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Stock Trading Explained

Online trading is the process of buying, selling, and trading securities, commodities, currencies, or any other products of value using an online platform. It first became popular during the technology boom of the late 1990s, during which exploding stock markets combined with the rapid advancement and proliferation of Internet technology created an environment that enticed many to try their hands at investing and trading at home without going through a broker, financial advisor, or other so-called expert.

What Is Stock Trading?

Stock trading typically is done through a trading platform provided by a brokerage firm or some kind of intermediary; however, the person doing the trading generally does not execute buy, sell, and trade orders through a live broker or third-party as with traditional trading. Stock trading begins with depositing money into an stock trading account, from which point that money is used to purchase securities (or other assets), the subsequent sale of which the proceeds are paid into that same trading account. Online trading comprises several different categories, including online investing and day trading.

Put briefly, stock trading is using an online platform to make investments in stocks and other valuables and then holding those assets until a satisfactory gain in value has been realized (or a loss needs to be mitigated), at which point they are sold. Day trading, on the other hand, is when all trading positions are closed out during the same day in which they are opened. This means any unit that is purchased on a certain day is sold by the end of business that same day. All stock trading is done through trading platforms provided by a wide variety of business.

Some of these platforms are cloud-based, while others are downloaded onto the home computer. In recent years, stock trading also has expanded to tablets and other mobile devices. Mobile stock trading apps enabling users to execute buy and sell orders with the touch of a finger are spreading rapidly. All stock trading is regulated by the Securities and Exchange Commission.

Functions and Purpose of a Stock Market

A Stock Market is essentially separated into two groups – Principal Market and Supplementary Market. Principal market takes on the initial project and offering of stocks and securities to shareholders while supplementary market performs the subsequent investing.

  • For businesses, the most crucial method of raising revenue is the Stock Market. The company can exchange publicly and raise further capital or resources by marketing the shares owned and operated by the organization in the Stock Market. The freedom and fluidity supplied by the stock market enables shareholders to market and purchase stock options easily.
  • If history be told, we will discover that the share costs have a great impact on the economic system and the social surroundings of a state. The abundance of households and their expenditures greatly depends on the costs of stocks retained by them. Hence, the central banking institutions constantly examines the tendencies of the stock market so that the monetary system works without problems.
  • It’s useful to invest in stocks as it contributes to a more lucid savings system when compared to the idle deposits with banking institutions or absorption of the savings. Investment in stocks particularly encourages economic industries such as, farming, business and enterprise, ultimately bringing about financial growth and higher work productivity levels.

It’s commonly noticed that the organizations whose stocks are publicly-acquired build more economic advantages than the privately-held organizations. Simply because the public organizations have more range to improve and therefore they’re predisposed in the direction of improving their administration criteria and efficiency to be able to fulfill the public shareholders, which essentially results in more profits to them.

What Is Online Investing?

Online investing is a broad term that can be used to describe any type of purchasing an asset and holding into it anticipation of it increasing in value. The only stipulation is that this type of investing be done online, directly by the investor, bypassing any kind of live broker or middle man. People choose online investing over traditional investing through a broker for many reasons, including convenience, autonomy, and avoiding many of the fees and commissions involved when a traditional broker is employed.

The most commonly known and discussed type of online investing is an investor using an stock trading platform to buy and sell stock in individual companies. The broad gamut of information available through a massive network of financial information sources online imbues individual investors with perceived level of knowledge and confidence that they can buy and sell individual stocks (generally regarded as a risky investment strategy) profitable without being advised by a trained expert. However, online investing is not limited to purchasing individual stocks. Various brokerages and trading platforms also offer software enabling users to invest in such assets as bonds, currencies, even mutual funds without going through a live broker or advisor.

Once again, the only common thread is that investments are executed online and entirely by the investor, not a third party. Investments made online can be held for as short a time period as a day or two to as long as decades or more, depending on the goals and objectives of the individual investor, as well as market conditions. The only qualification for a trade made online being considered an online investment rather than a day trade is that a day trade is closed out the same day it is bought, while a trade held overnight or longer is considered an investment.

