Stock Trading Basics

Stocks are extremely popular among investors due to their ability to generate positive returns over the course of months and years. A well-diversified portfolio of stocks can generate much greater returns.

Many individuals are unaware of the distinction between investing and trading. It may appear that these two terms refer to the same concept, but there are significant distinctions between them.

Stock Trading Basics

Serious stock investors are patient. Over the years or decades, the goal is to purchase as many shares as feasible. Long-term investors probably won’t sell when prices rise and will buy more during downturns. They have clear aims and don’t stray dependent on price.
Traders think differently. They prefer short-term earnings to long-term accumulation. Traders don’t hoard stocks. If it’s profitable, they’ll purchase and sell a stock in hours. Instead of a company’s long-term intentions, traders seek news that may impact the price in the following hours, days, or weeks. Experienced traders employ stop-loss orders to minimize losses if a trade goes wrong.

What makes stock prices rise or fall?

When you look at a stock’s price chart, you’ll see peaks and troughs, representing price increases and falls. Supply and demand cause these rises and declines.
If there’s more demand than supply for a stock, the price will rise since it’s more valuable. If a stock has lots of supply but little demand, its price will decline, making it a better investment.

What affects stock supply and demand? 

Stock News
Company news affects stock demand greatly. If a corporation received terrible news, fewer people would buy its stock, right? That’s how it works, but bigger. If a corporation released good news (like a new product launch), more people would buy its stock. Overall, the share price would rise.
Rival firms’ actions can also affect supply and demand. Imagine being a Tesla shareholder when Ford launched a new electric vehicle with better features and range. You may be tempted to sell your shares and buy Ford shares. If many people sold shares, the price would fall.
Morgan Stanley, JPMorgan, and Goldman Sachs stock analysts forecast company prices. This information leads to a ‘Buy,’ ‘Hold,’ or ‘Sell’ recommendation. Many investors will follow this advice because their experts are skilled and have access to in-depth data. If a major analyst recommended buying Apple shares, buyers would undoubtedly rush to buy.
World News
As noted, business and external news can affect a company’s stock price. Depending on the circumstances, economic or political reports can affect a company’s stock price. Imagine the government banned gasoline and diesel vehicles. If this happened, Ford and Chevrolet’s share prices would drop since they wouldn’t be as valuable.
Investors Mood
Investor sentiment is how investors ‘feel’ about a stock. As the stock price is affected by large-scale supply and demand fluctuations, if most investors were pessimistic (thought the stock would fall), it probably would. When sentiment gets negative, more people join the bandwagon, which lowers the share price.


How to Make Money from Stocks?

Increasing stock prices
The first method of profiting from stocks is a price increase. If you buy a stock today and the price rises the following day, you can sell it for a rapid profit. For instance, if you acquired one Amazon share for $2,000 and the price increased to $2,300, you might sell that share for a profit of $300. This is known as producing a capital gain.
Dividends are the second technique to earn a profit from stocks. Typically, established businesses split their gains with investors. If you own shares in a firm that distributes dividends, you will receive a portion of the company’s annual profits each year.
Declining stock prices
The third method of profiting from stocks is when their price falls. If you understand how to use Contracts For Difference (CFDs) and open “short” contracts, falling prices can create profits. CFDs are financial tools that enable traders and investors to profit from both upward and downward price movements. A long position will be advantageous if the price rises, while a short one will be profitable if the price falls. If you initiate a short CFD position and the price falls by even a modest amount, you can close the position at any time for a profit.

How to Buy Stocks Online?

An online stockbroker is the best way to buy stocks because it is the easiest way. After making an account and putting money in it, you can buy stocks through their trading platform in just a few minutes.
Disclaimer: eToro is a multi-asset platform that offers both investing in stocks and crypto assets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not an indication of future results.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.