Stock market trading: What it is and why people do it?
The London Stock Exchange has a long and exciting history that crystalised into its more traditional form through the East India Company in London. Every day people are busy on the stock markets, analysing data and making investment decisions. Whilst some stock prices remain stable, others fluctuate on a daily basis. Even events like political uprisings or Brexit, or the crash of a major company can affect the value of stocks and shares.
It may be that you wish to learn more about it and are thinking of becoming financially involved. When so many people spend their lives buying and selling through the stock market, they must have a good reason. We will now look at some of the fundamentals and discuss how people can gain from them.
Basic terminology
When you do research over the internet, it doesn’t take long before you come across phrases like clearing services, clearance and settlement, clearing and custody, custody banking and so on. Basically, a broker-dealer may decide to purchase some shares. There will be a trade date when this is agreed and a settlement date when the exchange of securities actually occurs.
A clearing service will stand between the two parties to make sure the contract is clear and that it can be successfully completed by both individuals. It will conduct the necessary background checks to identify what is being traded and to confirm that the buyer has sufficient funds. When people consider choosing the best clearing broker, they can discover more details from the Global Investment Strategy website. It explains that the actual shares are kept safely by a custodian until the sale is executed. In turn, the stock exchange passes the information to the clearinghouse to complete the process.
What is bought and sold
The word ‘securities’ encompasses a wide range of different tradeable assets, including shares, futures, options, stocks and equities. If they are to be sold on the stock market, it’s a requirement that they are listed there. A trader will also have to be a member of the stock exchange if they are to operate there. Most of the transactions occur electronically these days, making it a cheaper and quicker process.
The two types of investors
Value investors are looking for companies that have been going for a while, are making money and present a low risk. In contrast, growth investors want to learn about businesses that may be undervalued or that could grow exponentially (They are frequently dealing in technology or stocks). Whilst value investors want to receive regular dividends if the companies make a profit long term, growth investors look for higher gains quicker. Needless to say, the latter investments pose a higher risk.
Modern trends
Most people have seen adverts about forex trading and cryptocurrencies, and many of these make bold claims. With the advancement in technology, it’s possible for the uninitiated to become involved by simply using a downloadable app. As you may have often heard, shares can go up or down, and people can make huge losses as well as impressive gains.
