STOCK TRADING 101

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Investing the stock markets is one of the most profitable investment plans if you do it right. Several billionaires have made a considerable fortune by trading in stocks.This is because by buying a stock in a company, you are somehow owning a piece of it and when they succeed and earn profits, you get your cut in the form of a dividend.

However, it is not all rosy. It requires tact, strategy, patience, nerves of steel, and more importantly, an eye for good business.

To get started, you need to open an account with a stockbroker licensed to trade on the floor of the stock exchange where the shares of the company you want to invest in are floated.

Getting started

A company is in need of additional cash in their growth and operation strategy will offer a portion of their ownership shares to the public through an IPO (Initial Public Offering) on a stock exchange. The stock price is determined the company value as estimated by financial experts and the number of shares being offered. So it’s basically the company offering you a share of its ownership in exchange for your money.

How do you make money on stocks?

In simple language, you make money by buying when the share or stock price is low and selling when it is highest. You also earn money through dividend payments.

In reality, stock trading a little more complex than that but you’ll see that in a few moments.

Just like any other form of investments, stocks has its up and down and that’s why before buying shares you need to get advice from stocks expert who can guide you on sectors that are potentially profitable. You can find additional financial advice on Dollar Cents.

These tips will help you make head and tail of stock trading.

Have a budget

You will still have rent to pay and bills to settle when you invest your money in a stock exchange. When you are starting, start with a small budget to test the waters, so that on the remote chance you lose all of it you are not financially ruined.

Research

Carry out extensive research on the finances of a company before investing in their shares. Do not go by their brand and reputation alone. A company may appear to be doing well, yet they are in financial doldrums which will affect the possibility of ever making a profit on your stocks.

Do not be driven by your emotions or peer pressure either. Sometimes rushing to buy stocks when everyone is doing so backfires. In fact, it makes investment sense to buy shares in a business you understand quite well.

Bull and Bear Markets

A bull run is when the prices of a stock is high,and there is a lot of optimism surrounding the company. On the opposite and extreme endis the bear run when stock prices plummet and investors are more cautious in their trading.

Monitor the markets

The markets are affected by some of the events of the trading floor and current affairs. The internet has now made it easy for you to monitor these changes and buy and sell whenever you deem it feasible.