What is Stock Trading? If you have invested in stocks, then you might have heard of the term. The term stock trading mainly refers to the purchasing and reselling of stocks of a company. It is like online Forex trading, where you can profit from your investments in different currencies. But instead of currency, you are trading with stocks.
To understand the reason behind stock trading, you first need to know what is stock, stock market, and how the stock market works.
So, let us sequentially look at all the basics of the stock market and move up to stock trading. We hope our article will be very helpful for those interested in stock trading Philippines.
What are Stocks?
So, what exactly is a stock? Well, the stock is like a part or share of a company. Owning a stock means owning a part of the company. A company can have hundreds of shareholders. To acquire shareholders, a company must go public.
Now, why would a company want to go public? Why would it need shareholders? It’s simple. A company needs a bulk amount of money to expand and grow its business. A better way to acquire money is to sell the company’s ownership by going public.
What is the motive of people to purchase company shares? There can be three possible reasons for purchasing a stock. One, to be an owner of a company. Two, to get the dividends (fraction of company profit). And three, to create a diversified portfolio. Another reason could be stock trading.
What is the Stock Market?
The market in which you can buy stocks, hold them, and sell that stock is called the stock market. The stock market is what determines the price of the stocks. The more demanding a stock is to the public, the more expensive it gets and also the more dividend it pays. And just like that, when demands fall, the stock starts to lose its value.
Now that we know about stock and how the stock market works, let’s talk about stock trading and how you can profit from it.
What is Stock Trading?
We know that stock trading refers to the purchase and selling of shares. But what is the reason for it? Like all businesses, the reason behind stock trading or exchange is profit. The value of stock falls and rises in monetary terms in response to its demand, just like Forex currencies.
When a stock loses its value due to seasonal demands or other reasons, its price falls. A professional stock trader observes it and researches that share to estimate risk and profit. If everything looks fine, he/she buys that share and holds it until the price rises again. When the demand for that stock increases, the price rises, and that is when the stock trader will sell the share to earn profit from his investment.
Stock trading may sound very easy, but it is not. It is a very risky process and almost 60% of stock traders suffer from losses due to the uncertainty of the stock market.
The stock market is very susceptible to economic change and can change directions at any time. That is why it is important to keep up to date with your tabs in the stock market. But it is quite impossible physically. That is why people now prefer online stock trading,
How is Online Stock Trading Different?
Online stock trading is the virtual version of the physical stock market. With the help of the internet, now you don’t have to go to the stock exchange market physically. Instead, you can invest, withdraw, and make any other moves in the stock market from your home, using a computer or a smartphone.
The process of investing and maintaining your position in the stock market from anywhere using the internet is called online stock trading.
Because of its convenience and the huge number of users, big corporations and public companies like Google, Apple, and Microsoft are offering a limited number of shares in the online stock market.
There are many online brokers available. You can use them to purchase a stock and become a stock trader. Since we are talking about stock trading in the Philippines, let’s look at the step by step process of online stock trading in the Philippines.
Some of the best stock trading platforms in the Philippines are IC Market, AvaTrade, and Pepperstone. While they all are different online brokers, the process of stock trading is the same in all online brokers.
Steps of starting Online Stock Trading Philippines
Choose a Broker and open a stock trading account
The first step of getting yourself involved in online stock trading is to open an online brokerage account in a reliable online broker platform. Usually, with one brokerage account, you can invest in all the trade platforms that brokers offer. That includes Forex, CFD, Bonds, and virtual currencies. You can call a brokerage account a stock trading account.
Before opening a brokerage account, make sure that the broker is legal in your country. Be sure to read their terms of services for ensuring your safety. The available legal brokers in the Philippines are Pepperstone, IC market, AvaTrade, FXTM, Oanda, etc. You can choose from any one of these brokers or your personal favorite as well for opening your brokerage account for stock trade.
Research about stocks for trading
This is something all stock traders must do before investing. You need to see if the stock has the potentiality of price rise and also consider broker expenses, like how much do they charge per $100 investment.
A piece of advice, when investing in individual company stock, make sure to use a financial analysis ratio to compare that company with its competitors and choose the best performing company.
One more thing you need to consider is how stock trading affects your tax bills. There is a trick for minimizing tax bills and that is to use retirement accounts instead of a brokerage account.
Now that it’s time for buying a stock, you need real money in your account. You can easily deposit money in your trade account using bank lines or other eligible methods your broker allows.
Buy a stock
After depositing the necessary amount in your account, it is time to buy the stock. Make sure that the stock you are buying is potentially expensive and profitable. Buy that stock when it is undervalued.
Keep in mind that stock trade has a huge risk. So, it is better to start with low investment and then move up to the expensive ones.
Keep an eye on the stock market
After buying the stock, you need to monitor the stock market regularly to see if the price of your stock is rising or falling. It will help you to avoid financial losses.
There are two conditions for selling the stocks. One is when the price is falling dramatically and fast. It is to avoid big losses. The second is when your stock price rises and surpasses your purchase price. When the price surpasses the purchase price, wait and observe the price for it to reach its peak.
After selling stock, it is time to withdraw money from your account. The withdrawal method is the same as the deposit method. You either use bank wires or other cards, permitted by the broker. Keep in mind that some brokers charge money for withdrawal.
So that is how you open a stock trade account and trade with stocks in the Philippines.
To summarize, stock trading is a profitable business, but it comes with high risks. Research shows that over 60% stock traders lose half of their investments due to the uncertainty of the stock market. So, whenever you are making an investment in stocks, be sure to keep a sharp eye on the share market to minimize your losses when things go south.
If everything goes as planned, you can earn huge profits from stock trading. So, do your research and explore great opportunities!