In addition to investing completely online, many brokerage houses are now offering hybrid investing services, which allow investors to buy and sell online without going through a broker and paying associated fees and commissions but also provide 800-numbers staffed by advisors (many of whom have passed the Series 7 or other relevant exams) who are able to offer assistance when various questions or concerns arise.

What Is Day Trading With Stocks?

Day trading is a specific type of stock trading which became very popular in the 1990s when the NASDAQ was ascending rapidly and nascent stock trading platforms made it easy and convenient for everyday people to make quick money from the stock market bubble without leaving their living rooms. A few unfortunate situations kicked off the next decade, including the bursting of the dot-com bubble in March 2000, the terrorist attacks of September 2001, and the big-time corporate accounting scandals that took place the following year.

These events temporarily threw the economy as well as most stock markets into reverse and temporarily quelled the growth and popularity of day trading. However, as traders are a versatile and resilient bunch, new day trading strategies and methods designed to make money even in a declining or uncertain economy were born of the economic malaise of the new millennium.

Day trading is defined as stock trading in which every trade is fully executed within the course of one business day. This means that an asset is bought and subsequently sold all within a day’s work. The objective of the day trader is to take advantage of numerous small moves within the market on a daily basis. Successful day traders operate by identifying trends in the market, as well as “signals” or “triggers” which indicate that a security moving one direction or another in the immediate future is highly probably. At that point, the day trader either takes a “long” position on the security, meaning he purchases it with the intention expectation that the price will rise and he will sell it later in the day, or a “short” position, where he “borrows” the security and sells it with the expectation that it will fall in price, at which point he buys it to cover what he borrowed. The majority of people who try their hand at day trading end up losing money; however, those who take the time to become skilled at analyzing market trends have the potential to make money with consistency.

How Much Money Is Required For Stock Trading?

Because stock trading is such a broad term, there is no required set minimum amount of money to be able to start doing it. There are hundreds of different banks, brokerage houses, and trading platforms available to the online trader, all of them having different rules and requirements and qualifications and, at times, set minimums. Those minimums largely depend on the type of trading that you will be doing.

Some brokerages have very low minimums for more long-term, low-risk trading activities. They do this to encourage new investors to get established with their firm, with the hope that it will lead to larger trades and more money being placed with them in the future. Most brokerages and trading platforms that cater to day traders or other short-term, high-risk traders have in place much larger minimum balances. This helps keep out wide-eyed, inexperienced traders with dreams of starting with $500 and turning into millions in short order.

A better question to ask than how much money is required to trade online, is how much money do you require to feel comfortable trading online? To answer this question, you need to ask yourself how much money you would feel comfortable losing if you have a run of bad luck and trades don’t go your way. Because most types of online trading do not offer the insurance and security of a bank deposit, total losses are a real risk – although they can be greatly mitigated by following some common-sense practices.

Still, stock trading is not where to place your life savings, even if you have a working strategy. There is just too much uncertainty from day-to-day, and what may be a foolproof strategy one day can easily evaporate as a legitimate trading method overnight. Many online traders found this out the hard way during the early to middle part of 2000. The final factor that will determine how much money you feel is a good starting amount to get into stock trading is your level of trading experience. New traders are encouraged to seek out brokerages which offer lower initial trading account balances.

What Is The Difference Between Cash Trading And Margin Trading?

As you do your research and start fleshing out your different trading options, you will probably come across a lot of information about trading on margin. Many brokerage houses use margin as a way to promote their trading platforms and entice traders to go with them instead of a competitor. Before you use margin as one of your deciding factors in choosing a brokerage house, it helps to have a thorough understanding of what margin is and how trading on it differs from cash trading. Cash trading is pretty self-explanatory.

It is exactly as it sounds. The trader deposits his own cash money into his trading account and uses that money to make his trades. However much money he puts into his account is how much he has to trade with. Therefore, his buying power is limited specifically by his own funds. A cash trader who funds his account with $10,000 has a buying power of $10,000. Margin trading, in contrast, is where a trader funds his trading account partly with his own money but also leverages the buying power of the much larger brokerage house through which he trades.

