Learning the basics about stock market for dummies is a very important first step before investing in any type of investment. Perhaps you are already aware that stock trading refers to the buying and selling of stocks in the financial market. Trading usually takes place on the exchange floor of the stock market. This is where we can see different people waving, yelling, and gesturing at one another in order to buy or sell stocks. In the stock market exchange floor, the investor will approach a stock broker, who will make certain arrangements for his ordered stocks. The stock broker will then inform the floor clerk about the orders of the investors, and the floor clerk will locate the floor trader from whom these orders can be bought. Once the price is arranged, the trading transaction will be done. The investor will then receive his confirmation through mail after a few days.
Another way to trade is through online. This is done with the use of a computer and the internet, of course. A stock broker will still be needed to buy penny stocks or mutual funds and they will connect to the exchange network to search for a buyer or seller according to the orders of the investors. Online stock trading is more preferred by many traders, as this is faster and more efficient. Investors can immediately get their confirmation only a few minutes right after the transaction.
Once a person buys a number of shares of stocks from a certain company, this investor automatically becomes a shareholder of that particular company. Shareholders are considered part-owners of that company, and any profit that this company will gain will be equally shared among its shareholders in the form of dividends. A shareholder will also gain profit if he decides to sell his shares at a higher price than the price he bought the same shares for. However, there is a risk of loss in case the price of the stocks drops. This is mainly the reason why investors must be very careful in choosing which types of stocks to buy and which companies to invest into. This is an obvious tip about stock investing for dummies that one must always remember.