If you are thinking about making some money by stock and share trading, the best way to start is by learning the basics of the trade.
So, what the word stock mean?
Stock is a share, no matter how small it may be, in the ownership of a company. If you buy the stock of a company you have indirectly invest in it and thus become a part owner. However, while you are trading stock, the percentage of your ownership in that company is too low to be accounted for by the company.
But people normally talk about share trading. What is a share?
Share and stock is the same thing. You can also use words like equity and scrip, which have the same meaning as stock.
But there must be so many stocks in the market. Is there way to categorize them?
Yes, you can categorize stocks on the basis of the capital of the company into 3 types: Large Cap, Mid cap and small cap.You can also categorize stocks on the basis of the field or sector that the company is mainly functional in: Telecom, Education, Banking, Real Estate, Oil and Gas etc
So, do I have to go to the stock market to buy stocks of a company?
Stock markets were the only place to trade stocks a long time ago. These were places where buyers and seller of shares met and made their deals. Bombay Stock Exchange started as a gathering of traders every evening under a tree in south Bombay. Now it has grown because the expanse of the trade has grown enormously.
To find more and more buyers for their shares, company’s started making agents around the country who would sell these shares. From this emerged, the profession of stock broking. stockbrokers were initially people who would buy and sell stocks of certain companies and take commission for doing this. Now, stock broking is a major business and most stockbrokers deal in all the stock of the major stock exchanges of the country. So, now you can buy stock anywhere in India if you have access to a stockbroker, who may also be available via a website.
But how do I buy shares of a company that is just launched in the stock market?
If you plan to buy shares of a new company in the market, you should invest in its IPO in the primary market. The primary market is the part of the market where the shares of the company are created according to the volume of money that people are looking to invest in it.
So, new companies come via the primary market. Is there a secondary market too?
Yes, the markets where all the companies of which, the shares have been previously created in the primary market are available for trading. Normally, when you have to trade stocks, you approach the secondary market.
So, if a stock is a part of the ownership of a company, how does it change so rapidly? Does the capital of the company keep fluctuating like this?
When the price of the stock of a company changes, it means that there is a change is demand and supply. For instance, if 100 people want to buy the stock of the company and only 20 want to sell, then the price of the stock goes up. Similarly, if 20 people will want to buy the stock and 100 will be willing to sell it, then the price will dip. This does not mean that the capital of the company is fluctuating.
Is this the only reason?
Well, the basic reason is only this. What a trader should understand is the factors which cause people to want to sell or buy a stock. Let’s look at some of such factors:
1- News related to the company is a major factor. For instance, if people get the news that certain company’s main factory has collapsed due to earthquake; they will want to sell the shares as soon as possible. This will trigger a rise the number of sellers in the market and make the stock price dip.
2- International economic flow is another factor as like all the other countries in the world, even India is dependant on other countries for economic trade. If the economic conditions in other parts of the world detoriates, then the stock market also dips. This was seen recently in the last recession, the effects of which still show on our market.
3- Institution investors have an immense on the market. The companies which invest in stocks on large scale, like LIC, UTI, mutual fund operators and similar institutions from other countries, have a huge impact on the stock prices. If such investors decide to sell, the market dips rapidly.
So, now that I know the basic things about stock trading, I want to start trading. What all do I need to have?
If you need to trade, you can do it either by doing it through a broker. In that case you only need to have a pan card, a demat account and of course money to trade with
And in case I want to do it myself?
In this case, apart from the things you needed to trade with the broker, you will need a computer, internet connection with decent speed, trading account on a broking platform like Sharekhan.com, 5paisa.com etc
Share market is very complicated. Are there any technical terms which I should know about to make it simpler for me?
Yes, you should know the meaning of the following terms to trade:
Open: The price at which the stock opens in the morning
Close: The price at which the stock closes in the evening
High: The top level to which the price of the stock reached during the trading hours
Low: The lowest level which the price of the stock reaches during the trading hours.
Bid: The price at which you can buy the share
Offer: The price at which you can sell the share
Limit: The price preset by you, at which a particular stock will be automatically sold or bought.
Sensex: It is the index of 30 stocks. It in an indicator of the basic position of the market
Nifty: is an index of 50 stocks. There many other indexes which show the position of different types of stock like the large-cap index, small cap-index, banking-index etc.
Read more: http://www.bukisa.com/articles/188631_absolute-basics-of-the-stock-market#ixzz0w6cEaKh6
So, what the word stock mean?
