Understanding the stock market is the first step towards understanding the stock trading basics.

The stock market is the place where you buy and sell stocks. Stock markets today have gone online with technology. Stocks are the capital of companies divided into small units and purchased by investors. These units are called as shares. There are two ways of purchasing these stocks. You can buy in the primary market. You can buy and sell in the secondary market. You can apply for an initial public offer from a new company or an existing company which is mobilizing additional capital for expansion or debt reduction. This is called as buying from the primary market. The other way of purchasing stocks is thru the secondary market. Here you buy the stocks from those investors who already have the stock and wish to sell.

Brick and Mortar Stock Exchanges are shutting down with growth in technology and online trading of stocks. The system and method of trading is different in these exchanges from todays online trading systems. Buyers and sellers assemble in a stock exchange to buy and sell. Usually the buying and selling is done thru a stock broker who is registered with a stock exchange to trade. Individuals cannot go direct to the stock exchange and start buying or selling shares. They have to do thru a registered stock exchange broker. The stock trading happens in these exchanges thru physical share certificates. Once the transaction is thru the shares certificates have to be transferred and registered in the name of the buyer. But, all this has almost become history now. Today it is online trading.

Online Stock Trading

Online stock trading is done thru virtual exchanges. There is no specific place where brokers have to assemble for doing their stock trading. Sitting in their offices or their homes they can carry out the trading activity. As an individual you can do it direct from a computer terminal at your home. All information that is required for carrying out a trade is available on the monitor of your computer. Information like the current prevailing price of the stocks, the trading lot of the stock, the quantity that is so far exchanged on the day, the demand and supply for the stocks, and much more are available online. The transaction happens online here. The instruments for trading that is the shares are in a DEMAT form. That is they don’t have a physical form. You hold them in a demat account. A demat account is like a bank account. Instead of depositing and withdrawing money, you deposit and withdraw shares. When you buy shares the quantity is credited in your demat account and when you sell it, it is debited to your demat account.

With online stock trading, all the information that is required by you for stock market trading and investing is available online. Online stock market quotes in the form of tickers are provided by the virtual stock exchanges such as the NYSE, NSE, etc. Every country today has more than one online stock exchange.