Introduction to Stock Trading

One can buy shares, or a piece of a company. Shares give people the right to vote in elections of a company. In essence, buying shares of a company, called a stock, gives one the ability to control the operations of said company. Most importantly, periodically, elections can replace a current CEO with a newly elected one who may run the company differently from his predecessor. In addition to voting rights, one has a claim on a portion of the company's assets and earnings.

To participate in stock trading, or the buying and selling of shares, one must use a broker. A broker is simply a company that works between shareowners, also called shareholders, to complete transactions. Some brokers will charge a fee for buying or selling a stock. One may participate in the buying or selling of stock only during particular times and days of the week. The market has "on-hours" or the normal hours of operation and "off-hours." Normally, orders are placed at a broker during the day and completed either immediately or later in the day. One may place orders when the market is closed, but the order will not be dealt with until the market opens again. One may only participate in off-hour trading if they meet special requirements and use certain brokers.

Several types of orders exist including market, and limit. A market order executes an order immediately, at the current stock price. One cannot predict the order execution price, but the price will likely match or come close to the current listed price. Market orders only guarantee execution. Limit orders on the other hand set a maximum amount of money one is willing to buy a stock or the minimum amount one will sell their stocks. A limit order only guarantees price, and the order might not execute. The downside to a market order is uncertainty of stock price, creating risk. Always use limit orders unless you don't care about price and absolutely must execute an order.

Lastly, people invest in the stock market because of the potential profits. One can potentially earn more money on a stock than investing the exact amount in a bank account earning a modest interest. Participating in the stock market has many risks and perks. The major risk includes losing all money invested. Therefore, never invest money you cannot afford to lose. The perks include modest profits to huge ones. Some of the richest people in the world have become rich because they have mastered their trading skills in the stock market.