How Stock Market Works

How Stock Market Works Explained

Spend Enough Time to Understand the Concept. Fundamentally, stock market is an avenue for business people to meet shareholders.Other than bank loans, they now have another option to finance their businesses.They did it by offering their company’s equities in exchange of shareholders cash.The company is never required to repay the capital, but the new shareholders have a right to future profits distributed by the company.

For shareholders, they have alternatives to where they should put their money into. In the same time, they get the opportunity to participate in capital intensive businesses at an affordable price. However, unless you are the major shareholder, you don’t have enough power in deciding company’s directions.

Whenever a company decided to get listed, it needs to go through heavy regulatory compliance and reporting commitment set by the stock exchange authority. If successful, it will start selling its common shares to public investors through an Initial Public Offering (IPO).

This is what called as the ‘primary offering’, where the shares offered to shareholders are directly from the company itself. This is just the beginning of how stock market works though.

Once the company get listed in the stock exchange, you’ll find its share price start moving. Either it is moving upward or downward is depend on its demand and supply.

If demand is more than supply, the stock price will move upward, and vice versa. This is the time where other investors or stock traders start buying and selling stocks.

This known as ‘secondary offering’, where the shares offered to new shareholders are from other shareholders who previously owned the shares.

And what affect the demand and supply of the stock?

When Bloomberg reports Microsoft’s quarterly earnings as above expectations, its future profit prospect deemed to be brighter by most investors. Since more investors interested in owning the share, Microsoft’s stock price will go up as not many investors willing to sell their shares.

So, basically, when the company’s prospect deemed to be brighter, its stock price will increase as investors who want to own the share outweigh the investors who are ready to sell them; and vice versa.

This is how stock market works.In stock market, the presumed value by the investors is the one responsible to its price fluctuations.

Company’s profitability, business expansion, economics evaluation and market condition are some of the factors been considered by investors in determining if the stock worth the price or not.

Five Basic Investing Rules That Investors Easily Forget

These Basic Investing Rules

Will Guide You on How to Manage Your Investment

The Basic Investing Rules

It is very easy to jump into stock investment bandwagon following others to make money, but without strong investment philosophy straight from beginning, it is quite difficult for you to be successful. Not only in stock market but in any investment decision you ever do.

It takes me years after investing in stock market to discover these basic investing rules. It is not my intention to impose new rules to investing, but you'll be on the winning side if you know the basic rule of the game.

Basic Investing Rules 1: Investing Needs Money

Companies are approaching bankers, wealthy individuals and public investors asking for money. Therefore, only capable investors (at least have the money) should invest in the stock market. Though not the fastest way, saving money is the easiest method to accumulate wealth.

How much money will you be saving is depend on your financial goals, income capability and time availability. I myself allocate 30 to 50 per cent of my salary as a 'forced saving' to expand my investment muscle. Find out how much you should save from my retirement planning step by step guide.

Latest US surveys found that more than 50 per cent of the population is expending more than what they earned. Make sure you are not one of them!

Basic Investing Rules 2: Start Investing Only If Enough Money

Having money to invest is just not enough. After all, you aren't going to invest with your medical fund are you? Lying at home without proper medication just because you'd lost the money in the stock market should be the last thing you ever want to be happened.

Under normal circumstances, you should not seriously consider investing unless you had satisfied at least one of the three following conditions:

• You have six months income worth in savings.
• Your current assets equal to your current liabilities.
• You have just acquired a sudden windfall or inheritance, which should be thought as capital and not as current income.

Basic Investing Rules 3: Know How Much Money to Invest

Greedy stock traders risking ALL their money in stock market, but smart stock investors invest within their surplus in savings. It is just a common sense, but you will be amazed on how investors around you get greedy when stock market appear to be very bullish.I let six months worth expenses all the time in my bank account. In case the market turn against me, I'm not panic like other investors do. In fact, I will take advantage from this market inefficiencies to double my return by buying undervalued shares, while continue living my own life!


Basic Investing Rules 4: Have Investing Goals

Understanding your objectives is the major part of successful investing, and many don't have them since the very first day they start investing.

