Factors to know before you invest in stock trading

What is stock trading?

Stock trading is the process of buying and selling stocks of publicly traded companies. The stock exchange is the marketplace where all the transactions of securities like stocks, bonds, mutual funds, and others will take place. 

What is a share?

If a company is need of capital for various needs like the expansion of their operation, debt repayments, and the likes, it will release some shares of the company for a specific price for each share to the public. When investors buy these stocks using real money, they will go to the company. In turn, the company’s stock price will increase in the long run if the operations go well, and the investors can sell their stocks when they are high. You will be able to see the stock prices on stock quote mobile applications and various other platforms.  

What is a stock quote?

A stock quote is a decimal number that represents the current price of a stock in the stock exchange along with some supplemental information like the stock’s price during the closing time of previous days and the difference between both the prices. 

What is a dividend?

A dividend is the share of the profits made by the company in a year that the institution will give to its shareholders. Most of the companies will not provide dividends to the stakeholders. 

What is a brokerage firm?

It is tedious for an individual investor to go to a stock exchange and deal with the members to carry out the transactions amidst thousands of other transactions. So, several companies are there to act as middlemen between the investor and the exchange. These are called brokerage firms and they will do the transactions of buying and selling the stocks on behalf of the investors. The investors would have to pay a certain amount as a charge to the brokerage firm in exchange for their services. 

What is an order?

An investor’s bid to buy or sell a particular stock or large amounts of stock is known as an order. 

What is the rights issue?

In case of financial urgency, companies will decide to sell new stocks to the existing stakeholders at a discounted price to encourage them to buy. The stock prices of the rights issue campaign will be very less than the original price of the stock, but only the existing shareholders can buy these new stocks.

What is odd lot theory?

Odd lot theory is an assumption that was considered in the past by the potential investors. It states that individual investors with no experience in trading will buy stocks in lots under a count of 100 shares to sell them quickly. Apart from the purchases of shares less than 100, stocks numbers that are not rounded-off values and multiples of 100 are also considered as immature buys. It is a conception that these purchases will induce odd lot sales in the short term that will create a way for buying more shares.