As a beginner, share trading always seems confusing. There are so many processes, tools, techniques and strategies involved that the whole experience can be pretty overwhelming. To master any art, you need to start from scratch and the same goes for share trading. The key to success here is to have a thorough understanding of share trading basics.

Financial markets operate on technological efficiency. Handling millions of different firms, their daily dealings of buying and selling of shares is nothing short of a miracle. The stock exchange operates in two different ways: one is on the floor and second is electronically. Australian share trading exchange operates electronically. Let’s have a look at share trading basics for how the electronic exchanges work.

Electronic exchange
A vast network of computers handle the entire trading process. The buyers and sellers are matched through programming in these computers instead of human brokers. You can either place market orders or limit orders. Limit orders are more popular as they proceed as per the upper or lower limit defined by the investor. These orders are not processed until the limit is reached and when it does, the process happens automatically. The pending orders are automatically cancelled after a particular date or time.

Since the entire process is electronic, it is very fast and accurate. The investors receive confirmation almost instantly and the online process offers complete efficiency. In Australian stock exchange, you need a broker to handle your transactions. The broker should be licensed by appropriate authority. The stock exchange does not allow individuals to access the exchange. You place your order with the broker and the broker accesses the exchange to process your order electronically.

You can also short sell your shares in the Australian share market. It means that you can sell those shares that you don’t own. This helps in maintaining a difference if the value of the share decreases. If as a short seller, you sell 10 shares of $10 each, you make $100. Now when the value of the share is $5, you can buy 10 shares for $50 and then return the shares to the actual owner keeping the remaining money. (there is a bit more to it than this, but i wanted to keep this post share trading basics)

Deep insight and thorough knowledge goes a long way in making you a master of your trade.

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By purchasing a company shares, a shareholder automatically becomes a part-owner of the share issuing company. The share market is filled with tales of fortunes made and lost; this partly explains the reason why the stock market is so exciting and popular.  You profit from your shares by selling them at a price higher than the price you acquired them at; similarly, you suffer a loss by selling shares at a price lower than what you purchased them when the price falls, also called a bear market.

Whenever the company you invested in makes a profit, they share part of it with you as dividend. A shareholder is often an anonymous player in the share market and many make handsome profits. There is no holy grail to consistent profits in the share market, but prior to your odyssey into this exciting world, you should learn share trading basics.

Learning share trading basics will ensure that you’re conversant with the market lingo and other technical terminologies necessary to successful trading.  In order to trade shares, you have to approach a broker; this can be done electronically in an exchange floor. This means that you must familiarize yourself with the exchange floor environment; because it is here that your stockbroker organizes for your shares to be ordered. The exchange floor clerk locates your the trader from whom the shares can be purchased. Once they agree on price, a deal is settled.

Electronic transaction is the norm these days because of the efficiency and fast execution it affords. But even with electronic transactions you require a broker; the advantage is that order confirmations are instantaneous. In online trading, your broker will link you to the exchange network and search for buyers or sellers depending on your submitted order. Stock prices can not be foretold, they’re depended on various factors which cannot be easily predicted like geopolitical events and more.

Share prices fluctuate depending on demand at any given time. Any event that could negatively affect a company will also have a direct effect on the share prices of the said company. If you’re a novice in the stock market, learning share trading basics will undoubtedly equip you with sufficient knowledge to start trading.

Love life, not just the weekends. You only have one life, Live It! @ www.NicciAndLee.com