Shares Trading Basics

shares tradingTrading shares on the stock exchange is one of the tools for smart investment in order to increase financial resources and enrichment. What does competent stock trading mean for beginner investors? First of all, this is the fulfillment of the “golden” rule of increasing and preserving capital — investing most of the funds in the market-tested assets with a minimal degree of risk, but with a low income, and a smaller share of capital — in risky operations with a large return on investment.

What is the difference between online shares trading and Forex trading? On the foreign exchange market, trading takes place almost around the clock, with breaks on weekends and “night” hours for large international markets. In stock markets, shares online trading is carried out only at certain times. Playing on the foreign exchange market is considered to be riskier than trading securities, so the latter is better suited to those who choose a conservative game with little risk.

The main reason for investing in stocks is the possibility of high returns. If you are intimidated by the associated risks (and they are present in any kind of investment, even with deposits in the bank), then you can be happy and upset at the same time. Going bankrupt with shares is almost impossible. Of course, there is a chance of losing some of the funds, but if you invest into your knowledge first and learn how to buy shares and how to sell shares, you will receive, in majority of cases, only profits.


What is Shares Trading?

First, let’s answer this question: “What are shares?”. Shares, or stocks as they are also called, are a piece of company, where the person owning the shares of a company becomes its co-owner. The company is the issuer of these shares. Brokerage services is what makes initial purchase of shares from a company and trading shares online so simple and easy.

So, if you are not sure how to buy shares online, all you need to do is find a good broker that is selling the shares you want to buy or just search for the best shares to buy today and register on the broker’s website. After you upload money to your account online, buy shares you desire.

If you are still wandering “What is shares trading?”, the answer is very simple. When you buy and sell shares online, you become a shares trader. Stock trading is carried out on a regular schedule in a strictly defined place on a real (large financial and industrial centers) or virtual trading platform (internet). It is done in accordance with the unified requirements for the conditions of the transactions on the basis of counter offers of the parties. The main objectives of the trading platform include the following:

  • organization and structuring of the stock, currency and commodity markets;
  • simplification of stock trading processes;
  • adjustment of supply and demand in order to stabilize stock trading on the stock market and protect the interests of players from adverse price fluctuations.

Best Online Shares Trading Guidelines

A beginner trader has many questions, among which are “How many shares should I buy?”, “What is shares trading strategy?” and others. First, let’s say that when you buy shares online, there are two types to choose from:

  • «Blue chips» — shares of the largest and most successful companies, leaders in their respective industries. There are not many of those and they consistently occupy the top lines in stock market indices. The term «blue chip» in stock market came from the game of poker: blue chips have the highest value. On the stock exchange, they are considered best online shares, trading which gives an average yield of about 11% per annum. They always have both the seller and the buyer, being considered especially reliable.
  • Second and third rank stocks are those of well-known companies that are inferior to blue chips in terms of liquidity and capitalization.

What are the best shares to buy? Everyone has their own approach. You can listen to experts, you can use fundamental or technical analysis, if you, of course, have the necessary skills. You can buy random stocks based on your intuition. An important aspect for stocks is liquidity — that is, the ability to quickly buy or sell the amount of securities you need. Of course, it is best to study the basics of technical and fundamental analysis and act in accordance with the knowledge gained. It is also important to keep track of the economic calendar, news.

As it was mentioned before, to start trading shares you will need a broker. Brokers provide services for the purchase and sale of shares for a small percentage of the transaction. A broker is an intermediary between you and the company issuing the shares or an individual reselling those shares. It takes responsibility for the purchase of shares and provides you with the necessary equipment and market data.

To trade stocks, you need to register for a brokerage account. Usually, a small down payment is required to open it and the amount differs among different brokers. Through the broker, you can access any trading platform in the world, be it the stock markets of the USA, Europe, India, China, Brazil or Australia, and buy/sell securities traded there.

Shares trading is suitable for those who want their money to «work». There are only two types of earnings: on the rise (long trade) and on the decline (short trade) of shares prices:

  • Long trade: the purchase of shares on the «rise» of their value with the subsequent profitable trade with the same shares at the peak of their price.
  • Short trade: sell shares at the peak of the price, that is, at the initial moment of a fall, and buy shares at the lowest cost, that is, at the moment of maximum decline.

Having developed own strategy and rules of the stock game, a novice trader can open an account on the broker’s website and start investing. In order to free themselves from round-the-clock monitoring of price changes in the stock market, many players use an electronic robot to automatically perform operations according to a given algorithm using special programs as well as other various tools.