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[M183]Making Money Stock Market

by Dr. D.s. Merchant, Dr.

This market involves buying and selling of millions of shares all over the world, and generates profit.

As a beginner, you must understand in effect how the market works. You really don't have to know all of the technicalities of buying and selling stocks.

The first and foremost you need to know is the functioning of the exchange floor, irrespective of whether you trade through the floor or electronically.

When the market opens, hundreds of people are seen fast moving about shouting and signaling to one another, staring at monitors, and entering data into terminals, or busy on cell-phones on the exchange floor. It looks like a complete fiasco. However, by the time the end of the day approaches, the market has worked out all the trades, and is all set for the next day.

These are the steps in a simple trade on the exchange floor of any major Stock Exchange:

You instruct your broker to buy a number of shares of a company at the current market price.

The broker's order department passes the order on to their floor clerk, the dealing official, in the exchange.

From this person it goes to one of the firm's floor traders whose task it is to find another floor trader wanting to sell that number of shares of the company you wanted. Each floor trader has particular knowledge of which floor traders deal in what stocks.

The two come together on a price and seal the deal. The notification process moves backward along the line and your broker gets back to you with the final price. You receive the confirmation notice in the mail after a few days.

Beginners should avoid complicating things trying to get rich in a day by venturing into every nook and cranny without knowing a thing or two about them.

To begin with, you need a broker to handle your trades ? individuals don't have access to the electronic markets. Your broker accesses the exchange network and the system finds a buyer or seller depending on your order. Choose the right broker rationally. This is a crucial point of money making from stocks.

Depend on your comprehension and your broker, who must be a professional. Never bypass understanding fully the cause(s) behind a bad result when it occurs. Learn from your experiences, document them, and keep reading them once in a while.

Step1. Learn the language of the trade. Find out about the types of orders you can place. A market order is one that you buy at whatever price the stock is at the moment you place the order. This type of purchase is not for the first time investor. Instead, use a buy/limit order. The buy/limit order limits the maximum price that you pay for the stock. If the stock is available for a lower price you get that price. The same concept is true for sell/limits, but it is the lowest price you want to sell your stock.

Step 2. Decide if you are long-term or short-term buying. In order to make money in the stock market you need to identify the plan you want to follow. A short-term buyer looks for the easy, but frequently small, movements of the stock and buys or sells accordingly. Long term buyers seek out stocks that they believe substantially appreciate over a period. Microsoft millionaires got the penny stock as a bonus, because it was worth so little many just held on to it and later were delighted they did.

Step 3. Choose an area you know something about. A stock club of women made fortunes by stopping at restaurant chains, visiting stores and consuming the products of the companies they bought. One of the best mutual fund managers in specialty stock used this practice to become the top manager in the nation. When you choose a stock for a long-term investment, know the business.

Step 4. Watch the price fluctuation. Each stock has a different rhythm. The short-term buyer watches that rhythm and works with it. If you find a stock that you like and notice it has an up and down, almost predictable price, use the information to make additional money. Put a buy/limit order in at the low end of the cycle.

You may miss an opportunity by pennies, but if it is truly a repeating cycle the opportunity comes back again. Wait until you purchase the stock and immediately place a sell/limit order for the higher end of the cycle. Make sure the spread between the two is enough to cover the cost of both trades and make a profit. If the cycle is continuous, do this repeatedly.

Step 5. Concentrate on one or two stocks. When you begin to trade, it's easy to jump all over and buy a little of several stocks. That is diversification, but costs you more in trades in the end than you make on profit. Focus on one or two stocks to begin your trading.

Step 6. Buy stocks with higher volume. Some of the penny stocks are tempting but when you notice the volume, it is quite small. This means that when you want to sell, there aren't many people buying. Unloading the stock becomes difficult.

Step 7. See who manages the company. Some CEO's have wonderful track records. If you notice that the CEO managed three previous companies and they all went belly up, he may not be bad, he may be the man they call in to close a company down. Check the management carefully.

Step 8. Track your trades. List the dates, share price and number of shares on one side and if you sell list the date and price on the other. Track the profit to see what percentage you take. You need these records for the IRS. Aim for a 10% to 15% profit on your money. In a down market, 8% is still good.

Article Source : Investing In Penny Stocks

About Author

Both Dr. D.s. Merchant & Arkaitz Arteaga are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Dr. D.s. Merchant has sinced written about articles on various topics from The Internet, Health Care and Health. Ibrahim Machiwala (Lodhi) is a recognized authority on the subject of trading and online marketing. For FREE reviews on Stock Exchange and Articles on Stock Market, Stock Broker Visit:. Dr. D.s. Merchant's top article generates over 9900 views. to your Favourites.

Arkaitz Arteaga has sinced written about articles on various topics from Stock Market Crash, Finances and Stock. I have a degree in Computer Systems Engineering. I've been working in the world of forex trading and stock market investing. I also have been building a variety of websites for the last 3 years. For more information about Stock Market visit. Arkaitz Arteaga's top article generates over 49500 views. to your Favourites.