For example, if his brokerage house offers a margin of ten-to-one, he is able to achieve a buying power of $100,000 with only a $10,000 cash outlay on his part. The excess money that the brokerage house lays out is secured by the value of the securities purchased by the trader. The advantage of margin trading to the trader is that it enables him to make larger trades, which, if executed successfully, can net larger gains. However, there are a couple of downsides to margin trading. One is that the increased buying power sometimes has the ability to entice inexperienced traders into taking on too much risk too soon. What they often fail to keep in mind is that even though their buying power on paper is $100,000, once they lose that first $10,000, they are done.

This is why the amount of money that a margin trader actually contributes himself is known as “first loss” money. Something else to keep in mind when considering trading on margin is that the securities you purchase on margin collateralize the money being lent to you by the brokerage house. That means even though you own these securities, your broker has a claim on them. At any point, your brokerage house could execute a “margin call,” meaning it effectively redeems the value of those securities to get its money back. This can leave you, as a trader, in a bind if you aren’t well-capitalized with your own money.

What Is The Difference Between A Market Order And A Limit Order?

The two primary types of orders associated with stock trading are market orders and limit orders. A market order is an order to buy or sell a security at its current market price, usually as quickly as possible. This is where it can be vitally important to have a trading platform capable of executing orders very quickly, particularly when the price of a security is moving rapidly in one direction. If there is any sort of delay, the price at which a trader executes and order and the price it which the order is actually placed can be very different.

An example of a situation in which a delay in executing an order can bite a trader is when he is looking to sell off a security on which has gained in value since he purchased it but that is rapidly declining from its peak value. If he purchased it at $10, watched its price increase to $14, but now it has dropped to $12.50 in the last few minutes and that decline shows no signs of abating, the trader has a large incentive to sell that security and get out while he’s ahead. However, a delay in his trading software getting the order in could mean that the price drops back to $10 – or lower – before the sale is finalized, wiping out or even reversing his gains.

Obviously, market orders are much more effective when used by a trader who follows the market like a hawk and who is armed with fast, efficient trading software. A limit order, on the other hand, is an order to buy or sell a security once it reaches a certain price. Limit orders enable traders to plan out potential strategies ahead of time and to take more of a hands-off approach when it comes to following the markets. A trader using limit orders is able to analyze trends before the market opens, predict moves in certain directions, and execute future orders based on anticipated movements. Limit orders also provide a level in protection in situations where prices are moving very quickly or are vacillating from one direction to the other and market orders may not be executed in time. The downside of limit orders is that depending on trading volume, they aren’t guaranteed to be executed. Also, they almost always cost more in fees than market orders.

What Are The Risks Involved With Stock Trading?

  • Stock trading risks ultimately boil down to one thing: losing your money. Trading securities online can be wildly profitable for traders who commit to being students of the game, exhibit patience and discipline in sticking to proven methods that work, and are capable of refraining from letting their emotions usurp their knowledge and common sense during periods of volatility or upheaval in the markets.
  • The risk of a capital loss in stock trading can manifest itself in many ways. The biggest is that there is such a mass of information out there about stock trading, with so little of it being accurate or genuinely helpful, that it can be easy for an earnest newcomer to the industry to be led astray. Most of the information and advice being disseminated in chat rooms and on message boards is well-meaning but misguided at best, and disingenuous and purposefully misleading at first. After all, trading is a zero-sum game, meaning that for every trade on which you make money, someone else loses, and vice versa. Therefore, many traders feel it is in their best interest to lead others, whom they view as competitors, down the wrong path to give themselves a competitive advantage.
  • The most successful traders mitigate this risk by seeking out a proven mentor or committing to learning a proven trading system and not deviating from what they learn no matter what the buzz is online. The technology on which an online trader is dependent also presents somewhat of a risk. For example, a power outage or interruption in your internet service could prevent you from getting online and accessing your trading account at a crucial moment, such as a rapid ascent or descent in a security price necessitating you sell fast to realize a gain or mitigate a loss.
  • Finally, there is the risk of taking on too much risk itself. Any trading system you decide to be use should be thoroughly tested in practice, not just in theory. This means starting out by investing only as much in the system as you are comfortable with losing completely if the system doesn’t work as well in real time as it did on paper. Many traders think they have come up with the perfect method, so they get online and bet the farm on it, and only then do they discover some fatal flaw in the method that they failed to recognize when they were drawing it up. It is wiser to control risk with reasonable trades until a method has been proven.

