Stock Trading Basics – For the Beginner “I make money by stock trading”, my friend told me. That was a few years ago. I had no idea what stock trading was. The only thing I knew was that my parents owned a few shares of Barclays Bank stock options vs forex trading they had bought when they were younger.
All I knew was that you bought stocks when younger and sold them when you got older. Stocks or shares are what these companies use to raise funds for their operations. Every company needs funds or capital for their normal operations. The capital raised would be used to acquire property, pay off loans, buy new companies or fund any other operations of the company. In order to raise these funds for these operations, a company has an option to either borrow the funds or raise them itself.
Borrowing funds can be expensive and most companies prefer to raise the funds. To raise the funds, companies offer ownership to investors in the form of stocks or shares. Stocks in simple terms represent part ownership in a company by an investor. The investor exchanges his funds for shares to earn the right to participate in important company decisions as a shareholder. The shareholder gets a vote for each share owned. He also participates in any profits that the company earns in the form of dividends. The value of the shares will go up or down depending on the performance of the company.