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Stock Trading Education – A Guide for New Investors

Stock Trading Education – A Guide for New Investors

A new investor may find it daunting to invest in the stock market. For anyone looking to get stock trading education, there are many complexities and confusing terms. So how can someone protect themselves while learning basic concepts of the market?

I recommend that you read the article and then absorb it. Then, put it into practice.

This article provides stock trading education and discusses how to purchase and sell shares. A share is actually a fraction of a company, as you may be aware. We, the stockholders, and you are the true owners of a business. In theory, the stock holders share in the company’s profits when it makes money. However, they share in the company’s losses (at minimum indirectly).

Here are the essential steps to trading stocks. This is the key element Certus Trading Reviews of any stock trade education course. First, open an account with a broker and deposit an initial amount. Or, you may open an account at Scottrade, if you feel more confident. Remember that self-trading firms offer little to no support and no advice. Any stock trading education you require must come from a different source. As an illustration, we will start with a fictitious $1000.

3M is an example. You tell your stockbroker about your interest. He will search for 3M (MMM). He then enters MMM into the quote request system. He asks for $81.18, the current market price. He tells you that $1000 will buy 12 shares of stock at $81.18, plus a little bit more.

Your broker will make a offer for 10 shares at today’s market price. Your broker will charge $30 to enter the order. Does that sound excessive? The broker will enter the order and calculate the price you’ll be charged for those 12 shares. Here’s the math. 12 (the number and price of the shares) multiplied by $81.18 (the current share price on the open exchange) will result in a total cost of $974.16. Add $30 (the broker’s fee, which he must eat too), and you get $1004.16.

Now comes the fun part! Your stock-trading education finally starts to pay off. Your broker may somehow be able to find someone willing and able to give up their shares at the current market value of 81.18. The broker will then debit the account and send the money to the seller. Your broker will then debit your account of the required funds and send it to the seller. It’s simple as that! You have completed your first trade with very little stock trading education.

The next day, 3M shares increase to $82.18. Cool, you just made 12 dollars. This is a paper profit at this stage. This is a paper gain, meaning you don’t actually have any money in your pocket.

After another increase in stock market price, you decide one week later to sell your stake. You place a buy order at market ($83.18).

Your broker does another miracle. He finds a buyer to purchase your stock at current prices and sells it to them. While the transaction resulted in $998.16 for you stock, you do not receive that amount. In fact, your broker can take an additional $30 from your account. A few days later, you will have $968.16 in the account.

It’s now time to add up. Stock appreciated in value during your tenure, so you should be making a decent profit. However, profits aren’t real. Your initial investment, $1,004.16 has turned into a balance $968.16. You will need to continue stock trading education.

We are now on April 15, 2012. This loss may have some good news. Due to your initial investment in the stock market, you have incurred a short-term capital lose of $36. Your current financial situation may allow you to deduct the loss from gross income. You should seek the advice of a tax professional regarding this topic.

Hopefully, this article will clear up any confusion you may have about the basics of stock traders and the value stock trading education. Conclusion: Increase the amount of shares you trade per transaction.