This article is for anyone who is new to the stock market. You're probably familiar with some investing terms already but may not know exactly what they mean. You may be asking yourself: how do you trade stocks?
Let’s look at what a stock is. It’s a share of a company that means you are part owner of this company. When you purchase stocks, they will go up or down according to how the business itself is doing. If the stock price goes down, then you may lose some money. If the stock price goes up, then the stock increases in value and you have gained money. But, you only gain the money when you sell or trade the stock.
First, you have to buy some stocks. You can do this in one of three ways:
1. Buying stocks directly from a company
2. Use an online broker
3. Have a face to face meeting with a stock broker.
Once you have bought stocks and let them appreciate in value a little bit, you may decide to trade them. The best advice is to ‘buy low; sell high.' You may want to trade your stocks because they have gone up a lot in value, or they may be going down, and you want to get rid of them before they go down too much. Either way, here is how you trade stocks:
· Using either your stock broker or an e-trade account, get a market order. This will make sure your stocks are sold at the best price possible. Another choice is a stop market order, which has the opposite effect. Your stock will be sold when it depreciates to a certain price so that you won't lose too much money.
· Use a limit order, or stop-limit order. Similar to a market/stop market order, this sets up a price floor and ceiling. When the stock goes outside of the limits, it will be sold. There may be more of a commission with orders like this.
· Consider investing long term. Short term trading is alright, but staying invested for the long run will give you much more money overall.
When you are ready to trade stocks, go into your broker's office or log into your e-trading account. When you tell your stock broker to buy or sell, they give that order to a floor clerk at one of the stock exchanges. That floor trader speaks with another floor trader, and they agree on a price and then get back to your broker. It normally takes just a few minutes to do this.
How do you trade stocks online? The e-trade market uses computer networks to match up buyers and sellers. Your electronic broker will access the computer network, and the system will match you up with someone else who wants to buy or sell. The Nasdaq is the most popular virtual stock exchange.
The Bottom Line
Buying and selling stocks can be very exciting and profitable. When you're ready to do some trading, use these tips to help you out.