Stock Trading for Dummies

Stock Trading for Dummies
By www.ProfitableTradingTips.com

http://profitabletradingtips.com/profitable-trading-tips/stock-trading-for-dummies
If you are interested in making money
trading stocks there are things that
you need to know and do.

Stock trading for dummies is an
introduction to trading stocks.

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Before We Continue…

What is a stock? What kinds of stocks
are there? Why do stock prices go up
and down? How do you make money
trading stocks?

What Are Stocks?

Stocks are shares of companies. They
give the owner a claim on company
earnings and assets.

If you own a share of stock you have a
vote for who it is that runs the
company and other rules and
regulations.

A share of stock is traded on a stock
exchange such as the New York Stock
Exchange or NASDAQ.

What Kinds of Stocks Are
There?

Stocks are either common or
preferred. Most people own common
stock.

This is the kind of stock that you
typically trade in order to make
money.

Common stock is what gives you a
claim on company assets and voting
rights.

Long term investors buy stocks that
they believe will appreciate in value
over the years and even pay
dividends.

Stock traders look for stocks that are
likely to up or down in value over a
short time and either buy them or sell
short in order to capitalize on the short
term price change.

Preferred stocks usually do not confer
voting rights but they do offer a set
permanent dividend and if the
company goes out of business owners
of preferred stocks get paid before
owners of common stocks but after
bond holders.

One problem with holding preferred
stock is that companies often have the
right to buy back that stock without
your permission.

Stock Trading for Dummies

Stocks are traded on stock exchanges
or over the counter.

Many traders prefer stock exchange
traded stocks because these stocks
trade in higher volume and liquidity.

Stock markets have strict rules in
regard to which stocks can be listed
and companies are required to
provide substantial information so that
their business is sufficiently
transparent that traders can make
informed decisions as to where stocks
prices are going to go.

Where Is the Price Going
Next?

To make money trading stocks traders
need to have a clear idea about where
the price is going to be in a few
minutes, hours, days or months.

Fundamentals such as how money a
company makes and how much debt it
carries eventually determine the price
of a stock.

But everyone who trades stocks
makes an educated guess as to how
these fundamentals will evolve.

Technical analysis of price patterns
helps traders determine how market
sentiment regarding a stock is
evolving and where the price is going
next.

Small companies that are thinly traded
are not good candidates for technical
analysis.

The better choice in this case is to
study small companies and discover
things that the market has overlooked
and then trade accordingly.

Options

Many traders forego trading stocks
directly and make money trading
stock options.

options are contracts that give their
buyers the right, not the obligation, to
sell or purchase the underlying assets
at a future date, within the term of the
contract.

whether it is in stock options trading or
in trading commodities like corn
futures, trading options allows the
investor to invest trading capital using
a variety of strategies.

a call option gives the buyer the right
to buy and a put option gives the
buyer the right to sell the underlying
stock.

sellers are paid a premium for taking
on the risk of having to buy or sell at a
loss when the buyer chooses to
execute his contract.

options are used to both hedge risk
and to leverage trading capital.

The same sorts of fundamental and
technical analysis are necessary for
trading options on stocks as for
trading stocks directly.

The advantages of buying options are
that traders limit their risk of loss and
can leverage their gains.

Stock Trading for Dummies

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