Basic of online stock trading

Internet had brought revolution in all the fields and stock market is not an exception. Once stock market was only for the rich people as it involved lots of formalities and investment, but with the advent of the internet, the stock market has become a boon to people who have lower income. Once the stock market was all about spending lots of time with analysis as all the details were available only in paper and transaction done in person. But after the arrival of the internet, all the activities (Buying and selling shares, analysis) are done with the mouse clicks.

Internet has brought lots of changes within the stock market. Let us see some of the changes and advantages brought by the online stock trading.

1. Brokers: Initially the brokers were one of the most expensive aspect of stock trading. As the stock brokers were completely involved in trading, investors actually had less idea about the stocks and they simply followed what the stock brokers advised. Stock brokers also charged high brokerage due to their command in the stock market. But the scenario has changed with the internet. With more access to the stock market, investors are more involved in the stock market ever before. Even though stock brokers are still an essential part of the market. Stock broking also got expanded with different kinds of brokers as explained in previous article.

2. Electronic stock data: Before the arrival of the internet, all the stock prices were published in the newspaper next day. which means you have to wait almost a day to know the latest share prices. Or you were supposed to call the stock broker to know the latest. But now almost all the investors have access to streaming share price datas and with mobile phone it has got even more easier.

3. share Analysis tools: As i previously said, investors were totally relying on stock brokers for recent developments on share prices. But now with advanced tools like charts, electronic RNS, trading software etc. things have just become easy. Investors can now make their own decision in buying and selling shares. With the advanced charts, you can analyze the past movements of the stocks and with advanced trading softwares, you dont have to be sitting before the computer as the computer would do the job for you.

But with the developments always comes the risk. Here are some of the risks in online stock trading.

1. Data theft: With all the transaction done online, the chances of your money getting to someone’s hand is more likely. As the online transactions are controlled by passwords, its easy for the people who have good knowledge about the systems to take it away without your concern. You might even come across some strange brokerage fee (ie) phone brokerage is more expensive compared to online brokerage. Data theft is one of the reason behind this expensive brokerage.

2. Loosing track: With online softwares, maintaining stock portfolios is easier. So people tend to track lots of stock at the same time instead of tracking one or two. so investors normally loose track of the share prices or recent developments which might be crucial to make profit or prevent loss. So investors should learn to the keep the balance.

3. Stock trading softwares: As the usage of the software is getting more and more everyday, investors might get too dependent on the softwares as the softwares always has the tendencies to commit mistakes which might end up crucial for your investment. So investors must keep in touch with datas from all the corners instead of just one.

What is stock trading? A quick guide.

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.