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Share&Stock Trading

Share&Stock Trading

An Idiot’s Guide to How Share Trading Works

A Idiot’s Guide to How Share Trading Works

Share trading, also known as Stock Market Trading, is where an investor would buy stocks or shares from a particular company specifically from the best share trading firm in Malaysia, which they can sell to other traders. This is the usual way people make money in the share market.

But, how exactly do people trade? Here is an idiot’s guide to share trading:

1.Getting a Brokerage Account

Before you can actually start trading, you have to create your brokerage account. There are two ways to do this. Number one, you need to have an investment account such as a Roth IRA or your retirement fund. Number two, you can go to a brokerage firm, fill out some sheets, and they will be the one to make the account for you.

You need to make an initial deposit in your account so that you can start bidding. This money will directly be used in the stock market to get your shares for trading.

2.Bid/Offer

Think of the stock market as an auction. A seller of some shares would wait for suitable offers before they will give what they have. A bid, on the other hand, is what buyers would do to buy those stocks.

Suppose there is a seller of 100 stocks of Intel, buyer A “bids” $100,000, buyer B bids $150,000, and buyer C bids $200,000. Of course, the seller would go for the highest bid.

So in summary, offer= seller; bid= buyer.

3.At Market and At Limit

If we are talking about “At Market”, it means that any trade (whether it be buying or selling) means that the order can be completed at or around the current market price. Since the stock market’s price movements are erratic, the trade will not be complete if the price shifts before actually making the trade.

The term “At Limit” means that no matter the price movements in the market, the shares will have a specific price. This means that the buy order will be complete by paying the set price or even below it.

Conversely, the sell order will be executed at a fixed price or sometimes, even above it.

4.Confirmation

In every trade that you will do, you will be given a note, or popularly known as the confirmation by the broker that gives you detailed information about the trade like how many shares you bought/sold and at what price.

5.Settlement

Take note that every trade will be “settled” only after two trading days. The shares will be transferred directly to the buyer and the payment will be transferred to the account of the seller.

6.Additional Notes

When you buy shares from a company for the first time, you will be given a welcome message from a representative of the organization. You will sometimes need to comply with what was said in the letter before they can continue the transaction with you.

You will get paid by the company in the form of Dividends which is usually handed to the shareholders twice a year. DRP’s or Dividend Reinvestment Plans are also given occasionally and the shareholder has the chance to use some of the dividends to buy more shares which usually comes at a discounted price.

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