Who are Stock Traders and what they do?
The most common method of involvement in the stock market, the concept grasped by most people, is a simple stock purchase. Stock traders have been around for hundreds of years, buying and selling stock on the open market. Investors seek a company they like, one which has potential to make a profit and buy a piece of the company known as a share of stock.
Stock traders usually like the tangible aspects of purchasing stock. They feel more emotional involvement with the company and can often form some sort of unspoken bond with the company. They typically follow the stock’s progress each day and feel better when the stock’s price rise and worse when the price drops. Their goal in this process is to buy the stock when it is undervalued and sell it when the price exceeds the commonly perceived value. This is known as a buy-and-hold strategy and has been used for many years to produce profits.
Stock traders have two basic strategies when it comes to making money in the stock market. They are:
- Buying the stock. A trader will purchase the stock at a low point and sell it at a higher price, thus creating a profit for their account. This is known as buying low and selling high. Someone who does this on a consistent basis will make a lot of money.
- Shorting the stock. Not all stocks increase in value, so when a stock’s price is going down, a trader can make money by shorting the stock. This means selling stock that you don’t even own to open a trade, then replacing it later with the stock you purchase at a lower price. When you short a stock and the stock loses money, you make a profit.
One of the most common stock patterns is known as “channeling.” It is a simple, potentially profitable pattern that a stock follows between two price points, known as support and resistance levels. When a stock trades in the same repeatable manner, stock traders can buy the low and sell when the price nears its peak. Traders who find stocks that trade in a repeatable pattern have discovered a potential key to the door of profitability. A big selling point for the stock is the permanence of the transaction. An individual who purchases stock in a company owns that stock until they sell it or give it away, or until the company no longer exists. This is unlike an option purchase, which has a limited shelf life.
Some investors have owned the same shares of stock for decades. Stocks also often come with dividends, quarterly or yearly payments made to individuals who have invested in the company. Those who own options do not receive dividends. A student can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability.
A newbie can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability. If you are interested in joining our guidance program. Please shoot us a message.