What is the stock exchange and what functions does it perform? What are the features of online trading on the stock exchange and where to get training in such trading? Where was the first stock exchange formed??
1. What is the stock exchange?
Stock Exchange – one of the segments of the financial market. Unlike commodity exchanges and forex, securities are sold here, not currency or raw materials. The most popular type of securities – stock, she is the most volatile (that is, variable in terms of price).
The first stock exchange appeared in Amsterdam in 1602 – a real veteran compared to Forex. The stocks and bonds quoted on it did not shine with variety: only 44 tools were allowed to speculate.
In addition to stocks and bonds, forwards and futures come at the disposal of traders, options, bills and more.
Securities are volatile, often their fundamental factors influence their value, as for currency.
The most striking feature of the stock exchange – lack of leverage. One side, it’s good, because it’s definitely impossible to lose all the money. With another – badly, since you won’t get big profits from a small deposit.
A number of other differences (which you must know about) listed by us in the article «Financial market», drop in at your leisure. Fortunately, all segments operate according to similar laws, therefore having mastered, eg, Forex trading, you can easily switch to securities.
Securities, like currency pairs, divided into highly volatile (stocks etc.) and low volatility (bonds and a number of others). Remember, that it is always advisable to start trading with the tools of the last group.
The stock exchange does not work around the clock – operations can be performed only at certain times. for instance, Moscow Exchange opens its doors at 9.30 and closes at 19.00, The London Stock Exchange is activated at 8.00 and retires at 16.30.
2. What are the functions of the stock exchange — overview of the TOP 4 main features
Exchanges are created not only for that, so that traders can earn millions on speculation. The stock market has other features, which we will comment below.
Function 1. Organization of exchange trading
Trading on the stock exchange is offline, so in online modes. Stock exchange – peculiar platform, uniting traders and giving them the opportunity to declare their intentions: some buy paper, others sell.
Traders usually don’t think about, that to sell a tool you need to find a person, wishing to buy it. Search problem does not occur, because there are so many speculators on the exchange, organized by trained intermediaries.
The role of a broker on the stock exchange is performed by a broker – firm, implements trade orders of traders.
Function 2. Preparation and implementation of exchange contracts
Contracts mean directly the fact of a deal. Opening a trading position occurs at a certain price, with clearly defined commissions, sometimes even closing time (optional, in particular).
Exchange task – ensure the fastest possible flow of the specified process and provide the trader with a report after the completion of trading. If Positions Open Online, reports are sent by mail (usually daily, weekly and monthly).
To prepare and implement a contract, you need to know the dynamics of price changes, which brings us to the third function.
Function 3. Stock price quotation
Price – this is an agreement of many people about the value of a tool at a particular moment. The exchange analyzes the opinions and actions of all bidders and, on the basis of this, forms the price, which is displayed on the charts.
If you are optimistic, what can you influence pricing, disappointment is just around the corner. The trends are formed by the so-called majorities – the biggest players (Central Banks, largest investment funds, etc.).
Crowd – blindly following trends. If you can follow the price correctly, understand the psychology of changing quotes, then success will not take long. Inability to enter and exit trends – guarantee of failure and loss of all money.
Equally important for successful trading is the timely execution of trade orders – fourth function.
Function 4. Guaranteed execution of exchange transactions
When the speculator begins to open deals on the exchange, the broker gives him an obligation to do this at that price, Which was «ordered», and for no other. The same thing happens with closing deals.
Sometimes prices move so sharply, that it’s impossible to make a deal for any particular value. In this case, the trader sets the range: at what maximum/minimum deviation from the price allowed to open a position.
Keep in mind the limitations, not allowing the broker to open or close positions. The most common – Margin Call and the completion of exchange trading.
Margin Call – this is a certain level, expressed as a percentage of the deposit. When it is reached, trader loses the opportunity to open new positions. Margin Call activation condition – going negative to a certain value.
We have opened several deals, the market went against us. It goes into minus more and more money. As soon as the amount determined by the broker goes to minus, eg, 50%, we will not be able to open new deals.
Often Margin Call turns into a Stop Out – even more money goes into minus (most often around 80%). The broker closes all trades automatically, leaving him 20% initial funds (as intermediaries do not like to lose money and are afraid).
The second reason – completion of exchange trading. If the price drops to Stop Loss on a day off, broker cannot close it.
The position will close on Monday at that price, which will be at the moment «awakening» exchanges. Very often losing positions, left on the weekend, destroy all trading capital.
3. How to trade the stock exchange online — step-by-step instructions for dummies
The stock exchange trading algorithm is almost no different from the conclusion of transactions with currency. Let’s look at its main stages once again.