Ask yourself, do you invest:

• For short-term, medium-term or long-term?
• For your kids' education, buying new homes or for retirement?
• For income (dividend) or for growth (capital appreciation)?

Specific goals can direct you to specific investment plans. Having definitive investment plans will then make your stock investment practice much easier. More importantly, you are not influenced by the crowd; not easily tempered by the bull market and not panic in bear market.

Basic Investing Rules 5: Aware of the Associated Risk

There are always risks in investment. In stock market, the risks include:

• Individual Financial risk.
  Probability that you went broke, either because you lose your jobs or businesses. You didn't know when you get fired due to downsizing or business went down due to stiff competitions.
• Companies Business risk.
  Probability that the companies that you invest in went down either due to stiff competitions, mistakes in business directions or corruptions in it's own management.
• Stock Market risk
  Sometimes, the stock you invest in has nothing wrong but because the market sentiment went down, will also effect the price of your stock

Risk is everywhere.

In stock investment, it is not about avoiding risks that matters, but rather reduce the risks to the lowest level right from the dollar you cash in till the dollar you cash out.

Though all the basic investing rules are really that basic, don't take it lightly when it comes to money. Strictly follow the rules, and the money is yours.

PROFIT TAKING

Trading stocks education - Trading tactics & examples

Psychologist, Dr. Daniel Kahneman (The Nobel prize in economics - the field of behavioral economics) basically shows that investors are irrational, but predictably irrational. They continue to make the same mistakes over and over. One of the biggest is a common inability to take a loss: taking a loss is so painful, it is simply avoided.

A trader's most valuable commodity is trading capital. What is the most important rule for a trader? Preserve your capital. This is what keeps a trader in the game, and it is foolish to do anything that will jeopardize it. Subsequently, to preserve a trader's capital, there are rules that help a trader, whether in short, intermediate or long term play.

The rules listed below are suggestions. Only the trader can decide which rule is important. However, when a trader decides on a set of rules, they should be used consistently. Rules make up a trader’s system and are enforced by discipline.

1. Never be willing to let a position go against you by more than 5 to 8%. Obviously, the amount will differ depending on if it is a short, intermediate or long term play. If it is a short-term play and you have not set a distinct stop/loss, then you might want to set a dollar amount based on your capital. For example: If your capital is $60,000, you might not want to lose more then 1% on a short term trade. This also depends on what is happening with the trade and the market at the time. However, you should ALWAYS have in mind where you WILL get out of a trade. Don’t fear cutting your losses. Just cut them and move on.

2. Always take at least some profit at 20 to 25%. This is an important concept. When in doubt, take some profit. When the stock comes down again you can always get back in. It is the trader's decision to select a higher or lesser percentage. Of course it all depends on the market and the trade and how comfortable you are with the trade. Doesn't it make sense to take something off the table in case the stock goes down? This technique is a good way to control greed. If you are disciplined enough to cut losses at 5 to 8% no matter what, and you are taking some profits at 20 to 25%, mathematically how can you lose money?

3. When your stock has demonstrated its ability to move in the desired direction, you should take further action by raising your stop/loss point to break even. At this point, allowing a winner to fall back into losing territory is just not smart, no matter what the reason. We work hard enough being right in the stock market without allowing the winners to turn into losers. By raising your stop/loss to break even ALL of the risk is taken out of the trade. At this point you can literally relax and enjoy the trade. One cannot begin to tell how psychologically important this rule is. Once a trader realizes that money can no longer be lost, a tremendous calm and clarity begins to engulf his or her mind. A sense of control and power evolves as the trade moves on. You can move your stop/loss continually higher and you become more comfortable with the trade.

4. Decide at what percentage you will take profits, etc. You might decide to protect 3% of your profits when the stock rises 10%. Once a stock rises 15% you might decide to protect 10% of your profits. When your stock rises to your target 20 to 25%, revert back to rule #2. You must decide what is comfortable in the profit department. The important thing is to make some decisions. Make those decisions a part of your system and govern your system with your discipline.

