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However, before we get started with the specifics of the stock market, it’s important to point out that when you trade stocks in a conventional sense, you’re buying into a company, in very small amounts. The more stocks you own, the greater your share in the company. Publicly traded stocks number in the thousands, and many stocks are being listed or delisted each and every day.
The value of a stock is dependent on a wide variety of factors, including the fundamentals of the company, socio-economic issues, geopolitical issues, inflation, unemployment, taxation, and a host of others. At any given time all of these factors are working together – often in opposite directions – to influence the price of the company’s stock. But perhaps the biggest drivers of stock prices are speculation and perception. The more people that believe a stock is likely to move up or down, the greater the likelihood that they will move the stock price in a particular direction.
What determines stock value?
Stock prices are only calculated when a company decided to go public and makes its initial public offering. The company will primarily pay an investment bank that makes use of complex valuation techniques that determine the results of how many shares will be offered and at what exact price.
As a company’s total value is its Market Capitalization that is represented by its Stock Price once the company goes public this is published on the stock markets. Market capital is equal to the stock price, but multiplied by the actual number of shares. E.g.: If a company’s value is estimated at $100 million it may issue 10 million shares at $10 per share.
How to Get into the Stock Market
The simplest way to get into the stock market is to create a trading account with an online brokerage, such as AvaTrade. To create an account, simply fill in the short registration form on the website and create a password. Once your account is set up, you will be required to deposit a minimum amount of trading capital. Minimum deposit amounts can vary significantly from brokerage to brokerage and can range from $100 to $1,000. At AvaTrade, the minimum deposit amount is only $100 on credit card.
After you have deposited the minimum amount and once your account is approved, you will be able to start buying and selling stocks or other assets that AvaTrade offers, such as , indices and commodities.
Typically, brokerages will take a commission on every trade, or they will charge by spread. The spread is the difference between the buy and sell price of an asset. If the brokerage charges by spread, it will take a percentage of the spread, such as 1%, instead of charging a flat commission on every trade. At the end of the year, if you generate a profit from your trades, you will be required to pay a capital gains tax, depending on the country you live in.