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.

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

The Australian Stock exchange currently lists international share index on various foreign countries, founded on the Morgan Stanley Capital International (MSCI) Indexes. These indexes popularly known as iShares MSCI Index Funds - provide an investor with the option of selecting international investments one country at a time.

Index shares simply put; represent shares of ownership either in a fund or unit investment trusts which consists of common stock portfolio designed to match up to the yield performance and price of their core portfolios of securities. This could be sectoral, broad market, or global.

International share index provide investors with the opportunity to purchase or sell their overall portfolio of stocks as a single security. This can be executed as easily as a stock transaction. International share index offers many investment opportunities - the ease of transacting this type of security means that an investor can purchase index share via a broker of choice; similar to dealing in stocks.

Index shares listing and trading is done throughout the trading day as opposed to traditional mutual funds which can only be bought or cashed in at the close of the trading day price. The advantage of investing in index shares is that indexing, commonly referred to as passive management usually involves investing in grouped stocks, generally, a composite representation of sectoral, broad market or international share index. Index funds provide performance at the market level, since it aims at marching the market performance of a definite index in both bull and bear markets.

Passive indexed investments have been reported to outperform managed funds in longer terms, something attributed to lower administrative and expense fees. To an investor interested in index shares, below are more reasons to whet your appetite.

a)    Get instant exposure to selected stocks portfolio.
b)    Transact them at anytime during the trading day.
c)    Lower administrative and sponsor fees.
d)    No sales loads - only pay brokerage commissions.
e)    Index shares are tax efficient.

Another important aspect of index shares is that they can be bought on margin subject to terms and conditions similar to those of stocks. To learn more about this, contact your broker/dealer regarding margin maintenance requirements.

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

Are you a directional trader? If you answered yes, then Options trading can be an ideal way for you to play the markets as opposed to stocks or futures. When you trade options, you get the flexibility of specifying the maximum loss you can stomach upfront; you can even define where you want your options traded at when it expires.

Options trading provide the investor with unmatched advantage not available to other investment vehicles.  This is because option contracts offer the flexibility of placing bets on very definite market outcomes. A good example is that an options trader can place a bet that in 7 months time a particular stock will appreciate or depreciate in value - a two way bet per see.

Should the stocks trade between the forecasted price range in 7 months, the trader loses a preset amount. This options strategy is known as long straddle. Options contracts offer huge leverage. In America, 1 option contract is equivalent to 100 basic shares. In Australia, 1 option contract is sold in multiples of 1000 times the basic commodity or stock.

This means that even with a small grubstake in dollars, an options trader can manage huge stock position. The leverage factor makes options trading very risky for the newbie investor because losses as well as gains are greatly magnified when leverage is applied. As an options buyer, the biggest advantage is that you cannot lose more than your initial account equity.

Options trading allows the investor to gain from every move in the underlying asset - whether up, down or sideways. An options trader can easily participate in the stock market downtrends by purchasing a put option without the risk of margin calls prevalent in Forex by simply shorting the underlying stock.

It has been said that trading options could be less riskier than trading stocks. In order to trade options, you have to open an online options account with an execution only broker. Ensure that the broker offers online options trading, then you can practice trading call options for stocks you anticipate to rise in value, and purchasing put options for stocks you anticipate to fall in value.

Once you become completely familiar with options trading, you can advance to more complicated options strategies.

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