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Processes in Stock markets
- Classification of markets
- Secondary markets and Primary Markets(IPO)
- Trading systems and procedures of stock exchanges
- corporate actions and its impact on stock prices
- Essentials for online share trading.
Classification of Markets - For understanding how the stock markets work and how trading happens it is necessary to know about the primary and secondary markets.
Secondary Markets.
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves is a secondary market. For the general investor, the secondary market provides an efficient platform for trading of his securities. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
Primary Markets.
A market that issues new securities on an exchange. It is also known as "new issue market". Primary Market is part of the financial market where companies issue their new shares and bonds. This is the only moment when the enterprise receives money in exchange for selling its financial assets. A market is primary if the proceeds of sales go to the issuer of the securities sold.Companies, governments and other groups obtain financing through debt or equity based securities. In the Primary market the investors have the first opportunity to buy a newly issued security.
Trading Systems.
A trading system is a set of specific rules, or parameters, that determine entry and exit points for a given trade. These points, known as signals, are often marked on a chart in real time and prompt the immediate execution of a trade. For successful trading you must know when you will enter into a trade and when you will exit from a trade. Preparing a trading system or a trading plan is not an easy task. You have to take into account many factors such your risk taking capacity, capital at your disposal, probability of winning and losing trades, etc. When developed properly trading plans can improve your efficiency in trading.
Corporate Actions and Impact on Stock Prices.
The events that have an effect on the shareprices are:
- Cash Dividends declared
- Stock Splits, Reverse Stock Splits
- Rights Issues
- Spin Offs, Mergers, Acquisitions
- Share Buy-backs
Essentials of Online Trading.
Stock online trading is based on buying and selling stocks. Today stock online trading is the most popular method to trade owing to computers thru the internet. Earlier, before the internet was widely available, information on stocks was available only to brokers and you had to call a broker and pay brokerages for buying or selling stocks. Whereas now this information is widely available. Since this modifications occurred traders can control their investments with the help of Internet and online trading facility. The essentials for doing Online Trading are:
- A bank account
- A web trading account. It is usually available with a bank where you are having your bank account.
- An internet connection, preferably a broadbank connections that can provide enough bandwidth for fast trading
- An application to analyse the market, share prices, their trends, past trends of the share prices, etc. This is an optional requirement. As a beginner you may not need this immediately. As you gain experience and decide to take more risks it may become a valuable tool for you.
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