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Stock Market Overview for Beginners

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Introduction 

A stock market is simply a complex system that involves buying and selling of securities. A public company issues its shares in a stock exchange such as the New York Stock Exchange for stock trading. The traders, through their online stock brokers, can, therefore, buy or sell these stocks to make profits.

What is a stock market?

A stock market is a financial system that facilitates extensive trading in securities issued by public limited companies. Shares are the most traded securities in the stock markets. The stock markets operate with the help of stock exchange centers where public companies enlist their shares. The stock market nowadays can operate as a virtual forum with the aid of the internet that facilitates online stock trading.

A public company issues its shares for sale to the public after meeting certain requirements that ensure its credibility. The prices for the shares are standardized through matching of stock buyers and sellers. Based on a stock index, stock traders can track the performance of the stock market and assess the performance of their held portfolios. Some of the major stock indices include the S&P 500 and the Nasdaq.



What are its participants?

There are various interest parties in the stock markets. Among them include:

  • Traders: they can be individual traders or big investors who are involved in the daily buying or selling transactions in the stock exchange market. Registered stockbrokers can be used as third parties in trading the stock markets. Securities can nowadays be held and traded as virtual instruments with the invention of the internet. Traders open an account with the online stock broker and place their bids.

  • Stockbrokers: these are licensed intermediaries or third parties that are involved in the financial stock transactions in stock exchanges on behalf of the traders. They buy or sell securities such as bonds, or shares for the stock traders. With computerization, nowadays many securities can be traded via online stockbrokers by opening an online account with them and entering trade positions through the brokers’ platform. Good brokers have great broker reviews. Tradefw.com is one of the best stock brokers that offers stock brokerage services on indices, currency exchange, stocks and cryptocurrency leveraged services for the investors.

  • Stock analysts: they are a group of professionals that conduct stock market research to establish the appropriate time to buy or sell stocks. They also advise prospective clients on whether to maintain their stock trades or not.

  • Fund managers: These are professionals who commit themselves to invest in a stock portfolio on behalf of their clients. These professional managers are also involved in formulating feasible investment strategies for the Mutual fund firms, hedge funds or the pension plans.

  • Investment bankers: they are private company representatives that facilitate the IPO offering. They also facilitate mergers or acquisitions for private companies.

What is traded in the stock market?

The most common instruments traded in the stock market are shares and bonds. Shares are units of ownership in a public limited company, bought by investors for the payment of dividends when the company makes gains. Shares can be bought or sold within the operating time of the securities exchanges. Other instruments that are traded in the stock market include the unit trusts, and the derivatives (futures and contracts).

The pros and cons of the stock market

The stock market, like any other financial market, has its ups and downs. Let us have a look at some of them

Pros

  • Stock traders can earn income through dividends paid on the shares held.

  • There are reliable information and trading advice on how to invest in the stock market from the internet sources and professional analysts.

  • Stock traders have a potential to make long-term growth while trading in the stock market. They can compound their dividends yields and stock portfolio over time thereby generating huge revenues for themselves.

  • There are numerous trading options available. Stock traders are exposed to small and large company stocks that have a high asset growth probability.

  • Traders can enter their trading positions anywhere with the help of online brokerage and internet services from their smartphones or laptops.

  • With online brokers, the fees charged for trading stocks are usually low and affordable to many stock traders.

  • Traders can determine the risk they are willing to take on their trades to shield themselves against large losses.

Cons

  • Market swings due to economic events can generate huge volatility in the stock market which may lead to a loss in the invested stocks.

  • Unfortunate events such as the stock market crashes can have devastating effects on a trader’s equity.

Before venturing into the stock market, here are a few tips

  • A stock investor should first start by learning the basics, including the terminologies used in stock trading and the securities traded in the stock market.

  • Set goals that are long-term because the stock portfolio grows with time depending on capital invested and the gains from the stock investment.

  • A stock trader should establish his/her risk tolerance to determine the amount of capital to be invested over what period.

  • Developing patience and emotional control is critical for making logical trading decisions.

Conclusion

Stock trading is profitable for the stock traders who practice their learning on stock markets and adopt successful trading strategies. The stock market has limitless opportunities that can be grabbed by stock traders to meet their financial goals. If done well, stock trading will be a ticket to your financial freedom.

Disclaimer:
This is a sponsored paid post, this information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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