What Is The Best Way To Learn About Stock Trading?

When it comes to trading online, knowledge is vital. Relying on luck, instinct, or a wing and a prayer is a surefire recipe for losing money even if you have a strong base of knowledge. If you don’t – meaning those other things are all you have to go on – it only means you’ll lose your money that much faster. Having knowledge of stock trading means first understanding all the ins and outs of trading itself: What is a security? What is an option? What is an equity? What is the difference between a long and a short position? What is a margin call? From this basic knowledge, you can learn to analyze trends in trading and to develop a strategy.

Almost all successful traders start out simply by following other people’s established strategies. Once they have been in the game for many years, watching the way markets move on a daily basis, in good times and bad, and how they react to different situations and circumstances, some decide to branch out and develop their own trading systems. Others are happy following in the footsteps of others for their entire trading lives. But it all starts with learning the basis, and the best way to do so is to pick up as many books as you can on online trading, and devour the information inside. You should limit yourself to reading material written by respected and knowledgeable individuals in the business.

After you’ve read everything you can on the subject and learned the basics, the next step is to find a successful mentor whose methods you can learn inside and out and put into practice. The ideal situation is to find someone who can work with you live, either one-on-one or in a group setting. If this scenario isn’t feasible, live but remote training is your best bet. Otherwise, many successful traders have published volumes offering up the trading methods that have made them millions in explicit detail. These should be devoured as ravenously as the books about trading in general.

What Is The Difference Between A “Bull Market” And A “Bear Market”?

A bull market is established when a stock market as a whole increases in price over a protracted period of time. A bear market is the opposite: a stock market as a whole decreases in price long enough for a trend to be established. It is important to understand that just because the stock market as a whole may be experiencing a bull or bear market doesn’t mean that every stock within that market or even every industry is rising or falling in price in a corresponding manner.

For example, the internet and technology sectors of the market got hammered in the early 2000s when the dot-com bubble burst, but during the same period of time, other industries – particularly real estate – were doing just fine and even making rapid appreciations in price. However, for traders who endeavor to trade across a wide spectrum, it is important to recognize when the markets have entered a bull or bear period. Actually, this is equally important for those who trade more narrowly, only those traders need to focus on identifying the bull or the bear within the individual market segments they trade.

During a bull market, the most common way to make money is to take what is known as a “long position” on securities, meaning securities are purchased and held with the anticipation that they will increase in value. During a bear market, traders resort to other methods of making money, such as “short selling” (selling borrowed securities and subsequently buying them back at hopefully lower prices) or by selling call options against securities that they own.

What Does It Mean To “Short Sell” A Security?

During periods of economic downturns, particularly the dot-com bust of the early 2000s and the real estate bust of the late 2000s, you will hear a lot of chatter in trading circles about short selling. If you understand how it works, short selling can be a great way to stay profitable even during a severe bear market. Here is what you need to know. Traditional buying and selling of securities typically involves trying to purchase a security at a point when it is undervalued, meaning the price is low and you anticipate it to rise.

Once the price rises a certain amount, you then sell the security and make a profit equal to the difference between your purchase and sale price (minus, of course, fees and or commissions which are paid to your brokerage house). The colloquial expression for this, which you have undoubtedly heard, is “buying low and selling high.” It is the goal with any traditional security investment: to buy it while it’s cheap and sell it while it’s expensive.

In stock trading parlance, it is known as taking a “long” position. When you take a long position, you want the price to increase after you’ve bought it. Taking a “short” position, or short selling, is the opposite. Short selling is selling a security now, when you perceive the price to be high, and buying it later, when, hopefully, the price has dropped. It sounds confusing, but it really isn’t.

The number one question from those new to short selling is how is it possible to sell something before you buy it? The answer is that you actually “borrow” the security first, and then sell the borrowed security at the high price. When the price (hopefully) drops, you “buy” it and repay the lender. The excess is yours to keep, and it is how you make money short selling. It would be like if you borrowed your friend’s TV, sold it for $200, and then bought it back a week later for $150 and returned it to your friend, making $50 in the process.

When Trading Online, Do You Still Have To Go Through A Stock Broker?

