Share

A Share is a document which is issued by a company, which entitles shareholders to be one of the owner of the company. A share is issued by the company or it can be very easily purchased from the Stock market. By selling the shares we can get capital gain and by owning we can earn a portion. A Company’s share price depends upon what investors think about the share, not necessarily what the company is “worth”. Some of the companies that are growing quickly often trade at higher price. Stock price of a company is also affected by market news. Basically a capital is subdivided into shares. We can very easily calculate the capital of any company. Capital is the difference between Assets and Liabilities. Examples of Assets are The machinery, Furniture, Buildings etc. Bank loans, Money Owned to people from whom things  have been bought on credit. Capital is the total amount an owner has in the business.

For Example: if the required capital of a company is Rs. 5,00,000 and is divided into 50,000 units of Rs. 10 each, each unit is called a share of face value Rs. 10. A share may be of any face value depending upon the capital required and the number of shares into which it is divided.

When you invest in share, you do not invest in market. You invest in equity shares in the market. Owning shares means having a share of a business without bothering about managing it.

Types of Shares:

There are basically various types of Shares.

ü  Preference Shares.

ü  Equity Shares.

ü  Bearer Shares.

ü  Registered Shares.

Preference shares are the shares that give political right. Equity Shares enjoy the classical rights. Equity Shares do not have any preferential rights. Bearer Shares are the Shares where the owner is who posses them. Registered Shares are assigned to a determined name of a person.

Important facts:

• Owning a stock means you are a partial owner of the company.
• Investments in stocks can generate returns through dividends.
• Share offer no guarantee of any returns and can lose value, even in long run.

Shares have number of Advantages which make it a desirable investment vehicle:

·         Shares offer limited legal liability.

·         Most shares are liquid.

·         Shares offer two ways for their owners to benefit- by capital gains and by Dividends.

·         Common share has the potential to deliver very large gains.

·         Shareholders have the right to vote.

·         Shareholders are able to buy as many new stocks as possible.

Disadvantages of Shares:

• Prices of shares Fluctuate a lot.
• There is no positive link between inflation and corporate profits.
• Shares require more Hardwork and Analysis.
• Some companies go broke therefore you need to diversify a lot.

New to Stock Trading

Before we talk about stock trading it is necessary to understand what is meant by trading? Trading is the action performed by traders and other agents in the financial markets. Trading is basically exchange of goods, services or both. It is also referred to as commerce. Market is a place where trading takes place. Stock trading calls for a systematic approach. A successful trader will have to spend time, learn the systems, then finds out the system that best suits the trader. It is a misconception that trading can be done by anyone but honestly telling it’s not a game play which can be done by anyone by just investing money in the stock market.

There should be a proper plan strategy to earn steady returns from stock trading. A stock trader needs a trading plan. Each trader has different point of view to look at the strategies being used for the trading. A trader need to work on the best strategy applicable to him and which is best suited to him. Most of the traders shares and study their past price trends. Based on the trend they work out. They opt for the plans that give the maximum returns.

Market trend is continuous in nature. It keeps on changing because the trend never remains the same. There is a Bull market trend shows the market is rising. Bear market trend tells the market is falling. A flat trend is a trend where the market moves within a band. One single plan doesn’t work for all the above 3 conditions. It is recommended to look at the market and then decide to go long. Sometimes the market is really frustrating because the moment investors buy the prices start falling and decide to short sell, it starts to move up. It happens because the market behaves on the basis of millions of individuals who are trading. Basically a stock market is unpredictable, we cannot predict what will happen in the market after few hours.

You an also trade within the same trading day such that all positions are really closed before the market closes for the trading day. It’s called Day Trading. It is referred to the practice of buying and selling financial instruments within the same trading day. Traders are the active traders. There is nothing more exciting than playing in the stock market. Investors may become greedy after earning at a particular point of time.

There are two types of trades:

1. Market trade
2. Limit trade

Market trade: when we talk of market trade, investors buy and sell the stocks for the going rate.

Limit trade: here the prices have been set to you’ll buy or sell the shares.

There are different methods of trading – day trading, swing trading, trend trading. Swing trading combines the better of 2 worlds, the slower pace of investing and increased potential gains of day trading. Swing trading jumps into a strongly trending stock after its period of consolidation Trend marketing is the most risk free and fastest way to make money in the stock market. This helps to take large profits.

Note: Much of the money you make is in just a few days if you're a short-term investor. If you made $50 the first day and then added it to you investment and made $60 on that the second day and kept adding and increasing your return, the numbers grow geometrically and just like the penny doubled every day for one year, you soon make a huge sum. If you try to guess at exactly when to trade, you often end up losing all profit.