Step 1. Examining stock exchange information
You can not start trading for real money, rushing into the pool with his head. A novice trader should get comfortable in terminology, understand the features and principles of the stock market, explore the main areas of analytics.
Regarding market analysis, it is advisable not to cover all existing areas, and choose one for yourself, eg, graphic or wave analysis.
Can, sure, combine different options: trade by «Elliott Waves», but notice patterns or popular candlestick patterns on charts.
Beginners often complain, that brokers offer exclusively paid tuition.
If you don’t have enough money to attend paid courses, do so.
Look at the broker’s website and go to the section «Training». For starters, you only need «Basic course» — 3-4 lessons are held daily in different cities, there are records on YouTube.
View all, what is, because different teachers give different materials. Then move on to specific technical analysis strategies.
You can easily apply the acquired knowledge in the stock market, since the graphs, in fact, the same, analysis methods do not change.
Step 2. Choose a broker
To understand, how does the market work, and learn how to analyze it, will have to go through training (nowhere without him). Training is usually provided by popular brokerage firms, which have been successfully operating for 10-20 years.
In the penultimate section of the material, we will consider five companies, in which you will find everything you need for yourself, to become a professional trader in the securities market, and give four simple tips for choosing an intermediary.
Step 3. We open a personal account
Opening an account is easy: you register on the site, send administration passport details and start trading. Passport is not always required, but often. Reliable firms usually request it.
Before starting work, it is advisable to open a demo account. Newcomers often lose money simply because, that they do not know how «push buttons».
Step 4. Learning to work in a trading terminal
Learning is just what you need on the demo account, not real – practice setting Stop Loss, open positions on pending orders, track statistics. Typically, brokers conduct webinars for beginners on the trading platform.
Step 5. We select a trading strategy
Which strategy to choose, you will understand yourself after training. First you need to choose the direction of analysis, and then – specific strategy on it. Information on analytics is contained in the article «Forex trading — what is the forex market», does not hurt to get acquainted with her.
See the video below for the importance of this step.
When choosing a strategy, it is very important to assess the ratio of risk to profit, discover, what capital is needed for successful trading.
Step 6. Start bidding
Do not start trading with large investments, Do not forget, that the risk for each transaction should not exceed two percent of the deposit.
Psychologists have established, that loss 2% of all the money in each transaction allows the trader to remain calm and not give vent to emotions. Higher costs turn off the mind and lead to «drain» whole bank.
Need to gain momentum by increasing the deposit, not risk. Professionals advise not to replenish the account until, until the initial amount doubles.
Step 7. Withdraw profit
Ideally, profits can be withdrawn at any convenient time, but brokers often set various kinds of restrictions. for instance, if you have open transactions in your account, Most likely, withdraw money will not succeed.
However, in different companies in different ways.
4. How to choose a reliable broker to trade on the stock exchange — 4 useful tips
Concluding the article, give four useful tips, invaluable when choosing a brokerage firm.
Tip 1. Pay attention to the size of the minimum deposit
Despite, that almost all stock market brokers require large sums of investments to start trading, minimum capital levels often still vary.
Lower minimum threshold, all the better, but it is important to take into account a number of other factors, in public, commissions, Margin Call or Stop Out level.
Tip 2. Check out our withdrawal options
This tip is especially important, if you plan to cooperate with foreign companies or firms, who have not won a sufficient level of trust in the Russian Federation. There should be a lot of withdrawal options, obligatory transfer to a bank account.
If transfer to the bank is not possible, watch out. You have to trade big in the stock market, so it’s impossible to neglect the financial part of the work.
Tip 3. Ask about the amount of commission
The level of commission payments is indicated in the tariffs: to view them, no need to even register with the company. Lower fees, all the better.
Often the percentage of commission depends on the amount of capital: brokers motivate traders to invest large sums. You don’t have to fall for a bait right away, better to start trading for little money, even with a higher percentage.
Tip 4. Pay attention to the trading conditions, offered by a broker
This is the most important point. Unfortunately, to understand correctly, where trading conditions are better, need to be trained in the basics of trading, otherwise you just won’t understand, what is what.
Trading terms include many indicators, we will not list them all. According to professional trader and expert Alexander Elder, there are a lot of brokerage firms, so you should always look for the most profitable partners.
Stock market – vast field for activities with tremendous opportunities. If you understand its functioning and learn how to trade, You can forget about self-employment and low wages.
If you decide to become a trader, make the following statement of Genghis Khan a key rule of your trading philosophy: «Excerpt – the flip side of swiftness».