When trading online, with very, very few exceptions, a trader still has to go through a brokerage firm to have access to the markets. There are a myriad of barriers in place set by the Securities and Exchange Commission, other regulatory bodies, and the securities market themselves which prevent most individual traders from having direct access to the markets. It takes more money and more ability to navigate red tape to circumvent these barriers than 99.9 percent of people have.

Therefore, a brokerage house is a necessary intermediary with which you must align if you want access to the trading markets. This, of course, necessitates a portion of your trading gains being appropriated by the brokerage house in the form of fees and or commissions. The good news is that there are a lot of brokerage houses out there which cater to online traders, which means fierce competition between those brokerage houses, which means more incentive to provide low fees and commissions as well as perks to attract traders. For example, many brokerage houses offer proprietary trading software free of charge, as well as access to experienced traders with whom you can bounce around trading methods and strategies as well as the latest on industry happenings.

While online traders almost always must go through a brokerage house to have access to the markets, online trading usually means bypassing an individual broker. The trading platform takes the place of the living, breathing broker and enables the trader to assume full autonomy when executing trades. This can be a good thing or a bad thing, depending on the trader’s level of expertise and comfort with the market. It is good because you can trade at a moment’s notice – all you need is Internet access – without having to track down your broker and get him on the phone. Also, not having a personal broker means one less person to whom commissions and fees must be paid. However, many traders still prefer going through a broker and leveraging the broker’s experience and expertise. These traders feel that having someone who has spent years studying the markets as an ally justifies the extra fees and commissions that must be paid.

On What Criteria Are Online Brokerages Ranked?

Will I make more money by hitching my wagon to a highly-ranked brokerage? As noted before, there are dozens of online brokerage houses from which a new trader can choose. And there are nearly as many web sites dedicated to ranking these brokerage houses on various criteria. Some of these ranking service are more reputable than others, meaning they do legitimate research and offer useful knowledge and points of comparison rather than simply throwing out generic information to generate clicks and web traffic.

Even still, it is important to understand that even the best brokerage ranking sites cannot steer you to a brokerage that is guaranteed to make you a ton of money just by nature of having a high ranking. Instead, these sites can tell you which online brokerages have the most satisfied customers and the best reputations in the industry for providing quality customer service. Although it makes sense that a trader who is making good money would be more satisfied with his brokerage than a trader who isn’t (or who is losing his shirt), these types of rankings are highly independent of who is making money where.

Instead, they concentrate on such criteria as how user-friendly the trading software is, the availability and competence of live customer service agents, and how easy it is to retrieve your money from your account when you want to cash out. The viability of your trading system and how well you follow it will 99 percent determine how much money you make (or lose) stock trading, regardless of which brokerage house you choose. With that said, a brokerage’s rankings for customer service and technology will have an impact on your day-to-day life, as an online trader spends a lot of time interacting with his brokerage house in one way or another – either via his trading platform or, occasionally, via email or telephone with customer service.

How Easy Is It To Open An Stock Trading Account With A Brokerage?

Can it really all be done online? Most brokerages make it very easy for new traders to open up an account. If they didn’t, they wouldn’t get many people to sign up, and therefore they wouldn’t be in business for long. Typically, the entire application process can be done online, although some brokerages still require certain documents to be signed by hand and mailed back to the company before they will active an account. For others, this information can be transmitted via fax or even an e-signature, in which case you can complete the entire process on your computer or mobile device.

You will also be able to transfer your initial deposit into your trading account, assuming you are set up for online banking with your existing bank. If you go with one of the brokerage houses still requiring paper signatures, you can almost always still complete the entire application online to save time. At that point, they will simply mail you a paper copy of everything you completed with instructions on where to sign and date it by hand. Once they receive this back from you in the mail, they can approve and activate your trading account. Approval times vary from place to place, but it is unusual that you wouldn’t be up and able to trade within a few days of completing your application online.

How Helpful Is The Training Offered By Stock Brokers?

Many – if not all – online brokerage houses offer some sort of training or another both to their new and their experienced traders. This training ranges from basic printed information that you can read to live conference calls with established traders to full-on mock trading platforms, where you can test out different trading methods using fake money. Some brokerages even offer full trading courses with live or virtual instructors, complete with homework, pop quizzes, tests, trading simulations, and a final exam that endeavors to tell you if you’re ready for the real thing.

