So, you’ve been eyeing the stock market lately, watching it go up and down, making money for some while losing money for others. You’re convinced that you can do better than your friends, who you used to exchange baseball cards with as a kid. Well, you may be right — but there’s more to it than trying to eke a few bucks out of a card trade.
Most of what’s known as stock trading happens on an exchange. This is similar to your local memorabilia shop, but scaled up hundreds of thousands of times. The busiest exchange today is the New York Stock Exchange, or NYSE. What we call a “trade” constitutes a buyer purchasing a security on an exchange (a stock, option, currency, or other tradable asset) from a seller. The seller could either manufacture the security directly, like a company making baseball cards, or resell it, like your friends.
Most trades happen online and involve brokerages that resell securities. Brokerages are organizations that connect buyers and sellers. Traders can be categorized by the type of trading they do. For example, day traders buy securities at market open and sell at market close, while penny traders deal in stocks that are less than $5. Note the difference between trading and investing — the latter involves holding securities for longer periods of time.
Just like with your baseball cards, there’s always someone willing to take your cards off your hands for less than you know they’re worth. Controlling your emotions is crucial to producing profits. Now relive your childhood and step into trading on the right foot!