Stocks Trading Basics Concepts

Learning to trade the stocks market is much easier for beginners when beginners start by learning the stocks basics. This way the other stocks concepts become much easier to learn because the new stocks trader will have already learnt about the basic ideas before proceeding to the other stocks concepts.

The stock trading basics that traders should learn first before starting stock trading are:

What is Stock?

Stocks Trading is the simultaneous buying and selling of one financial instrument for another. Stocks traders buy & sell for speculation purpose and for the purpose of trying to make a profit. Traders will buy a stocks instrument that they think will appreciate in value and sell the stocks instrument which they think will depreciate in value.

In Stocks traders buy stocks trading instruments when they become undervalued and sell stocks instruments when they become overvalued. This is the basic concept of trading stocks, as a beginner if you want to become successful when stocks trading you must learn to buy undervalued stocks instruments and sell overvalued stocks trading instruments. Many Stocks traders miss this concept and do the exact opposite buying overvalued stocks trading instruments because that is when these stocks trading instruments seem to be moving up and up and they sell undervalued stocks trading instruments because these stocks instruments seem as if they will continue to move lower.

Just like in stock market successful trader buy stocks when the price is low and sell stocks when the price is high. This is the same trading concept which traders should follow when trading stocks.

What is a Stocks Trading Instrument?

Stock trading is the simultaneous exchange of one financial instrument for another, for this reason stocks instruments are traded in symbols known as stocks instruments.

What is a Stocks Trading Quote?

Because stocks instruments are traded in symbols, the stocks price at which these stocks trading instruments are exchange is determined by the stocks trading quote.

Stocks Trading quotes in Stocks Trading are quoted in format of 4 decimal points.

What is a Pip?

Stock trading quote are quoted in the format of decimal places. The second last decimal place represents a Pip which is the smallest movement used to calculate profit and loss in stocks market moves.

Pip means Stocks Price Interest Point: it is a one point move in the stocks trading quote.

What is a Lot?

Stocks Trading is traded in units known as lots. There is also the Mini lot which is made up of fractions of the standard stocks lots and the Micro stocks lots which are fractions of the stocks mini lots.

Therefore, in the above example where the stocks instrument moved up by 50 pips if a trader was trading using one standard lot then their trading profit would be $10 multiplied by 50 pips which is $500 dollars.

What is Stocks Leverage?

Because not many traders can afford to trade standard stocks lots which require a lot of money to trade, there is stocks leverage in Stocks Trading which means that traders can borrow money and use the borrowed money to make trades with. For example stocks leverage of 100:1 means that a trader with capital of $10,000 can borrow upto 100 times using the 100:1 stocks leverage option and therefore after borrowing using this stocks 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 stocks leverage is what makes Stocks Trading accessible to retail stocks traders because retail traders can begin with little capital of their own and use stocks 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 stocks 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 trading account to open the trade transactions they want to.

What is Stocks Trading Margin?

Margin is the particular amount of money which a trader is required to put aside in order to continue holding an open stocks leveraged trade. Margin can also be explained as the deposit a trader is required to keep so as to maintain his open positions. This margin is a percentage of account equity that has to be set aside and allocated as a margin deposit for the open positions that are held by a stocks trader.