better part of share trading.