A few of them even require completion of such a course as a prerequisite for trading on margin with firm capital. Most brokerages that do offer extensive training like this charge for it, anywhere from a few hundred dollars to several thousand, depending on the depth of the training and whether any incentives (such as firm capital being allocated) are offered upon completion. For a true beginner who has the money to spend, these courses are worth looking into, though if you’re going to spend the money, it’s also worth doing your research on the validity of any course you’re considering lest you wish to overpay for information you could have gleaned by reading a few books.

Brokerages that give you access to mock trading software which actually simulates the real thing are definitely worth a look, as you can trade with a lot more confidence once you’ve used a method with success (even fake money success) in a live, real-time setting. However, none of the training you can receive from a course or training program should replace the reading and studying it is necessary you do on your own to gain the knowledge needed to enter this industry with confidence. Establishing that base of knowledge through reading should be the first step for anyone; once that is completed, then is the time to seek out more specialized knowledge through training courses.

How Can I Be Certain That My Orders Are Executed Right Away?

Most advanced trading platforms have the ability to execute buy and sell orders very quickly. In fact, if you shop around different brokerage houses, you will invariably find that the order execution speed of their platforms is widely used as a selling point. These brokerages understand how important it is to traders to have their buy and sell orders executed quickly, particularly during periods of extreme market volatility and rapidly rising and or falling prices. With that said, unfortunately, there is never a guarantee that buy and sell orders will be executed right away – or even within a prescribed period of time. This is true no matter how fast and advanced the trading platform you are using.

The reason being is that many factors other than your trading platform – most beyond your control – influence the speed of execution for buy and sell orders. These factors include trading volume, the backlog in the order queue at your brokerage house, and the speed of your internet connection. During periods of high trading volume, you have lots and lots of traders who are all attempting to execute buy and sell orders at the same time. Just like buying a pair of shoes takes a lot longer on Black Friday when the masses all descend on the shoe store for the big sale, buying or selling a security can take a little (or a lot) more time when you have thousands upon thousands of people all trying to do it at once.

And no matter how fast your individual trading platform is able to relay your buy and sell orders to the central queue at your brokerage house, when that queue is backlogged, it can take some time for your order to be executed. It’s like having a Lamborghini that can get you to the shoe store fast, but when you get there, the line is out the door and around the building. Even though you arrived to make your purchase in a fast and efficient manner, unfortunately, you still have to wait your turn when you get there. The same is true for buy and sell orders in online trading. Brokerage houses execute them according to the order in which they came in. Finally, the speed of your internet connection can affect the speed with which your orders are executed.

This is why it is not recommended that anyone try to trade securities online using a dial-up or slow DSL connection. Online trading is a business, and like any successful business, the right investments must be made at the onset to increase chances of probability. A lightning-fast internet connection is a must for anyone wishing to be successful trading online. It is also ill-advised to rely on mobile devices or Wi-Fi “hotspots” to execute important trades, as no matter how advanced your device is, the speed and reliability of your internet connection in these situations is beyond your control.

Trading With Penny Stocks

Penny stocks, or stocks trading under a dollar, can be an incredible deal but they are also extremely unreliable. These stocks are trading at a very low price because the company isn’t meeting expectations or it is near bankruptcy. However, there is a chance that a company can rise from the penny stocks and raise its value thousands of percentage points. A seemingly small investment can turn into big profits if it is put into the right company. The only way to find the right company is through research, a lot of research.

A company may be in the low price range due to recent mistakes or mismanagement. If you see that there are big changes happening with a company like this then it may be worth it to invest. Getting out of the hole the company is in is difficult though. It may take years for the company to see any real profits again. Or it can sink even further and those penny stocks will drop from nearly anything to nothing.

To invest in penny stocks you have to put your trust into a few of the companies that you think have a chance. Since there are so many options just picking them randomly will end up with just lost investments. These are not investments made to diversify your portfolio, these are made in order to make some money and fast. Trading in penny stocks involves a lot of research and patience and with the right choice those stocks can make a lot of money.

How To Become A Stock Broker

All that’s necessary is determination and focus. If you cannot dedicate yourself to help consumers make the most ideal investment, then this isn’t a career field for you.