A personal note on profit taking: There is no question that if you are disciplined enough to follow a plan such as the one outlined, it will improve your results. However, most people will not follow rules. Why? Most people cannot stick to rule #1. Winners cut their losses short and move on to the next trade. Also they hold no grudges against any security. Losers hold on to falling stocks mostly because of psychological issues until making a rational decision has long since disappeared from their psyches. Only time will tell whether you have the inner strength to become a winner.

Trading terminology

Glossary - continue..

Long-Term - A long period of time, or for a buy and hold investment strategy.

LIMIT ORDER - A limit order states the maximum price you are willing to pay for a stock. You can use this type of order to avoid entering a position if a stock gaps up or down at the opening and you want to avoid entering at an extreme price. Limit orders can be combined with "buy" or "sell on stop" orders as well.

LONG POSITION - When you buy a stock from the long side, you are purchasing the shares with the hope that they will rise in price. This is the exact opposite of a short sale.

Margin Account -A sophisticated customer account at a brokerage firm which allows an investor to buy securities with money borrowed from the broker. Margin accounts generally offer low interest rates on margin loans to encourage investors to buy on margin. The Federal Reserve limits margin borrowing to at most 50% of the amount invested, but some brokerages have even stricter requirements.

Money Management -The process of managing money, including investments, budgeting, banking, and taxes.

Open a Position -To open an investment. Opening a long position requires buying, and opening a short position requires selling.

Overbought/Oversold Indicator -A technical analysis tool that attempts to define when prices have moved too far and fast in either direction. This indicator is calculated based on a moving average of the difference between the number of advancing and declining issues over a certain period of time. The analyst will sell if the market is considered overbought, and vice versa.

Risk Management - The process of analyzing exposure to risk and determining how to best handle such exposure.

Risk Tolerance -An investor's ability to handle declines in the value of his/her portfolio.

S&P 500 - Standard & Poor's 500. A basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole (over 70% of all U.S. equity is tracked by the S&P 500). The index selects its companies based upon their market size, liquidity, and sector. Most of the companies in the index are solid mid cap or large cap corporations. Most experts consider the S&P 500 one of the best benchmarks available to judge overall U.S. market performance.

Short - The state of having sold a stock short without having covered it (repurchased a previously sold contract).

Short Selling - Borrowing a security or commodity futures contract from a broker and selling it, with the understanding that it must later be bought back and returned to the broker. Short selling is a technique used by investors who try to profit from the falling price of a stock. The investor's broker will borrow the shares from someone who owns them with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, he/she "covers the short position" by buying back the shares, and his/her broker returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increases, the potential losses are unlimited.

Spread - The difference between the current bid and the current ask (in over-the-counter trading) or offered (in exchange trading) of a given security .SP500 or S&P500- The S&P 500 is one of the most commonly used benchmarks for the overall U.S.stock market. The (DJIA) Dow Jones Industrial Average was at one time the most renowned index for American stocks, but because the DJIA contains only 30 companies, most agree that the S&P 500 is a better representation of the U.S. market. In fact, to many it is the definition of the market. When you hear on the evening news that "the market was up today", the reporter is likely referring to a rise in the S&P 500. Companies included in the index are selected by the S&P Index Committee, which is a team of analysts and economists at Standard and Poor's. The S&P 500 is a market-value weighted index, which means each stock's weight in the index is proportionate to its market value.

Technical Analysis -A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future market trends. Technical analysts believe that they can accurately predict the future price of a stock by looking at its historical prices and other trading variables. Technical analysis assumes that market psychology influences trading in a way that enables predicting when a stock will rise or fall. For that reason, many technical analysts are also market timers, who believe that technical analysis can be applied just as easily to the market as a whole as to an individual stock. Unlike fundamental analysis, the intrinsic value of the security is not considered.

Ticker Symbol - A system of letters used to uniquely identify a stock or mutual fund. Symbols with up to three letters are used for stocks which are listed and trade on an exchange. Symbols with four letters are used for NASDAQ stocks. Symbols with five letters are used for NASDAQ stocks other than single issues of common stock. Symbols with five letters ending in X are used for mutual funds.

