Shares

What is share trading? Of course you may say - the answer is simple: "Share trading is the activity of actively trading shares in the view of making a profit". Simple wasn't it? Well, case closed, we can all go home now. Well, I want to probe into what share trading really is in reality, not some non-sensical theory that seems impractical in the real world. Sure, the laws of supply and demand rule the markets, but what I want to discuss is what share trading means to the retail trader: traders like you and me.

How are the number of shares a company has determined?

Bill Gates is said to have a billion shares of Microsoft stock...of course since he owns the company and at roughly $25 a share he is a billionaire. But this is only because someone has detemined that Microsoft has over a billion shares. How do they get that number?

The number of shares is determined by the number of stocks issued at IPO and any other further offerings after the IPO depending on the companys' needs.

How do I figure out how many shares of a stock can I buy for any given amount, without actually buying them?

The answer is by using simple mathematics.

First you need to decide how much of each stock you are going to buy - since not all stocks are priced equally some would be $20, other $400 and some 0.05 cents.

$100,000 over ten stocks... Decide what ratio you will hold of each stock. E.g. 6:3:4:1:9:4:3:7:9:2

So totalling the ratio is 48. Now you can use a combination of the ratios and fractions to find out how much stock you can hold with your $100,000.

Can I purchase stocks on my own or do I have to use a broker or an online trading company?

You can acquire stocks in the following manner:
1. Gift - they are given to you as part of your salary or Christmas present.
2. Dividend reinvesment plan
3. Direct on-market purchase through a broker
4. Sometimes from the company if they are issuing more shares
5. If brand new company - buy shares from IPO
6. Through executing derivatives such as options

If there is anymore please let me know.

How to create my personal stock watch?
How to create my own stock portfolio

You are essentially asking two questions.

A personal stock watch is usually called a watchlist. You can pick stock you want to track and list them down into what they call "watchlists" that show a whole list of stocks, their bid and ask prices, volume, highs and lows and whatever else you want them to show. Your borker would usually provide this as a free service.

How do you create a stock portfolio?

I often ask myself the question - which shares are being traded the most in the ASX sharemarket? Sometimes I use the local teletext services that you can access on your TV box for this information - if you point it to page 200 you'll get the financial index. The shares with the most traded shares with the highest trade volumes (not necessarily highest net worth) that day reveal the level of liquidity of the stock as well as the most actively traded stocks. The significance of this is simply that as a trader you should be aware of what the neighbours are doing but this doesn't mean you should join in with the crowd - Just to be aware of what the market is and perhaps recognise the activity as a result of some news or market information.

The Australian Stock Exchange is considering plans to sponsor stockbroker research of small companies in an attempt to boost liquidity and compete more effectively with foreign exchanges.

The ASX has discussed a proposal with stockmarket participants under which the exchange would facilitate payments to analysts in order to produce "independent" research of smaller stocks that are not widely covered.

The Australian stockmarket is one of the most highly concentrated in the world; the biggest five stocks are responsible for more than 80 per cent of turnover.