Words to understand while you enter share trading
If you are about to 開證券戶, it is necessary to know the following words to understand the stock market.
Arbitrage – If you are trading the same stocks in various markets at once, you are engaging in arbitrage. You could witness a change in the value of the same securities at different markets. So, arbitrage could work at times.
Averaging down – The stock market is unpredictable to some extent. So, your holdings’ value could go down suddenly during market dips. At this time, you could buy more stocks at a low cost and can make up for your losses in your initial buy. Once you buy the same stocks at a low price, the total investment amount would get averaged down. It is the process of averaging down.
Broker – Since there is only one stock exchange in your nation, it will be difficult to manage all your trades in person. So, they have introduced a middleman called brokers, who will act on your behalf in the country’s stock exchange and execute your trades as you wish. They will ask you for a small brokerage fee for their service. Nowadays, several applications are acting as these brokers’ tools to interact with the traders.
Dividend – Let us assume that you have invested in a company named ABC. If the profit of ABC in the next financial year is $100, it may provide a small share to all the shareholders proportionally depending on their holdings. The size of the dividend may vary with companies. Also, it is not a rule for the companies to provide dividends to the shareholders. Only some companies do this.
Stock exchange – If there is a market activity going on with investors and traders fighting for profits, there has to be a center to manage all these activities. Each nation will have a stock exchange where all the listings would happen. The introduction of mobile applications for brokerages has reduced the need to visit a stock exchange to trade stocks. However, all companies will be listed in these exchanges only.
Initial Public Offering – There will be several companies available for trading in the stock market. However, if you own a company that has some financial records over the years and you look to go public, you have to register with the stock market’s regulatory body in your nation. Once you do so, they will approve your company to be listed in the national stock exchanges. The first time you go public, you will issue shares of your company in lots to the public at a price decided by that body. This first issue of your company in the market is known as Initial Public Offering. Unlike usual buying of shares, IPO processes will have some application steps, and only a few of the applied investors could get the shares of the company. Also, people could not buy shares as much as they want. They have to buy in lots decided by your company.