When dealing with the online stock market, you have to realize that this follows the same rules of trading. Regardless as to whether you are trading on the floor or online, you obviously want to buy low and sell high; but how do you know when to do what? Understanding the basic principals as well as the process of trading stocks will be an important boost to your new found online stock investments.

For online stock market trading for a beginner, the first and obviously most important thing is to sign up with an online broker. But wait, before you do, you need to know and understand the basics.

As share of stock is a share in ownership of a company and while you may not have to physically do anything for the company's day to day business, you are investing in them and as such you will be paid handsomely in the event that a dividend is paid out. When someone chooses to start a business, if they do not have the capital to start it all the way, they have the option of splitting their company up into shares and then making those shares available on the stock exchange.

When an investor purchases shares of that company's stock, they do so in an expectation that they will also be repaid. When the company does well and makes a profit, they then will turn around and pay their investors through a dividend. The value of the actual stock though is dependant on its demand. A company who is a profitable one is also one whose stocks are in demand the most.

Now when you are trading stocks online, you are doing it on-line but the transaction is not automatic. You send the buy or sell order to the broker who in turn fulfils the request. The broker is buying stocks though, not in your name, but rather in the firm's name. As a result, in most cases if there is a dividend paid out on the stock while you own it, that money goes to the broker whose name the stock is under. The amount that the broker will share with you though depends on the brokerage. In most cases though, when you are trading in stocks on-line, you are more focused in profiting through trends.

What this means is that you are looking for a company whose stock's value is low, and you want to be one of the first to buy it when it is low to get it at the best price. Then as the stock goes up because the demand increases albeit for a dividend, buyout or any other number of reasons, you will want to sell the stock before everyone else does while it is still at its peak. This is where the real money in stock trading is when it comes to short term gains.