Stock Market Trading 101 – Starting with the Basics

Stock Market Trading 101 Starting with the Basics

Stock market trading refers to owning shares of company's profits and related voting rights attached to the investment instrument. The investment is made through a stock certificate, which is a piece of paper that shows proof of your ownership or a stake in a company. In most instances, investors would not ultimately take physical possession of the stock certificates, as these are records that are electronically kept by stock brokerages.

The brokerage firms offer professional help to shareholders through their experience of analysing the market behavior. These service providers gather essential and relevant market information in behalf of their client-investors. Brokerage firms with a wide range of services provide crucial information and strategies for effective stock trading. Investors don't always have to transact with full-service stock brokers, as the Internet has emerged into a most potent source of information and tips in practically all aspects of stock market trading.Most of this information is only a click away that a client would find it a more convenient way of clarifying doubts about stock exchange strategies and terminology. Apart from that, clients also enjoy bidding and selling stocks online with discount brokerages who take low commissions compared to a full service broker.

Stock trading gives you the opportunity to earn money from the business activities of the listed company without having to worry about the day-to-day concerns of running the business.Nevertheless, be aware of the pitfalls as shareholding is not always a profitable profession.The value of shares dive when a company does not yield acceptable performance and lacks achievements or a clear growth concern resulting in a significant loss to investors.Similarly, shareholders pocket a fairly large amount with every effective throughput of the company. Stocks are highly volatile investment instruments. One can lose his proverbial shirt if the value of the stocks goes on a sudden nosedive.Though compared to saving accounts, bonds and securities, trading stocks have been considerably profitable in general.

There are two types of stocks, the common stocks and the preferred stocks. Common stock basically defines the ownership in the company. It is the investment instrument that is used in stock market trading. Common stocks are sold by companies through public offerings, and it is also traded on the secondary market. Investors who own common stocks aim to earn dividends out of their share of the company that is offering the stocks.

In contrast, preferred stocks are also traded over the counter apart from the regular stock exchanges.Preferred shares have low risk and low rewards against ordinary shares which have high risk and also have voting rights. In most ways, preferred stocks are similar to bonds. While bonds come with guaranteed interest payments on a regular basis, preferred stocks come with guaranteed dividend payments for a specific time frame.Preferred stocks also have an advantage of immunizing stockholders against company failures, liquidations and bankruptcies, as these stockholders have the first rights on the company assets over debt holders.

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