Stock trading may seem like a complicated and daunting process, but it doesn't have to be. With a little bit of research and practice, you can start trading stocks like a pro! In this article, we'll walk you through the basics of how stock trading works. We'll cover topics like what stocks are, how to buy and sell them, and what you need to know before you start trading. By the end of this article, you'll have a good understanding of how stock trading works and be on your way to making your first trade!
What is a stock?
A stock is a type of security that gives the holder a claim on the assets and earnings of a corporation. When you buy stock, you become a shareholder of the company and are entitled to a portion of its assets and profits. The value of a company's stock is determined by the market, which is the collective value placed on all of the shares of stock outstanding. The market value of a company's stock will fluctuate based on supply and demand. When more people want to buy a stock than sell it, the price goes up. When more people want to sell a stock than buy it, the price goes down.
How do I buy a stock?
When you buy a stock, you are buying a piece of ownership in a company. When you own a stock, you are entitled to a share of the profits (if any) that the company makes, and you have a vote in how the company is run. For example, if you own shares in a company, you can vote for the company's board of directors. If the company does well, the value of your shares will go up, and you can sell them for a profit. If the company does poorly, the value of your shares will go down, and you may lose money.
What is a limit order?
A limit order is an order to buy or sell a security at a specified price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute, but it does ensure that you will not pay more (or sell for less) than the specified price.
What is a stop order?
A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A stop order is used to limit an investor's loss or to protect a profit on a stock that is already owned. A buy stop order is placed above the current market price, and a sell stop order is placed below the current market price. If the stock price moves in the desired direction, the stop order will be executed at or near the stop price.
What is a market order?
A market order is an order to buy or sell a security at the best available price. When you place a market order, you are instructing your broker to buy or sell shares of the security at the best available price in the current market. Market orders are the most common type of order and are generally filled within seconds or minutes.