Advertiser Disclosure
Everything you need to know about stock trading

Stock trading involves buying and selling of the stocks in a company with the intention of making a profit from it. Shares in an organization that completes its IPO becomes public and are then eligible to be traded on the stock market. IPO stands for Initial Public Offering and defines the first time that a stock of a company is offered to the public for purchase. Stock trading happens in stock markets which are places where the buyers and sellers meet to decide on prices and trade. These venues can either be a physical location or, increasingly, virtual, being conducted through a network of computers where the entire process is electronic.

Businesses on the stock market do not trade their shares which is why stock markets are considered secondary markets where an owner of a share of a company transacts with someone who hopes to acquire the share. Remember, when you engage in the stock market and buy a share of a company, you are not buying it from that company, you are buying it from a stockholder, someone who has already purchased the share. Similarly, when you sell a stock, you do not sell it to the company but to someone who hopes to make a profit off buying it. Therefore, shareholders are an essential piece of the stock market.

Stock markets first began to make an appearance on the New York Stock Exchange (NYSE) in the late 18th century. The NYSE was founded in 1792. Before this, traders met under a tree in Wall Street for stock trading. Now, thanks to the modernization of stock markets, traders can buy and sell, and trust the prices to be fair and also be time efficient. The considerable number of stock markets in the country today are all linked electronically making them more efficient and liquid. Liquidity, in this context, describes how quickly a stock can be bought or sold at stable prices.

However, there also exist OTCBB, otherwise known as bulletin boards that are loosely overseen exchanges made over the counter where stock trading is concerned. This is, of course, pretty risky, given that they don’t adhere to the strict criteria that are mandatory for the listing of more prominent exchanges. Bigger exchanges require a company to be in operation for a longer duration of time and, thereby, prove their credibility.

Prices of a stock trade can be determined by many ways one of which is an auction which involves traders and investors placing bids and offers with the intention of buying or selling. In stock trading, a bid is a price one hopes to buy at, and an offer is the price one sells at. When they coincide, a stock trade occurs.

Sometimes, stock markets employ professional traders to sustain bids continually given that a seller with an offer may not meet a buyer with a coinciding bid at the same time. These kinds of markets are called specialists or market markers. When a market consists of both the bid and the offer, it’s called two-sided. When the spread, which is the price difference between the bid and the offer is narrow, the number of shares on the bids and offers increases, and this, in turn, increases the liquidity of the stock. If there are plenty of buyers and sellers sequentially placed in the market on the bid and offer, the market is considered to have depth. These three factors, the spread, the liquidity and the depth determine the quality of the stocks in the market.

Online stock trading
Stock markets, thanks to online tools among other things, are becoming increasingly accessible. Select an online broker to help execute the trades, as well as save your money and your stock in an account. When you look for an online broker, have an idea of

  • how much money you plan on investing
  • how often you plan on making trades
  • the level of expertise you possess
  • how much of guidance you would need
  • a requirement of additional services

When you open an account to trade stock, you will have to provide a description of your investment as well as your financial history to determine your eligibility for the account. The information you provide will include your current location, phone number, social security number and other personal details. You also have to choose between accounts such as individual accounts, joint accounts with spouses, custodial accounts for children, retirement accounts that often are tax-deferred, cash accounts that are much like checking accounts, and margin accounts that are more like a line of credit.

Get Quotes











By clicking submit; you agree to share your info with us. We may reach out to you via mail or over call. We may also share your information with our third party partners.
Calculate Your Tax
Live Stock Updates
  • Loading stock data...