Trading Library

A stock broker's job involves a fast paced working environment where pressures are high and the risks are higher. The broker may find himself selling certain plays to their clients whose decision may yield a huge commission. Anyone can be a stock broker but not everyone can be successful in it.

Share trading is one of the most common ventures for beginners. However making money out of the stock market can be very difficult. Its a place where opportunities are grabbed and losers are taken advantage of. For any newbie, even for the pros, the stock market is a cut throat world. Fortunately there are day trading strategies that beginners can use.

The all important settlement or closing date is when a transaction is finalised. Share trading is like buying or selling property, you buy the house but don't actually own it until after closing. The seller also does not get the money until the closing date. On the settlement date, a seller collects money and gives up stock ownership while the buyer pays for the securities and becomes the official shareholder.

A franking credit is a unit of tax paid by companies in countries with a dividend imputation system. The Australian simplified imputation system started on 01 July 2002 which allows that only frankable distributions may be franked.

Who can frank credits?

Australian resident companies, corporate limited partnerships, corporate unit trusts and public trading trusts are franking entities. Mutual life insurance companies are excluded from issuing franking credits.

What distributions can be franked?

Market depth is the overall level of open buy and sell orders for an individual security. You can quickly check the number of orders and their corresponding prices if you want to know if there are sufficient liquidity levels. For example, low liquidity can be present for particular interest rate securities and warrants.

A market depth table is composed of buyers, sellers, and prices that the buyers want to buy at and sellers wish to sell at. In the middle column you will see quantity, which is the total shares in the market and total shares bought and sold at a certain price.

Technical analysis evaluates stocks using charts and other tools to pin down patterns that suggest future market activity. Charts are still charts regardless of market conditions. In times of high volatility, the pattern is merely down trending. A pattern which took weeks to trace out in low volatility times can take only hours or days to move in a highly volatile market.

To be able to bank big profits you also have to risk big amounts of money. Unfortunately most traders, especially newbies don't have that much capital begin with. Apart from that, trading will most likely be a sideline other than a day job to have a stable source of income. One of the ways to get extra cash is to borrow from a bank. This is called a margin loan. The question is, should you risk a loan in hopes of earning a big payout?

Market capitalisation is calculated by multiplying a company's shares outstanding by stock price per share. Large cap (capitalisation) companies are the big boys of the Australian Securities Exchange. Blue chip companies like BHP Billiton, Macquarie Group and Telstra have market capitalisations that are usually more than $10 billion.

Some say share trading is an art rather than a science, and the only absolute is market unpredictability (and that rule about using stop losses). The 'rules' below are guidelines that can help the beginner share trader in the game longer.

Get used to losing money.

Prepare your mind and pockets for losing capital when share trading. Loss is normal and necessary if you want to progress from newbie to shark.

Create a trading plan.

Having a good exit strategy is one of the important components of a profitable trade. Unfortunately due to the uncertainty of the stock market, traders may find themselves exiting by their stop loss after the price plummets, even though they started well in the trade. Beginners may also find themselves hesitant in sticking to their stop loss especially when they see sizeable return for their money. Market conditions can change pretty quickly, so deciding when to exit will determine your profitability.

Mistakes will be inevitably made in trading. Unfortunately more often than not it’s at the expense of your money. However, for a beginner this is to be expected. Trading is primarily trial and error until you are able to come up with your own system that lets you profit consistently. Unfortunately, these are not the biggest mistakes you have to watch out for. More often the simple ones have more bearing.

Market capitalisation (also called market cap) is the total dollar value of a company's outstanding shares. It is also the overall value of a company according to the market. The formula for market capitalisation is the company's shares multiplied by the current market price of one share. For example, company ABC has 45 million shares outstanding, each with a market value of $100. The company's market capitalisation is $4.5 billion (45 million x $100 per share).

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