Have you been curious about what stock market is all about and how to invest in it? You are in the right place. In this article, we will guide you through the basics of the stock market, and how to buy, and sell in the stock market before you go into it. By the end of this article, you will be fully ready to take your first step into investing in the stock market.
What Is the Stock Market?
The stock market is a marketplace where investors publicly buy, sell and trade companies’ shares. It’s an important component of the global economy, which allows companies to raise capital and investors to earn returns on their investments.
For instance, when you are buying a stock, you are purchasing a small piece of a company, and when you are selling, you are transferring your ownership to someone else.
How Does The Stock Market Work
The stock market has various exchanges just like the Nasdaq and New York Stock Exchange, which allow the public to buy and sell stocks. Most of the public companies issue stock to fund their businesses while attracting investors who will believe in their company’s future.
The stock market is classified into two different sections which are Primary Market and Secondary Market.
The primary market is where companies register themselves by providing details about themselves and stocks they want to issue, and then follow up by issuing shares with the plan to raise capital.
The Secondary market takes place when a stock is issued in the primary market. You can buy and sell it in the secondary market. This is a marketplace where investors (buyers and sellers) come together to transact at an agreed price and make money for themselves.
Now that you have an idea of what the stock market is and how it works, let’s look into the other aspects of how you can buy, and sell in the stock market.
How To Buy and Sell Stock
Buying and selling stock is one the simple ways to build wealth and achieve financial freedom. To get a hang of this, below are the steps of how to buy and sell in the stock market as a beginner.
Open A Brokerage Account
You need to open a brokerage account to have a direct entry into the stock market. A brokerage account is just like a bank account where you will be able to keep your investment.
There are a few steps you need to take when opening a brokerage account;
- Choose The Right Brokerage: There are different types of brokerage such as online brokers, traditional brokers etc. All you need to do is go for a brokerage with low fees, an easy-to-use platform and good customer support.
- Fill In An Application: Often times, this part only requires you to provide some information. This might include your phone number, employment details financial background etc.
- Fund Your Account: Once your account is approved, you can now deposit money into it for a start to buy stocks. You can do this either by transferring from your bank or wiring the money.
- Explore The Platform: When you are done with the set-up, you have to take your time to familiarize yourself with the platform, You can learn how to navigate the dashboard, place orders etc.
Research The Stock You Want To Buy or Sell
Before you buy or sell a stock, you need to look into what the companies do. Who are their competitors? And what are their product and services all about? What is their financial statement? This will help you have a proper understanding and evaluation of the company.
Buy And Sell Stock Using The Right Order
Once you are done with your research you can now place your order. There are different types of buy and sell orders to consider:
- Market Order: A market order buys a stock at the current market price while a sell order sells at the available market price. When you place the order, your broker will enter the next available price, making sure your order goes through once there are willing buyers or sellers available but you may not get the exact price you see on the screen.
- Limit Order: A limit order is buying or selling at a specific market price. This order is entered when a trade reaches its limit, an order will not be filled if the price does not reach your target.
- Stop Order: A stop loss order is quite different from a limit and market order. Stop loss order is an order type that manages risk on-stop buy or on-stop sell, once it reaches a specific price, known as a stop market. Stop-loss orders only help manage risk and do not guarantee a particular sale price.
Monitor Your Stock Performance
Monitoring your stock performance is also important to determine long-term success. You need to monitor your stock performance by setting up alerts on your brokerage platform to track your stock through notifications when the price changes.
Also, review the earning reports through the companies’ earning reports. Lastly, always stay updated to get the latest news about the company’s new price stock, new product launched, change in management etc. This will help you stay informed and make the right investment decision.
Bottom Line
You need a solid understanding of the stock market on how to buy and sell stocks. This can be done by setting up a brokerage account, researching the stock you want to buy, choosing the right type of order, and exploring the marketplace confidently.
The main key to successful investment is doing thorough research, planning carefully and monitoring your investments. All this will help you make smart decisions and accept the changes. Once you are equipped with the right tools and strategies, a thoughtful approach to buying and selling will pave the way for your success in the stock market.
Frequently Asked Questions
How Do I Know Which Stocks To Buy?
There is no right stock to buy that is why you need to have a financial advisors advocate for investing in stocks. And if you want to invest in individual stocks, it is necessary to do a thorough research on the stock before buying.
When Is The Good Time To Buy Or Sell Stocks?
There is no right time to buy or sell stocks. All you just need to do is buy stocks as soon as you have the money available, and also sell stock when you feel the need to. But when the market falls after investing, don’t worry, you will have plenty of time to make up for the losses.
How Much Should I Sell My Stocks For?
Before you can sell your stocks, you need to look at the following factors:
How much do you buy the stock? How will be your financial return when you sell? What is the state of the economy?
