About Stocks Trading

Stocks is a term that is commonly used by stocks investors & traders to describe trading activity in the market that is carried out by traders, investors & speculators.

In stock trading a trader can buy or sell a stocks. A trader will buy a instrument if they think the value of the instrument is likely to appreciate in the future. A Trader will sell a instrument if they think the value of the instrument is likely to depreciate in the future.

The Market is an over the counter market which means trading is carried out through a network of the big international banks; this stocks network is commonly referred to as the interbank network. This interbank stocks network consists of banks and brokers which are in different locations. These interbank network is responsible for providing the prices at any particular time to the traders and other market participants who want to buy or sell stocks. In stock trading the price is constantly changing and this price is denoted by what is known as a Quote. In the Price is displayed as a Trading Quote. This stocks quote is constantly changing and the interbank network will update automatically the current quote and traders can then trade the instrument at the current price.

Stocks Quotes

trading prices of instruments is displayed using Quotes. This is the price at which any trader wanting to trade this instrument will trade at.

Because stocks instrument prices are constantly changing it means that traders can take advantage of these price movements to make profits by trading these price movements. The price of any stocks instrument will keep moving because of demand supply. This is because there are many participants stocks instrument in the open market and therefore this means that the price quotes will get determined by the current market forces. These market forces may be determined by factors such as an increase in demand for stocks.

Stocks Pips

In stock trading the price moves are measured in points commonly known as Pips in the market. The pip is used to calculate the profit or loss that a Trader makes in a particular trade. For example if a trader makes a trade which moves 50 pips in his direction, then the profit of the trader will be calculated as 50 pips. Pip in stocks is represented as the second last decimal point in the Quote and it is made up of pipettes - pipettes are fractions of a Pip.

Stocks Lots

In stock trading - stocks instruments are traded in units known as lots or stocks contracts.

Leverage

Because not many traders can afford to trade large units of stocks contracts, there is leverage in stocks which means that traders can borrow money and use the borrowed money to make trades with. For example leverage of 100:1 means that a trader with capital of $10,000 can borrow up to 100 times using the 100:1 leverage option and therefore after borrowing using this leverage the trader will have a total of $10,000 multiplied by 100, which means the trader will have a total of $1,000,000. This leverage is what makes Stocks Trading accessible to retail traders because retail traders can start with little capital of their own and use leverage to borrow the rest of the money required for trading. Money that the trader deposits is referred to as the trader’s margin and a trader can continue borrowing money using this leverage option as long as they have the required margin in their account. This is why traders must have the required account balance in their account to open the trades they want to.