Understanding The Stock Market

Filed Under Finance |

by David A. Sorenger

Online stock trading is exciting. It can be a fulfilling hobby and a source of income. Many millionaires around the world have made their money by investing in stocks. Stock investments can bring lucrative profits short term and long term.

Buying and selling stocks has become much easier today because of computers and the Internet. Today everybody can buy a fully equipped and professional trading station for less than $2,000 and be part of the global financial markets. While US stock trading is most popular, you can trade stocks on international stock exchanges as well.

The fascination of online stock trading lies in the immediate feedback of your trading strategy. Your buy or (short) sell is executed almost immediately and you can see your profits and losses in real-time if you wish. You have everything at a glance, your stock quotes, charts, indicators, fundamentals and news. Everything at your fingertips.

If you decide to trade from home or your office than you can have the same data as your investment banker has. Real time data are available at low costs today and the trade execution is almost the same as for the bank trader. Within 1 second you could get filled with your order to buy or sell stocks. However, the bank trader might have much more money on the side line what allows him to trade more aggressively.

There are many online stock broker nowadays. Every broker is different. The main decision you must make is whether you want to trade yourself or if you need advice from the broker. The last one is called full service broker and helps you to find the best stocks and also executes the trades for you. The other ones are discount brokers and they only execute the trade for you but don’t tell you which stock to buy or when to sell.

If you are more a speculator than an investor, you usually go with a discount stock broker because the commissions per trade are much cheaper. And since you are trading more often than an investor this can quickly add up. The average commissions for buying stocks is about $5 to $10 per order. The execution time of your order shouldn’t be longer than 1 minute.

There are different types of trading platforms. The easy ones just offer basic order entry methods which are sufficient for the average trader and investor who places less than one trade a day. The more advanced ones offering highly sophisticated ways of routing your order to different market places. The advantage of these trading platforms lies in their execution speed but the handling requires some experience. Day traders who execute up to hundreds of trades per day are using such direct access trading platforms.

The stock market gives you hundreds of opportunities every day. Thousands of stocks are listed on the various US stock exchanges and every stock is different. For more than 6 hours a day the regular market is open for taking your orders plus hours of special pre- and post market trading. You can spend your whole life analyzing and trading stocks back and forth.

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You need to know this about online stock trading before buying or selling stocks. Understanding the stock market is vital to make profits and protect yourself from losses.