Volatility - The relative rate at which the price of a security moves up and down. Volatility is found by calculating the annualized standard deviation of daily change in price. If the price of a stock moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.

Volume - The number of shares, bonds or contracts traded during a given period, for a security or an entire exchange

Trading terminology

Glossary

Aggressive- An investment strategy with an above-average risk tolerance, with the expectation of above-average returns. Aggressive strategies usually favor the purchase of stocks of rapidly growing companies, buying on margin, and options trading.

Buy and Hold - An investment strategy in which stocks are bought and then held for a long period of time, regardless of the market's fluctuations. This strategy is based on the assumption that in the very long term (10-20 years), stock prices will go up and the market as a whole will rise despite any short-term fluctuations due to business cycles or rising inflation. Trade commissions are reduced by buying and selling less often and taxes are often reduced or deferred by holding positions longer.

BUY AT OPEN - If you'd like to implement this type of trading order, then you should place a market order before the market opens up for trading (9:30 AM EST). When placing a market order, your trade will be filled at whatever the opening price is on that morning.

Capital gain- The amount by which an asset's selling price exceeds its initial purchase price. A realized capital gain is the profit resulting from the sale of an investment. An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold. Capital gains generally receive more favorable tax treatment than ordinary gains. Depending on your tax bracket and on how long you held a capital asset, you may pay about one-third to one-half less tax on a capital gain than you would have paid on the same amount of ordinary income.

Capital loss- The loss that results from the sale of a capital asset. Ordinary income can be offset with capital losses up to a maximum of $3,000 per year and excess capital losses can be carried forward indefinitely until exhausted.

Close a Position -To end an investment. Closing a long position requires selling, and closing a short position requires buying.

Conservative - A cautious, risk-averse investment strategy. The preservation of capital is a high priority to a conservative investor.

Cover- To repurchase a previously sold contract.

Current Market Value -The present worth of a portfolio of securities at current market prices.

Day Trader - A very active stock trader who buys and sells the same security very quickly, executes a large number of trades each day, and generally closes all positions at the end of each trading day.

Diversification- A portfolio strategy focused on reducing exposure to risk by combining a variety of investments which are unlikely to all move in the same direction. Diversification reduces both the upside and downside potential and allows for more consistent performance under a wide range of economic conditions. A diversified portfolio may contain stocks, bonds and real estate.

Equity- Ownership interest in a corporation in the form of common stock or preferred stock. It can also be expressed as total assets minus total liabilities, referred to as "shareholder's equity", "net worth" or "book value". In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account (the value of securities in the account less any margin requirements).

Fundamental Analysis -A method used to evaluate the value of a security, by which an investor would carefully examine the company's financial and operations, particularly sales, earnings, growth potential, assets, debt, management, products, and competition figures. Fundamental analysis considers variables that are directly related to the company itself, whereas technical analysis considers the overall state of the market.

Growth Strategy -A strategy based on investing in companies which are growing faster than others in the same industry, with the goal of generating capital gains rather than dividends.

Hedge funds- A fund which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Used generally by wealthy individuals and institutions, hedge funds are restricted by law to no more than 100 investors per fund, and as a result most hedge funds set extremely high minimum investment amounts (ranging anywhere from $250,000 to over $1 million). Investors in hedge funds pay a management fee as well as a percentage of the profits (usually 20%).

IRA (Individual Retirement Account) -A tax-deferred retirement account for an individual that permits the individual to set aside up to $2,000 per year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later.IRAs can be established at a bank, mutual fund, or brokerage. Only those who do not participate in a pension plan at work or who do participate and meet certain income guidelines can make deductible contributions to an IRA. All others can make contributions to an IRA on a non-deductible basis. Such contributions qualify as a deduction against income earned in that year and interest accumulates tax-deferred until the funds are withdrawn

Online Stock Trading: Balancing Risks And Rewards

Online stock trading policy.

