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Trading Stocks … the Right Way

By Claire Cattone, California Business Journal

Stock trading involves buying or selling shares of a company listed on an exchange. This financial market has a long historical record that starts from 1790 in Philadelphia in the United States. In 1792 the New York stock exchange came into life and began an era of trading stocks.

Investors have long since devised various strategies to trade equities. With the developments in the fintech department, there have been multiple improvements in the whole sector which we will discuss thoroughly in our article.

Symbols

Each company that registers on an exchange is provided with a character that traders can use to search and find it. For example, Microsoft is listed on the NASDAQ and has MSFT as its recognition symbol.

What is a stock exchange?

A stock exchange is a place that allows brokers and traders to buy and sell securities. All the orders placed by an investor through an online platform must reach the exchange for proper execution. Previously traders had to be physically present or use the telephone line to maintain the process of trading. But now, with the development, it is possible to trade shares from the comfort of one home.

Major Factors Affecting Movement of Stocks

Several economic factors are contributing to the movement in the share market. A few important ones are listed below:

• Earnings report
• Interest rate and inflation
• Natural disasters
• Monetary policies

Heavy buying or selling from an institution can also increase or decrease the price of certain shares. Traders can witness businesses and companies go up and down rapidly when such a thing happens.

Trading Session

The US stock market is open from between 9:30 a.m. and 4 p.m. ET (Eastern Time). There is also trading in between the market hours in which the big boys can do their buying and selling.

Important Terminologies In Stock Trading

Let us go through some of the crucial terminologies that are present in the stock market:

• Broker. A broker is the center point where traders can sign up using their credentials. They list the respective exchanges and represent the stocks.
• Order types. Brokers allow traders to buy stocks or short them. Hedging options are mostly limited and are available with CFD trading.
• Caps. Stocks are classified into three categories, i.e., low, mid, and large. This depends on their volume, the number of shares in the markets, and the share size. For example, Amazon is a large-cap stock, and its current share size hangs around $2000. They are also classified into 11 categories, including Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Communication Services, Utilities, and Real Estate by the global industry classification standard.
• Ask and bid price. The asking price is when a trader buys the stock, whereas the bid is the selling place. The difference between the two is called the spread, which is the fee the broker charges.

Stock Trading Strategies for Business People

Depending on their conditions, investors in the US can analyze the market. For example, traders with a busy schedule can opt for swing or carry trading. Fundamental trading is best in this setting.
Technical traders use charts and price action along with indicators to trade. Day traders and scalpers employ such kind of practice.

Stock trading allows traders to diversify their portfolios. Investing in different stocks or ETFs is a good option for investors. It is also important to understand that trading is risky if there is no proper risk management and strategy. Dedicating your time to the market and journaling all the executions is just one of the steps.