How The Process Of Buying And Owning Stocks Works

The stock market can seem like a confusing place, we have all seen different scenes of the exchange floor with people yelling, buying and selling. And there is some way people are making money during all this chaos. How do they do it? Let's take a look at how the stock market works.

The purpose of the stock market is to move money. Some people need to use it and others have it to be used. A company's decision to sell stock is usually based on their need for a large sum of quick cash. Usually it is for some type of expansion or building a new plant. Then the company will issue stock certificates. The common amount for a certificate is $1.00 to begin. The certificates are a piece of the company. When buying stock you are becoming a part owner. Often the people with the most stock will sit on a company's board of directors and help to make the decisions about the company's future. Everyone who owns a share of the stock has a vote in how the company is run. It doesn't matter if they have one share or 1000.

When you decide you want to buy a piece of a company. The first thing you want to do is to research the company. Find out what they are about and find out their history of profitability. You want to make sure a company is moving in the right direction before you invest your hard earned money.

Then you need to find a reputable broker. A broker is in charge of your money while they have it, make sure it is someone you can trust or they might take your money and run. The stock broker is a go between. They match their clients with the available stock at a price they are willing to pay. You can determine the amount you are willing to pay per share. You might have to wait until it reaches that number but when it does your broker will buy for you. The same goes with selling, you can pick a predetermined number to sell and when it reaches that number it will be sold.

Usually when someone takes this approach they have a percent of profit they are interested in earning and are willing to wait until it happens.

You can also trade in stock online and be your own broker. There are many web sites that will allow you to do this and they will charge you a small fee for every transaction you make. There are some people who make their money by spending the day in front of their computers buying and selling. The amateur stock broker is called a day trader. They are usually only interested in the short term. Hoping to buy and sell at a profit within one or two business day.

How to Choose a Stockbroker

A stockbroker is a person who mediates buying and selling of stocks and shares. She is specifically trained to do this for investors in exchange for a fixed commission. This commission, a percentage of the invested capital charged for the service, varies from broker to broker, or the firms they represent.

Transactions by stock brokers in the US and UK

In the US: When acting as an agent, the stockbroker typically charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker informs the client and charges the client a markup or markdown from the prevailing market price.

In the UK: When acting as an agent, the stockbroker charges the client a flat fee and/or a percentage-based commission for undertaking the trade, and the price quoted the client must be the best price available in the market. When acting as a principal, the trade could be with another market participant or one of the stockbroker's clients. When trading in a principal capacity with a client, the broker is obliged to inform the client and no commission is charged.