Trading can be a very lucrative profession provided you know how to navigate the market and that you have a penchant for following market trends and stay up to date with financial developments in the sector.
As far as the basics are concerned, there aren’t a lot of complications and you don’t need a lot to get you started. With so many resources available today through online platforms, one can easily get started on their trading journey and turn their savings into profit. However, learning through investment is dangerous and is often advisable to seek help and learn from successful traders like Tim Sykes who is often referred to in the industry as the Penny Stocks Whizzkid.
For beginners, the task can be daunting though as they aren’t aware of what the stock market is and how trading works. You also need to be aware of different investment strategies if you’re looking to make a real profit and make it big in the market. Luckily, you have us to get you started on all of these topics.
This article is going to explain the basics of stock markets and trading, giving you an idea of what the job involves and whether it’s something you would actually be interested in. Before you start investing your hard-earned money read through this article to make sure you make the right investment.
STOCK MARKETS, EXCHANGES, AND TRADING
The “stock market” refers to the market where buyers and sellers trade with each other in shares of different public “listed companies”. All these companies are “listed” on a stock exchange provided they comply with certain financial and regulatory requirements. The size of a stock exchange is judged by adding the value of each share of every company listed on the exchange, also known as the “market cap”. The two largest exchanges in the world are NASDAQ and the New York Stock Exchange (NYSE) which have a market cap of $11 trillion and $31 trillion, respectively.
Only public companies can be listed on an exchange and a company can “go public” by offering the majority of its shares to the public for the purposes of trading. One example is Apple which has a total of 4.6 billion shares, out of which 4.35 billion shares are available for trading on NASDAQ with a market cap of more than $925 billion! The number of shares that are offered to the public is known as the “float”. A more recent example of a company going public is Uber that was listed on the NYSE in May 2019 with a market cap of $74.59 billion.
As mentioned above, traders of an exchange buy and sell shares of different companies in the market. That is how simple the concept of trading really is. Different types of stocks and shares may have a different investment or holding requirements but at the end of the day, the concept of trading remains the same. The principles of supply and demand play a major role in the price of a share of stock.
Simply put, traders would consist of buyers and sellers and the more buyers there are than sellers, the higher the share price stays. More buyers than there are sellers for a particular stock means that the demand for the stock is higher than the supply can accommodate. On the opposite end of the spectrum is high supply but low demand. This is where there are more sellers than there are buyers of a particular stock, which drives the share price down.
There are a number of factors that can affect the demand of a share price of a particular company including the company’s business practices, policies, strategies, marketing, and end-of-year results. Companies like Apple and Google, who excel at each and every one of these factors has a very high share price, which doesn’t seem to be falling any time soon.
However, you don’t need to worry as there are a lot more companies than big names like Apple and Google which you can trade with. You even have options of penny stocks which usually mean stock where the share price is lower than $5. Investments in penny stocks allow you to make bigger profits in a shorter time and hold a large block of shares in one company, which has its own advantages depending on your investment strategy.
One of the most common strategies for trading is called “buy and hold”. This is where you buy a block of shares and hold on to it for years and years. When you hear someone say “they have some money in stocks”, this is what they are referring to. After a few years of holding on to the shares, you can sell them for a profit, provided the demand for the share grows and the company continues to do well. Most common people adopt this approach and purchase blocks of penny stocks.
Then there is day trading, where shares are purchased and sold for a profit on the same day they are bought. There is also a sub-strategy under the day trading model called scalping where the shares are held for mere seconds or minutes to make a profit. A lot of analysis and speculation is involved in this strategy, along with risk, and the profits are subject to short term capital gains tax as well.
HOW YOU CAN EDUCATE YOURSELF
Even if you have the basics down and are only trading to make some extra pocket change, if you want to grow as a trader and make massive profits, you will need to educate yourself more. Luckily, with the advent of the internet, online resources have made books and articles available for anyone wanting to increase their knowledge of trading, investment, and the economy.
There are also different courses you can enroll in that will increase your theoretical and practical knowledge of the field. The Tim Sykes Trading Challenge is one such course where you get access to a whole library of content that will teach you different tips and strategies on investing and trading. You’ll also be able to get alerts on different market activities to keep you on point with your investments.