Stock Trading

What is Stock?

The stock of a company is the original capital invested by the founders. It essentially serves as a security for the creditors of the business. The properties and assets that a business own are distinct from the stock as they may fluctuate in value and quantity.

What is Stock trading?

It is the buying and/or selling stocks. The goal is to invest by buying stocks at a low price and then selling it at a higher price. The difference is the ROI or Return On Investment or simply the profit. The advent of stock trading goes back to when companies needed to raise funds. There may be various reasons why a company would raise funds by issuing new stocks. The company may need the money to expand operations, or may need it to pay off a debt.

Stock Trading Benefits & Drawbacks

You can actually make money with stock trading and even become very wealthy if you are a good trader but you can also lose money if you don't do your homework and are a reckless investor. By means of online trading software you can trade in any public company, inspect and analyze activities of stock trading markets world wide. It may sound simple to trade and earn but it isn't as easy as that. You have to do your homework: research and study about the company you intend to invest in. A trader should understand the company's business. There are a lot of virtual stock trading tools online for practice which you should do before putting real money on the line.

Types of Stock Trade

1. Day Trade, as the phrase implies, is transaction that occurs within the day. It could last a few minutes or several hours but not continue overnight. It is commonly used based on news like reports on retail sales or company earnings.

2. Swing Trade is a trading based on daily charts. Its time frame could last from one day to several days or weeks. It involves the use of technical analysis or fundamental analysis to forecast future the movement of stock prices.

3. Scalp Trade or scalping involves very quick trading to profit from quick moves in stock prices, usually seconds or minutes. The majority of these price movements occur in the morning, so a scalper must be available and in top focus state.

4. Long Term Trade is the buying and holding stocks for a long period of time that could last several months to even years. This is a perfect approach in investing in undervalued companies. This is Warren Buffet's approach who used fundamental analysis to identify undervalued stocks.

The approach that could make you a really wealthy person depends how much capital and how skilled you are. A trader may be skilled in day trades. Another trader may be good in technical analysis and succeed with Swing Trades. On the other hand if you have a talent in fundamental analysis and identifying low valued stocks then you can succeed with long term investing. So there is not really a specific approach. It depends on what works best for you most of the time.