Owning Stocks Through Stock Trading
Stock trading is an exciting and high-risk investment opportunity that has invigorated the interest of millions of investors across the globe. Traders believe stock trading to be one of the sure-fire ways to untold riches, and it is true that the world has seen a significant number of traders making a significant sum of money through stock trading. However, it should be mentioned that the number of losers in the market far outweigh the winners, and it takes an immense amount of knowledge, expertise, and patience to make it big in the stock trading industry.
Stock trading offers the trader a chance to invest in different stock exchanges from around the world. All publicly traded companies are listed on stock exchanges in their respective countries, and modern day technologies have helped traders to invest in shares and stocks from any stock exchange situated across the globe. The primary form of stock trading involves buying stocks at a particular price point and then closing them at a higher price point. This allows the trader to profit from the potential upward movement of the stock. Traditional investors carefully analyze different stock options and only invest in stocks that are undervalued or aptly priced to prevent facing a loss from price correction. Most large investors usually hold on to stocks for an extended period, which qualifies them to receive dividends and other bonuses.
A different category of traders, known as speculators or day traders speculate on the price fluctuations in the stock markets and stand to gain or lose money according to their market predictions. These types of traders are purely in the market to predict the underlying trends in the stocks and are in trades only for a few hours or a few days at maximum. Ultimately, stock trading rewards different traders in a variety of ways, and is entirely dependent on the invested amount and the type of trading.
How Stock Trading Online Has Revolutionized The Way Of Life
Since the early times, stock trading was primarily carried out through a trading floor of a stock exchange, and such a concept was reserved for a privileged few. Only people with a significant investment capital or with the proper connections could participate in the financial markets. Traders with a small investment capital were mostly non-existent and had to face quite a few hurdles even to get access to a trading floor or a reliable broker.
Over the years, the situation gradually improved, but with the introduction of stock trading online, several brokers started setting up shop for potential investors who could dip their toes into the market without a huge investment capital. Online stock trading allowed a large number of investors to get live price feeds and enter the market according to their preferences. Brokers also started offering attractive margin for trading that allowed investors to get into the market with never-before-heard investment capitals.
The concept of online stock trading also helped traditional investors to streamline their trading process, and the increased liquidity in the markets only helped them to take better advantage of the price fluctuations. Today, the concept of online trading has spawned a massive array of investment products in financial markets around the world. This has led to both the good as well as bad aspects of trading taking root, but the financial markets are inherently risky, and should be treated with care and respect.
Nowadays, it is common for traders and investors to trade the financial markets from the comforts of their home or while on vacation, as these traders can enter trades, monitor them, and even make adjustments with access to a trading terminal over a wireless network. This has changed the lifestyle of an average trader tremendously and continues to attract new investors due to the freedom and flexibility that it offers when compared to other career opportunities.
The Evolution Of Stock Exchanges Before Online Stock Trading
There are different types of stock exchanges, and in the US alone, there are several stock exchanges including the NYSE, NASDAQ, and AMEX, to name a few. Stock exchanges are fundamentally designed to act as trading platforms to facilitate the market economics of supply and demand. All transactions that include buying and selling of securities happen through an exchange and is the primary source for all publicly traded contracts in the economy.
Stock exchanges were mainly conceived around two centuries ago to connect the buyer and seller through a centralized platform, which has evolved into what we know as stock markets today. All trading happened on the floor of exchange, and most of the transactions were entered into manually. Traders, brokers, and other market participants used to trade securities and other transactions through these stock exchanges, and would fill orders from clients or investors through a manual process.
Over the years, computers started to have an immense influence on how stock markets works, and by the late 80s and early 90s, most stock exchanges in the world began to computerize their trading. But the concept of online stock trading took off during the rise of the internet bubble, and ever since, online stock trading has been a part and parcel of modern-day financial markets.
Advantages & Disadvantages Of Stock Trading
Stock trading comes with a host of benefits, but it is also one of the most difficult markets to make money. Let us take a close look at some of the advantages and disadvantages of stock trading.
Broad Choice Of Companies Or Stocks To Choose From
Stock trading offers one of the most varied choices of instruments that investors can choose from. The various choices help investors to mitigate risk by creating a basket of top-performing stocks, rather than just holding on to a specific stock over an extended period.
Reduced Risk Than Forex Or Commodities Trading
The amount of margin or leverage available for trading is lower in stock trading when compared to Forex, Futures, and Commodities trading. The stock markets also have comparatively lesser volatility and liquidity, which coupled with lower leverage, helps traders to minimize their risk exposure.
Ability To Earn Dividends
Investors who own stocks for the long term can receive dividends per share, which can act as supplemental income on invested amount. If the trader makes the right call, he can maximize his returns by both receiving dividends as well as the appreciated value of the stocks that he has invested in.
Stock markets have produced more billionaires than any other markets, but these are dependent on the stock options and the performance of the company in question. Therefore, any aspiring trader can dream big while entering the world of stock trading.
Not As Liquid As The Forex Or Commodities Market
While the stock market has its movements and liquidity, it is not as volatile or liquid as the Forex or commodities market. Therefore, traders who are familiar with the mechanics of a highly volatile market will require a lot of patience and expertise to deal with the pace of stock trading.
Several Trading Restrictions Imposed By Stock Exchanges & Regulatory Commissions
Stock trading has more restrictions put in place that is designed to protect both the investors as well as the markets. The primary aim of all regulatory organizations is to put forward a framework of operational protocols that can help safeguard the integrity of the markets and protect investors from any fraudulent malpractices.
Requires Larger Investment Capital
Even though traders can invest in stock markets with a lesser capital than what was possible a few decades ago, the initial investment capital needed for stock trading is still larger than other financial markets such as Forex or Futures trading. The lower amount of leverage is also detrimental to the higher amount of capital, which further reduces the number of traders who wish to enter into share trading.
Discovering The Best Stock Trading Site
Stock trading should always performed with a good partner, and several brokers offer unique service packages for investors who wish to invest in the markets. All traders should also utilize a board range of tools and resources to predict market behavior properly and find the best stock trading site will help to eradicate any instances of losses that stem out of a lack of market knowledge. Several online resources will help traders to get comfortable with the markets, and every trader should always read the fine print before subscribing to any service provider.
Trying Your Hand At Binary Stock Trading
Binary stock trading involves betting on stock options without actually investing in them. Binary stock options are a safer and more economical alternative to dedicated stock trading, however, traders shouldn’t expect to trade binary options as they would in a real stock exchange. Binary stock trading will only help traders to get a fair idea of how stock markets perform, as every binary trade will only have two potential outcomes. Binary trading is also a fixed profit/loss model, unlike traditional stock trading, which offers a massive profit/loss potential.