At first glance, trading in the stock market (both online and offline) might look just like another common investment option. But to the astute trader, it brings with it many benefits that are substantial.
For both long-term and short-term investments, one very attractive benefit in the business of stock market trading is that you have a relatively liquid asset. This is because you can quickly (and easily) convert your stocks to cash by selling in times of need.
Your return of investment is also guaranteed whether you are in for a long haul or had chosen short-term options with your investments. Long-term investments are always safer because values generally increase over time. Short-term investment choices can be profitable by taking advantage of the quick changes in stock prices.
Stock trading
Compared with other businesses, taking to stock trading (and earning well) offers more flexibility in terms of work timings, educational qualifications and investment. This is especially true now that computers are now readily available to everyone.
No other business has all of these advantages. Moreover, you can work part time or full time. If you are into another business or profession, you can do trading in your spare time. A fulltime housewife can still earn while actively raising her children as well.
For physically-challenged persons, stock trading is a good earning option. With computers and today’s connectivity, mobility is not a problem anymore. For students who are also interested, the only requirement is that they have to be at least 18 years old.
Work at home
With the computer and the internet, stock trading can now be done fully online. From the comfort of your home, you can do all your transactions with out-of-town business associates or those from other parts of the world.
With the click of the mouse, even the delicate business of payments and transferring funds online are now standard procedures.
Low costs
In the old pre-internet days, stock brokers dictated the exorbitant amounts of their commissions. The advent of the internet and computers changed all that.
Today, there are so many stock brokerage companies offering much lower commissions, the latest trading technologies and other facilities to attract customers.
24-hour operations
Today, online stock trading had already erased the old restrictions on working hours. You have now the option to do your own trading at night after the old official business hours have closed.
If you did your research well and are updated on the latest business trends and economic crinkles, you can make thousands or more in a matter of minutes and with a few clicks of the mouse.
No limits
Today, if you cannot afford the full amount of a share in best value stocks, you can choose to buy its fractional shares. You can trade in stocks with as low as $3 per transaction.
You can invest in a whole range of sector (niche) stocks, either in small amounts or as high as your budget will go.
No waiting time
Unlike other businesses, you need not wait out for months to cash in on your profits. There is no need to advertise your goods, coax customers or write catching sales letters.
In the stock market, your stocks are sometimes regarded more dearly than cash.
Understanding the stock market does not only involve why businesses sell shares of their companies and why investors buy these shares. Today, there are aspects on the business of stock market that are still unclear to most people. The most obvious are the stock prices and pricing.
Pricing of stocks
Scanning the newspapers, many people are confused and still could not understand about the pricing of stock prices as they see or read it.
Among the wide variety of stock prices, what puzzles the layman would be (1) why some well-known and giant companies are being traded for relatively very low prices and (2) why some little-known companies are being sold for excessively high prices.
Investor confidence
To some extent, the prices of stocks for each company are determined by the confidence of investors based on either a real or a perceived performance of the stock.
Among the requisites of a company to its shareholders are financial status reports as reported on a quarterly basis. These would include the company cash flow, sales, and its earnings for the period.
You would think all this disclosure would suffice. The truth of the matter is that the company’s worth based on its financial reports can be overridden or undermined by speculations, unfounded or not.
Rumors
Stock market rumors are some of the most devastating one can see. It virtually derails some carefully-laid out reports and scientific data and such. Rumors usually affect the fate of the company’s stocks.
A sample would be an ongoing rumor that states that a particular company is planning to make a strategic move. Like a crowd rush in a train station, investors would come flocking in just to buy stocks from that company.
Supply and demand
The principle of supply and demand also applies to the stock market. If there is a sudden rush of interest from investors, expect a rise on the prices.
If there is fear among them, prices will promptly plummet downwards. The worth and the performance of a company are considered to be the biggest factors to determine the prices of stocks.
Reading stock quotes
In daily market summaries of newspapers or online sources, there are sections where there is information on the current prices and market movements of stocks around the clock. (Stock brokers also provide stock quotes that can be accessed via phone or the internet.)
This stock quote table contains useful information that can help investors make their decisions in buying or selling the stocks. For would be investors, it is necessary to be able to decipher the data listed there.
The first column is a 3 or 4-character ticker symbol. (sample: BCE means Bell Canada Enterprises and MSFT stands for Microsoft.) The newspaper price was the closing price for the day. (It is updated every few minutes at the internet.)
Change is the difference between the previous day’s closing price and the current quote. High indicates the highest price while Low is the lowest price sold.
Volume is the number of shares traded, and the 52-week High and Low is the highest and the lowest prices the previous year. Some tables have additional columns to make room for more data (like the Bid and Ask prices, etc.)
For would be investors, stock market pricing should be among the first areas in the business that needed to be learned and mastered. They are the heart of the business.
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