Basics Of Trading In the Stock Market

The stock market is one of the biggest avenues for investing money. People believe that trading in stocks is like gambling. But it is not a gamble if one understands the share market basics.  The stock exchange is a trading platform wherein the financial instruments like derivatives and stocks are traded. The participants who wish to take part in stock exchange trading have to be registered with the exchange. The participants include the brokers who are conducting the trades, investors or traders and the organizations issuing the shares.  There are other options to invest your money other than stock exchange and you could get all the information by going through this post.

Workings of the stock market

First, the organization has to get in the primary market through the process of IPO (Initial Public Offering).  In the offer document, the company has to give the details about the organization, stocks that are issued, etc.  The stocks that are issued in the primary market will be allotted to the investors who will be bidding for same.

Once the organization is listed, the shares issued would be traded in the secondary market by the investors. All the trading happens in the secondary market.  Here the sellers and buyers would conduct transactions to cut losses or make a profit.

Brokerage firms and the stockbrokers have to be registered with the exchange.  They will act as the intermediary between the investor, stock exchange and investor.

The broker will pass on the buy order on your behalf to the exchange and it searches for a sell order. Once the buyer and seller are fixed, the price agreed would be finalized and the exchange communicates to the broker that the order is confirmed. This message will be communicated to you by the broker. Nowadays the process of trading has become electronic.  The entire process of trading is done through the computers. Hence entire process would be finished within a few minutes.

How to invest

Step 1- First you should understand your financial limitations and requirements for the present and the future.

Step 2- Once you know about the investment profile, then analyze the market and decide on your investment strategy.

Step 3- You need to wait for right time to invest. You should do some analysis while you wait.

Step 4- You could conduct the trading either through an online platform or through a broker. You should recheck trade confirmation in order to avoid errors.

Step 5- Regularly monitor the portfolio.