Trading Basics

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Trading Basics

What is Trading?

In the financial market, buying and selling of stocks is referred as trading. But all types of buying and selling are not trading. In stock market two types of buying and selling are happening, i.e. Long Term and Short Term. Only short term buying and selling are called as trading. Long term is known as investing. In order to trade you have to approach a broker. You can trade either electronically or on the exchange floor. Exchange floor picture must be well-known to you. In exchange floor trading your broker arranges for your shares to be ordered. . The floor clerk locates the floor trader from whom the shares can be bought. Once the price is agreed upon, the deal is finalised.

Electronic transaction is very common today. It is a well-organised and fast method of stock trading. Here too you require a broker but you receive confirmations almost immediately .In online investing your broker will connect to the exchange network and search for a buyer or seller according to your order.

Trading Basics

Following are the Trading basics for beginners. To become a successful trader you should do so many exercises. Before entering into trading, you should complete the following procedures;
• 1. Set Your Objectives
• 2. Estimate short term needs
• 3. Create an emergency fund
• 4. Repay debt
• 5. Set priorities in a chronological order
• 6. Practice Asset Allocation

1. Set Your Objectives

The starting point for achieving financial freedom starts with a financial plan. You should have a clear picture about your current financial position, available resources and immediate fund requirements. This will help you in setting the long term financial goals. Also keep in mind your risk-taking ability, current lifestyle, occupational profile and family background, the number of dependent and their own financial status. Your trading pattern and style should match to these characteristics. A working spouse can give you a greater degree of financial independence.

A financial plan helps you to design realistic goals and then work towards them over a period of time. Since each individual has unique needs and characteristics, there is no standard formula for setting the objectives. This article only makes broad recommendations that should apply to everyone before starting an investment programme.

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