There are a number of ways that people can profit from operating in the stock market and stock trading. If you are an investor, obviously, you can buy companies you feel are undervalued and unloved by the market and eventually get rewarded by selling them at full valuation; buying low and selling high.
The other way to profit from stock trading comes in the form of dividend payments. Companies which are profitable may pay shareholders on a regular basis a portion of those profits on a per share basis. The dividend yield is just the annual amount distributed per share divided by the price per share. Buying companies with high growth potential who also pay dividends allows you to take advantage of both methods.
Many people are actively investing in stocks and commodities in order to take advantage of short-term fluctuations in price. Some do so many times during a day, day-traders, while other look to take advantage of longer term waves in the price. They are sometimes referred to swing traders. No matter what the approach, though, the goals are the same. Stock trading always boils down to buying when there are very few buyers and selling when there are very few sellers.
Stock trading carries with it considerable risk but with a solid plan of attack can create excellent gains. It is recommended that one avails themselves of the countless resources available online on the basics of stock trading methods before putting real money into an account to trade.
Investing in stocks for the long haul is a strategy as well, as opposed to actively trading. Comparing the performance of a particular stock to the major indexes like the Dow Jones Industrial Average or the Stoxx 50 is a popular method for selecting out which stocks to buy and hold for the future. If that company pays dividends, re-investing the dividend payments back into the company at the current price builds your position through time, compounding the return, in much the same way that a savings account grows through time.
As with anything that you engage in investing in stocks requires the build up of knowledge of how it works and why. Whether you decide to passively invest in a handful of low-risk companies with good valuations or try your hand at trading stocks, it is always advised to only put at risk money that one can afford to lose.Previous Post » Stock Trading And Using Technical Analysis Software