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The Basics of Stock Market Trading
Stock Market Information
What is a Stock Share?
Corporations issue official-looking sheets of paper that represent ownership of the company. These are called stock certificates, and each certificate represents a set number of shares.
- Why invest in the stock market?
When you buy stock in a corporation, you own
part of that company. This gives you a vote at
annual shareholder meetings, and a right to a
share of future profits.
- Why Sell Stock?
The reasons people sell their stock are more complex. A
person may just need the money. He or she may have
watched the price go up, and have a hunch this is a good
time to lock in their profit and sell some or all their
- How are shares bought and sold on the NASDAQ?
If an investor asked his or her broker to buy shares in a company, the broker would call a few dealers, known as market makers, finding the best price for the customer.
- How are stocks traded on the New York Stock Exchange?
Stocks that are bought and sold on the NYSE and the
American Stock Exchange (AMEX) use an auction system.
- What are ECNs?
Mutual Funds do much of their trading among
themselves and with other institutional investors
directly through electronic computer networks (ECNs),
the largest being Instinet.
- Supply and Demand
A stock's price movement, up and down until the end of
the trading day, is strictly a result of supply and
demand. The SUPPLY is the number of shares offered for
sale at anyone one moment. The DEMAND is the number of
shares investors wish to buy at exactly that same time.
- American Stock Exchanges
American stock exchanges by year of inception.
- International Stock Exchange
International stock exchanges by location.
- What fuels demand for a stock?
Wall Street has said for years that the market is
efficient, and the price of a stock represents
everything that is known about a company up to that
moment. Wrong, stock prices over-react to news, both
good and bad.
- More to Know About Stock Trading
Probably the first thing you must understand, is that
with any investment, there is always some risk. Even
your savings account, insured by the United States
Government, has the very real risk of inflation rising
faster than the interest the bank pays you.
- What is a Limit Order?
Most new investors place market orders, just buying or selling at the moment's current price. But you can place a limit order, in which you name the price that triggers your order to buy or sell.
Cap is short for
capitalization. As a stock market term, the
capitalization of a company is found by multiplying the
total number of shares times the current share price.
- Preferred Stock
When I was about 13 and first heard about “preferred
Investors that buy preferred stock are generally the conservative type, who are looking for a steady dividend that may be higher than they can achieve with A-rated bonds.
- How to Buy Stock?
Buying stocks is not as simple as walking into a
stockbroker's office and buying shares like you would a
pair of shoes from a store. You are required to open an
account with the brokerage, like opening an account at a
- How much money do you need to open a brokerage account?
Although most traditional full-service brokerage houses
such as Merrill Lynch, Dean Witter, and Paine-Webber,
and giant "discount" brokers such as Fidelity and
Charles Schwab require a $2,000 ($1,000 for IRA's)
opening balance, I have located 10 brokers who will
establish your account with no money - $0.00!
- Money Market Funds
Investments such as bank
certificates of deposit (CDs) which are insured by the
federal government, sound pretty good. You agree to tie
up your money for anywhere from 30 days to 5 years to
earn a guaranteed rate of interest.
- Margin Loans and Investment
If you have at least $5,000 in cash and investments in your account, you can use available margin to increase your profits. But using margin doubles your risk!
- Corporation Executive Pay
If you think the CEO of the companies whose stock you
own are paid too much, and the wasted money should be
paid as dividends, forget it (unless you happen to own
millions of shares).
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