Saturday, April 19, 2008

How Stocks Work?

Before you learn how to start trading stock you must to understand how stocks work? Basically, stock market is an avenue for the company to finance their businesses, other than bank loan. The fund proceed can be used to finance the company’s expansion, repay loan, etc.  For shareholders, they get the opportunity to participate in capital intensive businesses at an affordable price.

Where can we buy stocks?
Primary Offering
The primary market is for the sale of fresh shares newly created by a company through the Initial Public Offering (IPO) in stock market. If successful, it will start selling its common shares to public investors through an Initial Public Offering (IPO).

Secondary market
Since, the company get listed in the stock exchange, this is the time where other investors or stock traders start buying and selling stocks. You’ll find its share price start moving. Company’s profitability, economics evaluation and market condition are some of the factors will affect the demand and supply and made the price fluctuation on the stockmarket

Stock Exchange at glance
We must look at the concept of the stock exchange. The stock market is in existence to enable buyers and seller to interact, a stock exchange is simply somewhere people can go to buy and sell shares.

Types of Stock Exchange
These are the physical exchange where there is a trading floor such as the New York Stock Exchange. The best example of this system is of course the New York Stock Exchange. The people you see waving their arms and talking on the phone are floor brokers who represent a brokerage elsewhere.

The virtual stock exchange where buying and selling of stocks is done on computers.
The virtual exchange as I have said before is an exchange where to trade takes place on computers and this is how most people start of when learning how to trade stocks. Before you learn how to start trading stock you must to understand how stocks work?

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