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Stock Market Trading Essentials To Make You A Rich Jerk

Updated on June 12, 2011

Trading Stocks Online - For Beginners

If you're really serious about trading stocks online, then you should know some definitions:

Trading stocks - Stocks are a 'unit of ownership' in a particular company. Trading is basically "buying and selling something". Stock trading simply means that you will be purchasing and selling stocks in the financial market.

Types of stocks:

Common stocks - where the trader reserves the rights to vote in/out management and has a say in the amount of distribution as dividends.

Preferred stocks - as above but with the trader having less rights (especially regarding distribution of dividends). Companies can decide whether to distribute more or less as dividends, depending on where they see the money best spent.

Trading basics:

In stock trading, there are basically two interactions that take place when a trader executes a trade.

If one is trading on the exchange floor, the marketplace is open where hundreds of people are speeding up, shouting, make gestures to one another (hopefully not rude ones) and are in heated discussions over the phones. There are also those who carefully watch the monitors for any changes, and almost simultaneously enter data into each respective terminals.

When it comes to online trading, the exchange floor might be more chaotic compared to this set up. These days, there is a stronger demand in shifting trading to the networks and off the trading floors. In fact, because of lesser room for pressure, more and more traders prefer this stock trading set up.

It all "looks easy" - you just need to make a few phone calls, meet some people, talk to some high brass firms. It is all in the presentation! It's important that you have the know how to say things at the right time. It's almost like golf - it's not a sport, it's an art!

Stock Trading - Is It For You?

Stock market trading is a dog-eat-dog industry. That means you have to know what you really want; you must be ready to face all the challenges and difficulties that are associated with it.

The number of people engaging in stock trading today continues to increase simply because investment could flourish in no time (relatively). But since stock trading is means business, it takes a smart business minded person to make it work - hey, that's you! :)

The stock market or stock trading is considered as one of the most viable sources of income there is. Compared to other industries, stock trading can make a person or a trader a millionaire from just one whole day transacting (apparently, hasn't happened to me yet). Every day, somewhere, someone is making money. Money is always changing hands. Even if there is a big downturn in the market you can rest assured that someone has made money as a result of it.

Stock trading is great for you if you have:

  • the skills
  • the knowledge
  • the ability to learn
  • the enthusiasm
  • the drive to suceed

Online Stock Trading - What Are The Benefits?

  1. The flexibility of its business schedule - the industry runs 24/7, you can create your own trade on schedule at your chose pace and time.
  2. You can do Online Stock Trading from anywhere really, all you need is a laptop with an internet connection!
  3. Low cost of transactions (compared to going through a broker).
  4. There's a wide array of trading vehicles, techniques and strategies. It gives choices to the trader and they can employ methods that have a level of risk with which they are comfortable.

Setting your goals on stock trading

So if you're starting out, you might notice that the whole process of researching and making decisions in a controlled type of method is difficult. You might be thinking: "How do traders continue to stay in this field where there is only competition and pressure?"

Well, if you are into stock trading you will experience the hardships, sure, but you could also see the (potentially big) rewards of the venture. Experts say that one of the best ways to overcome hesitation and fear in getting started with stock trading is by learning all about it. Knowledge = intelligent decision making = ability to maneuver strategies to give your investments a greater chance to blossom.

You need to have a goal in mind.

It's one of the best things that would ensure your success in stock trading.

Are you looking for the "growth" focus? Use the stock trading strategies that would engage in finding those companies that are on the brink of growth and development. Try to get stocks of companies that are just starting out since they might have better chances compared to those who have been around for a while. Sometimes, it is a punt. In the late 1990's there were many internet startup companies around, just before the IT crash. As they say, a growth-oriented type of stock trading is not for those that have weak heart.

Are you looking for the "value" focus? If so, search for under-priced stocks. One way to find companies that are meant for value is by discovering those that have lower face value of stock when compared to its direct competitors. Obviously you'll have to research any recent disclosures to the market as to possible reasons why their stock value is lower (eg they may have made some bad investment decisions?) Always bear in mind that value focused stock trading is also risky so it would be best to prepare fool-proof plans!

Keys To Successful Stock Trading

1. Make sure that you prepare and equip yourself in the way of data gathering and being knowledgeable about the industry. Preparation physically, emotionally and mentally is required so you can cope up and overcome the trials and difficulties that will come along your way.

2. Arm yourself with knowledge about stock trading. Take a course, read a lot of books and other reference materials, visit various websites that offer free and seemingly limitless information on it. Also ask people you know about their experiences with stock trading.

3. Assess yourself and know where you stand. It will help you determine if you are still in the right path of success or whether you need to make some amendments in your stock standing.

4. Reflect on your goals and realize them. Having a goal is a very important key to achieve success in stock trading. If you know your goals, then you have something with which to measure your level of success.

5. Plot your strategies. Although there are no guarantees of certain strategies in stock trading, it is best that you start with your own strategy.

6. Never be complacent. Always monitor the current trends in stock trading to keep your knowledge up-to-date. Do this through magazines and news reports in the industry.

7. Don't give up when your fail. Stock trading is not always about big successes. Keep in mind that there will always be windows for failures along the way and accept that this is part of the industry's nature. Donald Trump made losses buying and selling one particular casino many times (and he's still buying and selling it - he'll make it one day!)

8. Always persevere and work hard. This formula always works when you get into stock trading. Because if you don’t give up and you keep on working hard to achieve your goals, a lot of opportunities will be opened up to you. Persevering and working hard will also keep your feet firmly planted on the ground.

When You Shouldn't Get Into Stock Trading

  • If you're an impulsive kind of person and have not done your research (people have lost a lot of money on a punt they took off the cuff).
  • It is a free market, meaning that there is a chance that you may not close your transaction. If you're happy with this and understand the risk, that's fine.
  • If you're not prepared to learn about stock trading, as it can become pretty complicated. It can take a while to get the hang of some of the concepts, techniques and trading strategies (sometimes years).

Practice Until You Learn It!

Stock Market - The Wall Street Trading Game
Stock Market - The Wall Street Trading Game

Better to practice before using real money in the real world...

 

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    • marcofratelli profile imageAUTHOR

      marcofratelli 

      9 years ago from Australia

      I considered that title, but didn't want to offend the reader before they even read the hub! :) Thanks

    • dohn121 profile image

      dohn121 

      9 years ago from Hudson Valley, New York

      Thank you for writing this, Marco. I learned a great deal here about the basics of stocks...I'd go as far as saying you could rename this, "Stocks For Dummies!"

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