What does it really mean to trade stocks? This was a question I had in high school that no one could adequately respond to me. Except a large house in financial education, high school is probably the first time that most of us believe that what we would like to trade.

Most of the upper classes have a program of economy which has a unit in the stock market, and some even allow students to trade stocks on paper. This was my experience, and I thought I had a great strategy for trade. However, there are many myths and misconceptions that needed to be dissipated before It might actually start to trade stocks.

Many newcomers and beginners are not aware of some basic facts about the markets, and have afraid to ask. Worse, it assumes that the authority figures often do not even know the answers. This article is intended for anyone who would like, but the Trade has always been afraid to ask these simple questions.

What it really means to trade stocks?

In economics, the class My plan was simple to trade, and "guaranteed" to make money (or so I thought). I found the "cheaper" (the lowest populations price) I could find in the newspaper - preferably around $ 1-2 per share - and sought those that were near their 52-under week. My strategy was to buy these populations in large volumes, and then sell each time marked by a meager 1 percent.

For example, if I could buy 10,000 shares of a stock of $ 1, which would only have to go to $ 0.01 for me to make $ 100! Sure, the stock could go down, but what were the chances that an action $ 1 would see $ 1.01 again? I just want to hold on to it until it reached U.S. $ 1.01 (or higher) and then sell. Ah, if so simple to trade stocks.

There are commissions when populations of Commerce - buying and selling

I knew you were charged a fee for trade, and this factor in my strategy. However, none of my teachers could tell me exactly what a "trade" was. I assumed that trade was the exchange a population of another - the exchange of one thing for another is the definition of trade, after all.

But I had a suspicion that you might be charged to trade when it was purchased and when sold, and of course, I was right.

Not to be confused with the term "commerce". We normally not think about making a purchase at the supermarket as "trading." We believe that the risk of changing an old TV for a new bike in a garage sale and trade. But every time you make a purchase actually trade money for a theme - and this is the definition of trade that matters when you want to trade stocks.

Thus that the first flaw in my strategy was my underestimation of the commissions. Instead of $ 15 round trip, would be $ 30 to enter and leave my business. That reduced my benefit of $ 100 $ 70. But it would be worse!

The Bid / Ask Spread when populations of Commerce - The Silent Murderer

When trade, there is also something that is called the buy / sell. This means that the price of buying a stock is higher than the price to sell at a given time. The stock market makers trade for their own accounts to provide a liquid market, and this is his way of making money.

In negotiating the $ 1 shares in companies, this can be a real murderer. Since These businesses are usually less liquid than large companies like Microsoft or GM, its bid / ask spreads wider. So the population can cost $ 1 $ 1.03 to buy and yet could only sell for $ 0.97.

These are my first plans for trade. We hope this article answers some questions for you. If a strategy to negotiate the action seems too good to be true then it probably is.

About the Author:

William Smith the author provides much more financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at
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