Making money from stock markets requires trading in the stock market. Prudent buying, holding and selling of stocks generate profits and money. Stock trading is the function that interacts and organizes in the stock market.
This market involves buying and selling of millions of shares all over the world, and generates profit. A share of this profit comes to the successful trader in the stock market. That is how s/he makes money from the stock market.
It is a mystery how this large a volume and value of trade is accommodated in the system of trading. These financial markets are marvels of technological capacity.
As a beginner, you must understand essentially how the market works. You dont have to know all of the technicalities of buying and selling stocks.
The first and foremost you need to know is the functioning of the exchange floor, irrespective of whether you trade through the floor or electronically.
When the market opens, hundreds of people are seen fast moving about shouting and gesticulating to one another, staring at monitors, and entering data into terminals, or busy on cell-phones on the exchange floor. It looks like a complete fiasco.
However, by the time the end of the day approaches, the market has worked out all the trades, and is all set for the next day.
These are the steps in a simple trade on the exchange floor of any major Stock Exchange:
You instruct your broker to buy a number of shares of a company at the current market price.
The brokers order department passes the order on to their floor clerk, the dealing official, in the exchange.
From this person it goes to one of the firms floor traders whose task it is to find another floor trader wanting to sell that number of shares of the company you wanted. Each floor trader has particular knowledge of which floor traders deal in what stocks.
The two come together on a price and seal the deal. The notification process moves backward along the line and your broker gets back to you with the final price. You receive the confirmation notice in the mail after a few days.
For the individual investor, you frequently can get almost instant confirmations on your trades, if that is important to you. It also facilitates further control of online investing by putting you one step closer to the market.
Beginners should avoid complicating things trying to get rich in a day by venturing into every nook and cranny without knowing a thing or two about them. There are many types of trading like day trading, swing trading, futures and so on. Instead of trying to do a little bit of everything, it is profitable to concentrate on a single type that is simple to understand for you.
To begin with, you need a broker to handle your trades individuals dont have access to the electronic markets. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order. Choose the right broker rationally. This is a crucial point of money making from stocks.
You then need to anticipate the behavior of prices of stocks. Price is the immediate cost of a share and potential source of profits. And this price behavior is so dicey that it keeps everybody in the game quite excited. This is what generates the profits or losses that are made by investing in this market.
Dont worry if you find it very difficult to infer the price, because it really is difficult. It is frequently seen to be irregularly moving all along the day. Yet there are patterns to be figured out and expectations work quite often.
Depend on your comprehension and your broker, who must be a professional. Never bypass understanding fully the cause(s) behind a bad result when it occurs. Learn from your experiences, document them, and keep reading them once in a while.