What You Should Know About Stock Market Trading

Stock market trading refers to a process where shares of stock are bought and sold. A stock market exchange does not own the shares itself, rather, it acts as a marketplace where buyers and sellers interact. There are a variety of stock exchanges out there, with two of the most widely used being NASDAQ and NYSE. AMEX is another commonly used exchange. These are abbreviated names that you will see referred to often in the stock market world.

Trading a stock means you are either buying it, or selling it. When buying a stock, your number one goal as an investor is to purchase shares at the lowest possible price. Also, you will want to choose stocks that not only have low buying prices, but that are forecasted to rise in value. This is how investors make money -- by buying low and selling high.

There are basically two ways that potential investors can buy and sell stocks. One is by retaining the services of a stockbroker to perform their transactions for them. Not only do stockbrokers buy and sell stock, they advise their clients as to which stocks are recommended and which are not. Some investors simply hand their investment money over to a trusted broker and let them handle things their way. Other investors like to have some input as to which stocks are being purchased with their money.

The other way to trade is to do so online. There are many online brokerage sites where anyone with enough start up money can buy and sell the stocks of their choice. Just as you would pay a stockbroker for their services, you will pay an online brokerage a fee as well. Normally, fees are charged for each transaction. On some websites, you can trade for as little as $8 per transaction.

For investors that don't have a lot of money to start off with, there is a way to invest using small amounts of money. Commonly referred to as DRIP, this method allows investors to put in as little as $10 on a regularly occurring basis. This money is used to accumulate shares of stock and reinvested to purchase more shares of desired stocks. DRIP investing is great for long-term investors who want an inexpensive way to get their feet wet in the stock market trading world.

Copyright 2006 Jim Sterling - All Rights Reserved

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