  • First of all, you must be knowledgeable to get a stockbroker’s license. A college education is not needed to be considered for the license, however it would be convenient for those who have a college degree in business, financing, or business economics. A lot of stock firm organizations take more serious concerns over people with higher degree of learning.
  • Secondly, take into account that normally people do not become stock brokers immediately after they complete college. You must go through some career guidance from a stock broker organization not less than 4 months.
  • After successfully completing the GSRE or the General Securities Registered Representative Exam implemented by the National Association of Securities Dealers., you might have to complete the Uniform Securities Agents State Law assessment if your state demands you to achieve this.
  • You could post your application on a number of stock broker directories or other comparable websites to increase your potential of getting employment. Subsequently, you may get more clientele and more business development.
  • The work atmosphere around stock investments might be highly competitive and busy, so be ready. Be prepared to work extended hours, and to acquire work pressures from different day-to-day tasks.
  • Stock brokers are a very high paid. And individuals who are able to do whatever is required to help their consumers will quickly become a big success.

Considerations When Trading Stocks Using Fundamental Analysis

There are many considerations that a person should have when trading stock. To start a person should be aware of their risk tolerance and understand how all of their assets are invested. Consider what other assets you have such as a home, cash, retirement accounts and consider how much and what types of stocks you want to invest in. Many people don’t want to allocate all their money to stock or alternatively they already have lots invested in safer stocks or index funds and now want to use the account they are trading in to take large risks and potentially reap large rewards. If you are investing for the short term you will be following different criteria than a long term holder of stock. Be aware of what you are looking for with the money you are investing in so you can align the investments you are buying or selling with your investment goals.

Once you are aware of what type of stocks you want to invest in you can start winnowing down the options to a manageable list of stocks. A common strategy for long term investors is to understand the current value of a stock and compare it to the current price of a share. This is the basic of fundamental analysis. to understand what a company is worth is challenging. Many people will apply a multiple times either revenue or earnings (typically EBItDA) and compare it to other companies in the industry as well as the stocks traditional trading range. Other methods are also used to value stocks such as present valuing a company based upon its future cash flows. Usually some combination of different methodologies is best and provides a more balanced estimation of a company’s value.

Once the value of a company is estimated you should compare to the current going price of the company by multiplying their current shares outstanding by the individual stock price. Theoretically any stock trading below the value of the company is trading at a discount and can make money for you in the long term. Due to the imprecise nature of these calculations you will typically want to give yourself some room for error and give a margin of ten percent or more. As the market is always fluctuating up and down even if you don’t spot attractive deals currently you will eventually find them if you wait long enough.


Big risks equal big rewards and there is no other place that utilizes this statement more than the stock market. This pure form of capitalism is where stocks from the biggest companies in the world are bought and sold for five days of the week. Some stock market investors make insane amounts of money from analyzing the markets and buying stocks when they are prices low and then selling them when they are priced high. However, there are no finalities or promises in the stock market. A company on the rise can lose 35% of it’s value the next day leaving traders with a big dent in their pockets.

The advantages of stock market investing can really pay off. Investors who want to play it safe can buy blue chip stocks (highly stable stocks) that will earn them a small percentage of profits every year. Many stocks also pay dividends which is basically the company paying the investors for buying their stocks on a monthly basis. Investors that want the big reward have the option of buying stocks that can rise in value hundreds of percentage points if the company does well. But, these big payoffs are never promised. The risks of investing in the stock market are big. Companies can go under and the stocks can be worthless. If profits are suddenly down in a quarter then it will reflect on the stock price as well. There are risks and advantages to the stock market and it needs to be invested in with intelligence.

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Risk Warning

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Trading with financial products (CFDs, Forex, Stocks, Cryptocurrencies, etc.) in general and with leveraged products especially is highly speculative and not suitable for all investors! The loss of your entire investment is possible. Never invest money you can`t risk losing! Decentralized and not regulated cryptocurrency markets are also a high risk and may lead to a significant loss.


Everything on this site should not be considered as financial or investment advice. This is only a website offering information, EarlyBull is not a registered broker, advisor or analyst. Always do your own research, only you are responsible for your actions. What works for others doesn`t have to work for you.

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