As the internet's popularity has continued to rise, many small jobs can be performed much more simply and quickly online, when in the past they would have needed to be carried out in person or over the telephone. A good example is online stock trading, which previously was done through brokers. However, investing stocks online has become the method of choice for many investors. Making wise investment decisions and finding a good online company are essential things to think about when choosing to trade online.

The advent of online stock trading has resulted in many online stock trading companies being set-up. When you are looking for assistance in stock trading, it is imperative that you check the credentials of these firms. You can use the internet to read what previous customers have to say about their experiences with these firms. Reading the terms of service is a must. A good online stock trading company makes its policy disclosures in no uncertain terms and provides good customer service.

Your internet trading can be an extension of your offline trading program. If you have a financial advisor you trust, he or she can suggest reputable sites and provide valuable information to help you keep a consistent trading style. Depending on his or her relationship with the internet trading site you select, he or she may be able to arrange for the money that you have invested currently to roll over in to the new account.

The freedom of trading online without the benefit of an advisor will also entail significant responsibilities and risks. If you decide to trade on your own, it is essential you understand completely what is involved. Classes or books may be useful sources of information. This is a crucial part of trading online. The lack of advice from a financial advisor has caused many people to lose money through online trading.

The risks should be kep[t in mind and should be balanced with rewards. Most people invest in a variety of companies, and this balance of high-risk stocks, and lower risk stocks which are slower growing and funds can help minimize the investor's risk and maximize his reward. Online stock trading that allows the user to trade without a personal advisor can be risky. The advisor's experience and knowledge help balance these risk and rewards. Many investors quickly forget to balance risks when looking at appealing high-yield growth opportunities.

Though it is still possible to trade through traditional brokers, both online and offline, internet trading has grown steadily in popularity over the course of the past decade. Internet trading can be a fun and interesting hobby, and it can be fascinating to make investment decisions on your own. There are, however, some risks associated with online trading

Tips to start investing in stocks.

Beginner Investor Education

If you are a beginner investor, this article will be enough to get all necessary information that you need to know because, it covering each and every point that a beginner investor need to know about investing.

For your better understanding, I am dividing this article into four parts. In the first part, I will provide all the most needed information for a beginner investor, what is stock and stock market, how it is working etc... In the second part, explaining the necessary points that a beginner investor should keep in mind. Third part, I will talk about the facilities required to start stock investing. Finally, I will cover the parallel investment instruments that an investor can opt to get the same benefits of investing in stocks directly.

Part 1: What is a stock and stock market?

In simple word, 'stock' is a single piece of ownership in a business. 'Stock Market' is the place where all the stocks listed for people to buy and sell. Click the "Download" here or the button in the top menu of this blog and download the file "The Financial Market Guide" to read it full. After reading this, you will be familiar with all the terms that associated with investing and investor.

part 2: Points that beginner investors should keep in mind

For a beginner investor, direct stock investing is not recommended due to lack of knowledge and experience. Getting adequate knowledge is a time taking process with lots of required efforts. If you are entering to direct stock market investing as a beginner, there are enough room for errors and losing money. Chances of misguidance are another disadvantage.

To begin with stock market investing, you should understand different style of investing.

Share trading: This is commonly using by day traders. It is a buy now and sell after little time strategy. It is just like gambling and risk of losing money is 100%. A beginner investor shouldn't move with such investing approach and should be avoided the same.

Value investing approach: It is a buy and hold strategy. This is the right approach for anyone who really want to enjoy the classic investment style and increasing wealth gradually. Success of this strategy entirely depends time and quality of the stocks that an investor selecting. Legend investors like Warren Buffett and Benjamin Graham are the best examples for those who practically used and succeeded with value investing strategy.

To get the required qualities of a value investor, you are required to read lot of books on the experience and investment methods used by succeeded value investors. This will put you to the safe side by understanding the style and idea that legend investors like Warren Buffet, practiced and successfully implemented. For your best reference, below are the two books I greatly recommending for you to purchase and read:

1. Common Stocks and Uncommon profit by Philip Fisher
2. Intelligent Investor by Benjamin Graham


As a beginner investor, if you really like to follow the successful value investing style and required to achieve all the skills to be a good value investor, I highly recommend you to buy and read both of the above classic guides.