Stock is a share, no matter how small it may be, in the ownership of a company. If you buy the stock of a company you have indirectly invest in it and thus become a part owner. However, while you are trading stock, the percentage of your ownership in that company is too low to be accounted for by the company.
But people normally talk about share trading. What is a share?
Share and stock is the same thing. You can also use words like equity and scrip, which have the same meaning as stock.
But there must be so many stocks in the market. Is there way to categorize them?
Yes, you can categorize stocks on the basis of the capital of the company into 3 types: Large Cap, Mid cap and small cap.You can also categorize stocks on the basis of the field or sector that the company is mainly functional in: Telecom, Education, Banking, Real Estate, Oil and Gas etc
So, do I have to go to the stock market to buy stocks of a company?
Stock markets were the only place to trade stocks a long time ago. These were places where buyers and seller of shares met and made their deals. Bombay Stock Exchange started as a gathering of traders every evening under a tree in south Bombay. Now it has grown because the expanse of the trade has grown enormously.
To find more and more buyers for their shares, company’s started making agents around the country who would sell these shares. From this emerged, the profession of stock broking. stockbrokers were initially people who would buy and sell stocks of certain companies and take commission for doing this. Now, stock broking is a major business and most stockbrokers deal in all the stock of the major stock exchanges of the country. So, now you can buy stock anywhere in India if you have access to a stockbroker, who may also be available via a website.
But how do I buy shares of a company that is just launched in the stock market?
If you plan to buy shares of a new company in the market, you should invest in its IPO in the primary market. The primary market is the part of the market where the shares of the company are created according to the volume of money that people are looking to invest in it.
So, new companies come via the primary market. Is there a secondary market too?
Yes, the markets where all the companies of which, the shares have been previously created in the primary market are available for trading. Normally, when you have to trade stocks, you approach the secondary market.
So, if a stock is a part of the ownership of a company, how does it change so rapidly? Does the capital of the company keep fluctuating like this?
When the price of the stock of a company changes, it means that there is a change is demand and supply. For instance, if 100 people want to buy the stock of the company and only 20 want to sell, then the price of the stock goes up. Similarly, if 20 people will want to buy the stock and 100 will be willing to sell it, then the price will dip. This does not mean that the capital of the company is fluctuating.
Is this the only reason?
Well, the basic reason is only this. What a trader should understand is the factors which cause people to want to sell or buy a stock. Let’s look at some of such factors:
1- News related to the company is a major factor. For instance, if people get the news that certain company’s main factory has collapsed due to earthquake; they will want to sell the shares as soon as possible. This will trigger a rise the number of sellers in the market and make the stock price dip.
2- International economic flow is another factor as like all the other countries in the world, even India is dependant on other countries for economic trade. If the economic conditions in other parts of the world detoriates, then the stock market also dips. This was seen recently in the last recession, the effects of which still show on our market.
3- Institution investors have an immense on the market. The companies which invest in stocks on large scale, like LIC, UTI, mutual fund operators and similar institutions from other countries, have a huge impact on the stock prices. If such investors decide to sell, the market dips rapidly.
So, now that I know the basic things about stock trading, I want to start trading. What all do I need to have?
If you need to trade, you can do it either by doing it through a broker. In that case you only need to have a pan card, a demat account and of course money to trade with
And in case I want to do it myself?
In this case, apart from the things you needed to trade with the broker, you will need a computer, internet connection with decent speed, trading account on a broking platform like Sharekhan.com, 5paisa.com etc
Share market is very complicated. Are there any technical terms which I should know about to make it simpler for me?
Yes, you should know the meaning of the following terms to trade:
Open: The price at which the stock opens in the morning
Close: The price at which the stock closes in the evening
High: The top level to which the price of the stock reached during the trading hours
Low: The lowest level which the price of the stock reaches during the trading hours.
Bid: The price at which you can buy the share
Offer: The price at which you can sell the share
Limit: The price preset by you, at which a particular stock will be automatically sold or bought.
Sensex: It is the index of 30 stocks. It in an indicator of the basic position of the market
Nifty: is an index of 50 stocks. There many other indexes which show the position of different types of stock like the large-cap index, small cap-index, banking-index etc.
Read more: http://www.bukisa.com/articles/188631_absolute-basics-of-the-stock-market#ixzz0w6cEaKh6
