Stock Trading For Beginners

    Every field of human endeavor have its own terminology that is associated with it, the stock market is no exemption. Therefore this article seeks to make you get familiar with some of the day to day terms of stock trading.

a. Share. Describes the total share holding of a company divided into bits or slices to be purchased by institutions or individuals.

b. Securities. The unit shares you hold are well protected to the extent you invested by the regulatory authorities. Once a share is created, it cannot be destroyed, stolen, and can only be transferred.

c. Equity. Means the distribution and sales of shares are equitably done i.e. once a price is fixed; it remains the same for everybody irrespective of where you live unlike property investment whose prices are affected by location.

d. Stocks. Describes the total volume of shares held by the individual in company.         

e. Rally. Means simply that the stock market goes up from whatever point it stood at when the rally started.

f. Blue Chips. Describes solid, quality stocks on the stock exchange e.g. Nestle, First Bank, Cadbury, Nigerian Breweries, Zenith Bank. The term is derived from the blue chip used in gambling especially in poker, which has the highest value.

g. Correction. When the market has moved rapidly in one direction, then changes (usually not so rapidly) in the other direction.

h. Long pull. How high an investor thinks a stock price will go before they sell.

i. Pull back. When the price rise reaches its peak, slows and then stops and begin to decline or fall back, people begin to sell at this point.

j. Bottom out. When the price has gone as low as it can, investors begin to buy again.

k. Liquidity. When we talk about liquidity on a stock exchange, we are talking about how easily and quickly a company shares can be converted to cash. If it is very liquid, it means is easy to trade in the shares.

l. Bull trend. Upward move or trend. It means the market is going up and is doing well, as reflected in share prices.

n. Bullish. Investor who believes that the market prices are going to go up.

o. Bearish. Investor who believes that the market prices are going to go down.

p. Stag. Investor who wants to make profits from new issues of shares. He buys the shares before they are listed. Then sells them at a higher price soon after they are listed.

q. Automated Trading. Is when the buying and selling of shares is done on a computer? dealers enter buy and sell orders for shares into an electronic trading system on a computer. The computer automatically does a transaction with the best selling and buying prices.                                                                            r. Brokers Contract Note. The broker’s contract note is very important. It shows everything about the deal that the stockbroker has done for you. It tells you how much you have to pay the stockbroker for the shares he has bought for you. If you have sold shares it tells you how much you will receive for the sale of your shares.

s. Certificate of Stockholding. Shows how many shares you own. It is a very important document. You must keep it safe place.

t. Capital Market. Refers to the Stock market, it is a platform for raising money or capital from the investing public to meet company’s financial needs.

u. Money Market. Refers to Banks and other financial institutions that offer loans investment opportunities and capital for businesses.

Getting familiar with stock trading terms is an invaluable asset to any investor worth its salt. Don’t disregard it, it could make the difference in your investing career.

Sometimes people see a television show or a movie where the suave characters live the high life made possible by stock trading. Maybe you saw “Wall Street” and dream of having the Gordon Gekko lifestyle. Though that was fiction, there are real life success stories out there.Like any high stakes decision, most people would give serious consideration to a new career choice. The excitement of a stock trading job might seem payment enough. After all, how hard could it be? You make some phone calls, do some persuasive talking, explain the benefits and risks and land a big fish with the money to start an even bigger portfolio. While you may have the gift of selling, you still need to know the fundamentals of stock trading.The other type is called the “preferred stock”. Basically, it is the same as common stock only that the trader enjoys lesser rights. But the good thing about preferred stock is that the trader does not partake in dividends, thus, giving companies more freedom in deciding the trend of the income from dividends. If you are just beginning in stock trading, it would be best to look for companies that have bigger profits on their preferred stocks because it means that they earn bigger dividends, which can give you bigger return on investment.1. Different types of stocks.There are different types of stock. But let’s narrow it down to the two most basic, common and preferred stock. The one that traders hold is common stock. In common stock holdings, the trader represents the largest portion of the stock and therefore the rights associated with it. These rights include voting for management on the board as well as the company dividends package.This is one of the most basic things you need to know. If you are just starting in stock trading, you must understand what a stock is, what does trading entail, and how will trading stocks affect your overall success.2. What is trading stocks?Experts say that a beginner in stock trading doesn’t really have to have in-depth knowledge of the minute details of how one buys and sells stocks. The most important thing is that he or she learns the basics so they know how to execute the stock trading strategies.You may have given thought to changing careers and becoming a big time stock trading mogul. If this sounds exciting to you, well then go for it. But for most of us, getting into stock trading doesn’t require such drastic measures.Because of the stringent guidelines and chaotic atmosphere of the exchange floor, most new traders are beginning their careers on the electronic side of stock trading. While still full of pressure, traders prefer this style of trading to the wild gesticulating and running around on the exchange floor.Only publicly held companies have stock that is traded on the open market. The stock itself, represent ownership, a fractional piece of a very large pie. Stock trading is a financial tool used to make money by purchasing and/or selling these fractional pieces to other buyers and/or sellers in the stock market. Market like “Farmer’s Market” where the cabbage is always green.3. The basic methods of stock trading.For the trader, there are two basic interactions that take place when actively stock trading. The primary act takes place on the floor of the exchange while the second exists in the cyber-world of electronics.The trader on the exchange floor enters a world very much like a market of the old days. There is much shouting and arm waving, gesturing and running around in order to conduct business and make trades. There are traders who instead work at terminals with monitors that record the trades on the floor while. Then the trader can actively react to those trades at their own terminal.

Swing trading stock markets promises to give you the best of the trading world but without the inherent high risk that other traders expose themselves to when they day or intra-day trade. Swing trading can be used on any market and is widely used on stocks. There are two main tendencies you should look for in a stock if you plan to swing trade it.

First, to swing trade a stock it must show signs or have a tendency to trend. Some stocks are sporadic in their movement and there is no underlying explanation as to why it moves as it does. Swing traders need a stock that trends or typical trends more than it moves sideways. This is necessary for you to be able to take slices out of the market with your trades.

Secondly, the stock must not be too volatile. Volatile stocks, while offering the potential of a good income if you happen to be on the right side of the trade, make it difficult to swing trade. Swing trading takes time and as a result if a stock moves too fast or too abruptly in any one direction, it does not give you time to plan your entry and exit. The best kind of stock is one that is widely and heavily traded.

Anyone can swing trade stock as long as they first make sure that it is one that tends to trend more than it moves sideways and that it does not move abruptly or erratically without explanation. This will put you on the path to becoming a profitable stock swing trader.