First guide, Common Stocks and Uncommon Profits" will teach all necessary lessons to have adequate knowledge on all considerable points when selecting a company. It finally shapes you to identify excellent companies to invest among thousand of listed companies in the stock market. Take a look on the 8 cutting edge investing principles Philip Fisher explained in this book for investors.

Second guide, The Intelligent Investor, will give you the most required qualities of investors to get investing success. It also give you the ideas of selecting stocks at right time. It is the best guide to learn an investors required approaches to the stock market at the time of volatility or stock market crashes. It will also teach you the required qualities of a value investor for making profitable decisions.

Part 3 - Facilities required to start stock investing.

As you aware, this is the online era. Everything is in your finger tips with the magic of internet. You can now buy and sell share from anywhere in the world using your online trading account. At the very first, you need to approach a good stock broker to start and online account with them. Once after getting the account, you can start buying and selling stocks using internet by following the simple guidelines on how to purchase and sell shares and other instruements. You have required to work a little before finalizing a stock broker and online trading account. "I have written an excellent article explaining the criteria to select an online investment account with a stock broker, enable you to understand what are all the required qualities of a good stock broker and online trading account.

Part 4 - Parallel investment instruments

In this part, I intend to cover all other available investment instrument in a market that a beginner investor can select till getting enough knowledge and experience to buy and sell stocks directly.

Mutual Funds - Applying to a well diversified mutual fund using "Systematic Investment Plan (SIP)", help an investor to get same exposure like investing stocks directly. Through mutual fund, an investor investing his/her money to the bunch of stocks and getting the benefit of managing the money by well experienced fund managers on his behalf.

Index Funds - Another option for a beginner investor to invest into direct equities and grow money with time and economy. You can purchase index funds in two ways. First, most of the mutual funds have index funds and you can apply for one or two with them. Second, knows and ETF - Exchange Traded Funds - another kind of index funds that you can purchase directly from stock market using your online trading account like purchasing any stocks.

In my best opinion, as a beginner investor one should start investing in equities using Systematic Investment Plan and/or purchasing ETF through trading account using Dollar Cost Average methods. Once after getting enough knowledge and experience, he can start investing in stocks directly.

How Stock Market Works

How Stock Market Works Explained

Fundamentally, stock market is an avenue for business people to meet shareholders. Other than bank loans, they now have another option to finance their businesses. They did it by offering their company’s equities in exchange of shareholders cash. The company is never required to repay the capital, but the new shareholders have a right to future profits distributed by the company.

For shareholders, they have alternatives to where they should put their money into. In the same time, they get the opportunity to participate in capital intensive businesses at an affordable price. However, unless you are the major shareholder, you don’t have enough power in deciding company’s directions.

Whenever a company decided to get listed, it needs to go through heavy regulatory compliance and reporting commitment set by the stock exchange authority. If successful, it will start selling its common shares to public investors through an Initial Public Offering (IPO).

This is what called as the ‘primary offering’, where the shares offered to shareholders are directly from the company itself. This is just the beginning of how stock market works though.

Once the company get listed in the stock exchange, you’ll find its share price start moving. Either it is moving upward or downward is depend on its demand and supply.

If demand is more than supply, the stock price will move upward, and vice versa. This is the time where other investors or stock traders start buying and selling stocks.

This known as ‘secondary offering’, where the shares offered to new shareholders are from other shareholders who previously owned the shares.

And what affect the demand and supply of the stock?

When Bloomberg reports Microsoft’s quarterly earnings as above expectations, its future profit prospect deemed to be brighter by most investors. Since more investors interested in owning the share, Microsoft’s stock price will go up as not many investors willing to sell their shares.

So, basically, when the company’s prospect deemed to be brighter, its stock price will increase as investors who want to own the share outweigh the investors who are ready to sell them; and vice versa.

