Trading in Stocks

By | August 5, 2016

A Safe Bet

Trading in stocks and shares is the best option for those who do not have sufficient funds and experience for doing any other business. You can start small, dream big and finally reach the stars. The initial investment can be ludicrously small. In fact ‘investment’ is too big a word for the amount of money you require to start trading in stocks at the initial, learning and experimental stage.

Minimal Investment

You can start with the cost of a pack of cigarettes or the price of a cup of coffee. All you need is a personal computer and an Internet connection. Surf through the net and you will find that there are hordes of online stock brokers. Read through their sites and decide on the one that suits you best. You can open your account online at free of cost. Besides, you will find the necessary instructions at the website to set the ball rolling. Tread the ground cautiously, have patience and try to learn as much as you can the new lingo of stock trading from the education tab of your stockbroker’s website.

Education in Stock Trading

The education section of your stockbroker’s website provides comprehensive details about various aspects of stock trading. Starting with the definition of a stock, the reasons to buy stocks, investment risks, types of investments and ticker symbols, the instruction material further explains how the stocks trade, the stock market, the primary and secondary markets, the major stock exchanges like the NYSE, NASDAQ, AMEX and OCTBB for Penny stocks. Once you are familiar with the basic functioning of the financial market, you will begin to understand the factors that drive the share prices such as supply and demand of the stocks and shares that you trade in. You need to understand the concepts such as ‘earnings per share’ and P/E ratio. The knowledge of these basic concepts will help you to evaluate the price of the stock of a company and its income potential.

Cautious Beginning

If you are a novice to the art of trading in stocks, your first step should follow the guidance of your stock broker. Become acquainted with the terminology associated with stocks such as bulls and bears and what they signify. You should also be familiar with the research tools and research reports that highlight the financial performance of the company you are interested in investing in.

If the price of your stock goes up, and your broker asks you to sell it and book profit, it is in your interest to do so. Do not be greedy and wait for your stock to touch the skies. The wait may become interminable and you may be stuck up just in one stock and will not be able to move further. Who knows the value of your stock may plummet in future and you are left wringing your hands in despair. It is always advisable to be dynamic, keep moving, changing, experimenting and learning. Since the initial investments are small, the risks can be affordable. Once the fundamentals are clear, you may shoot for the big.