Time and again, stock trading has proven its worth as a steady income generating source and as far as its future is concerned, it will be brighter in the coming years with the growing economies around the world.
The world of the stocks market is not just for market experts but it also stands as a steady income generator for newbies as well.
It’s just that you have to put a bit of hard work and effort to learn how to do it and with time, you can grow in to making stocks trading a permanent and steady income in your life.
In our today’s subject of discussion about earning money from stock trading, we will discuss how a newbie can learn about stocks trading and how he or she can enter into the stock market.
Learn the ABC of Stocks Trading
Stock trading is no adventure and just like other jobs and businesses, it requires some basics to learn before venturing into it.
The term ‘trade’ or ‘trading’ means buying and selling a particular thing and when we talk about stock trading, it’s about selling and buying stocks or shares.
A stock or a share is a public share of a public limited company which sells its stock or share to the general public.
When you buy such shares, you become the stockholder or shareholder in that particular company.
In order to learn the basics of stocks trading, you first need to go through the list of companies whose shares are available in the market. These kinds of shares or companies are roughly divided as follows:
- ‘A’ Grade shares or a Company
- ‘B’ Grade shares or a Company
- ‘C’ Grade shares or a Company
Basically, the above categories show business strength of a particular company and how good the company’s fundamentals are.
So, once you go through the list of companies, pick one of the companies and read the basic fundamentals of that company.
Now, what are basic Stocks Trading fundamentals?
Basic fundamentals contain a few financial parameters such as the company’s total turnover in a year, its profit margin, its profit/cost ratio and the upcoming orders for execution.
With the accurate study of the basic fundamentals of a company, you will be able to make out whether the company is going to perform excellently, good or bad in the near future. (either quarter or a year)
Based on this study, to start with, you can decide which stock to buy and how much to buy.
However, I would definitely suggest that you pick any of the stocks which lie in Category ‘A’ because the ‘A’ category stocks contain the lowest risk of losing money.
At the same time, let me also give you a warning that to enter in any stock market, you need to have patience and have to invest money for the long term.
Do not feel bad if you lose money when starting your stocks trading career because that’s common for almost all of those who are now at the top of their game.
How Stock Market Works?
Stock market or what is also known as the Stock Exchange works in two different basic methods:
During the electronic session of stock exchange, all stock trading happens through computers via Internet and each stockbroker has their own computer, which is also known as the ‘terminal.’
A computer terminal is something that is loaded with software that shows the changing prices of a particular stock “live” during the stock market sessions.
Meanwhile, you must have read the term ‘stockbroker’ and wonder what that means. However, we will look at it little later in this conversation.
2. On Exchange Floor
During the exchange floor sessions of the stock market, stocks trading takes place personally where a person-to-person conversation takes place to buy and sell the stocks.
But with time, this method is obsolescing and the electronic method is taking its place. So, let us not talk about this method much in detail as it’s not going to be useful anymore.
Stockbrokers are those individuals who have a valid license to trade stocks in the live market. These are the people who also have the right to establish a terminal on their machine and an individual who wants to trade stocks in the market can do so only through stockbrokers.
A stockbroker provides an individual with something called a ‘trading account’ with which stocks trading can be carried out.
Let me tell you that stockbrokers are those guys who are considered to be the experts of the stock market and they can provide you the best knowledge about which stocks to buy and sell.
As part of their job, day in and day out, they keep reading the fundamentals of stocks and they can provide you with the right kind of advice about the direction to head for.
So, if you get a chance to meet a stockbroker personally, you can discuss how to go ahead in your stocks trading career.
There are few stockbrokers and stock-broking companies that would help you by providing daily, weekly, or fortnightly tips about which shares to buy and which not to buy.
So, if you are interested, you can subscribe to such tips as well. However, I will caution you about not to follow these tips directly;
first study the pulse of the market and how this business goes on. If you feel you are made for it and would not mind a few monetary losses here and there to start with, then you know where to go and what steps to take.
Trading and Demat Account
Stockbrokers provide an individual with something called a ‘trading account’ (as I had mentioned earlier) through which it becomes possible to trade stocks. Now the question comes that even if you buy shares, where will you store them? Here comes the concept of ‘Demat Account.’
Demat Account is a repository to store the stocks that has been bought from the market. Once you buy stocks from the market, it will go to your demat account and at the time of selling those stocks, it gets deducted from the same account.
A trading account is also connected to your saving account from which your money to buy can be deducted and the same savings account receives the money when you sell the stocks. So, it’s a cycle that would go on repeating itself while you trade in stocks.
Therefore, studying of the stocks and the stocks market, opening a trading account and demat account, and having words with a few stockbrokers will surely help you in deciding where to go in the stock market and how to earn money by stocks trading to pursue your career.
I hope this information will help you to earn money from stocks trading, if this is the direction you want to go…