This is how stock market works.In stock market, the presumed value by the investors is the one responsible to its price fluctuations.Company’s profitability, business expansion, economics evaluation and market condition are some of the factors been considered by investors in determining if the stock worth the price or not.

The Best Online Stock Trading

Most Important Things When Looking for Online Stock Trading Account

When you first get started, you might think that all online stock trading companies are the same. The truth is, other than the fact that they are helping investors and traders buy and sell stocks, they all totally different altogether. Here are few tips you should look in a stock trading company:

• The trading cost
  The commissions vary from one online stock trading account to another. The difference have very much to do with kind of services they provide, facilities that they have as well as the branding power that they posses. So, choose the one that suit your needs and don’t get overwhelmed with all the fancy tools that they provide if you don’t know how to use them. Your decisions should consider how frequent you are planning to trade too; 100 trades per day or just five trades per year (such as long term stock investing), as you can take advantage of their trading plan.
• Reputable Company
  As you are dealing with hundreds if not thousands of dollar for each transactions, you don’t want your money to lose in the way do you? My suggestion is, check with Better Business Bureau before deciding on which online trading company will handle your money. In the same time, surf the internet and find which companies most preferred by investors. TIPS: You can check also its Alexa traffic ranking too, just for an indication on how many visitors are visiting their website everyday; assuming bulk of the visitors are from its existing users.

You must be comfortable with the website layout for easy navigation. Besides, it is also useless to trade online if the website is frequently down for maintenance. You should also have quickly surf the website and see the loading time and see if you have the patient to wait till the full page loaded. Sometimes, the online stock trading company provide graph and charts view facilities.
While some may provide it for free, others may charge the services.

What You Need to Know About Online Stock Trading

What is Online Stock Trading or Online Stock Investing

Investing or trading stock online is as simple as you buy or sell shares online. Meaning, rather than the traditional stock broker, you can buy shares over the internet. Examples of companies that provide this kind of services are Charles Schwab, E*Trade, Fidelity, Firstrade, Muriel Siebert, OptionsXpress, Scottrade, TD Ameritrade, Thinkorswim, TradeKing, Vanguard, WallStreet*E, Wells Fargo and ZECCO Trading.

Why you should consider trading stock online?

Why Online Stock Trading Is So Popular Nowadays

Demand from stock traders to reduce their operating cost is the major reason. Since bulk of their expenses were come from the stock brokers' commissions, they are pushing so hard to find the cheapest possible options. Now, the integration of technology and online application makes their dreams come true.

But, if the online stock trading companies are offering much lower commission, how did they gain profits?

Actually, there are many ways for the online stock trading companies making money. And of course, their main stream is from the trading commission itself. They are able to offer lower commission rates largely due to their lower operational expenses as well as the economies of scale by having huge number of users.

But amazingly, there is online stock broker that can offer ZERO trading account. For example, at ZECCO Trading, you can have 10 trades for free each month, provided that you have a minimum of $2500. Where they get their income then? ZECCO Trading is still making money from the interest income of the account balance. Meaning, you’ll be gaining less interest rate on your saving if you let it idle in their account balance than if you put elsewhere. Besides, they often make money whenever stock traders choose to trade on margin. And sometimes, if they manage to get active participation from other traders or investors, they can sell ads too! That is why, they can cut the cost, and you too can save on your trading costs.

br>But stock trading is not just about looking for the cheapest possible commissions. Instead, it had changed the way stock traders works too. With online stock trading, they can do multiple jobs while sitting at home. They can assess the latest stock price, historical stock trading chart pattern as well as the market news by just sitting on their chair while buying and selling shares. With this kind of online market information that is easily available and accessible, smart traders can trade the right stock at the right time, ALL THE TIME.

Moreover, as people are becoming more incline towards the ‘work from home’ culture, the online stock trading need least possible marketing for it to be a successful stock trading product.

In addition, due to its simplicity, they can provide opportunity for almost everybody to participate in the stock market rally. As long as you are 18 years old, and have cash in hand, you can start investing anytime and anywhere. That is why, medical doctors, graduates engineers, farmer or even school leavers are so interested in investing in stock market.