Thursday, September 27, 2007

Stock Trading Basics

My research and experimentation on stock trading continues. My notes says...

Trading in a stock market like the Philippine Stock Exchange (PSE) means you buy and sell shares of stock of companies listed there. You can do this either through a stock broker or by yourself online. To earn from this trade, you have to know when to get in (buy) and when to get out (sell).

Of course, the stock market provides you some basic information. This include the bid price, ask price, volume and value of all trades for the day. The bid price is the price that buyers are willing to pay for the stock. The ask price is the price that sellers are willing to accept as payment for the stock. The volume and value of stocks traded are also available.

The bid and the ask price is never the same. The ask price is always higher than the bid price. The difference between the two is called the bid/ask spread. I read something about the spread going to the brokers, but newbie as i am, am not exactly sure. For now, it is enough that we are aware that there are bid and ask prices.

Now, I understand that in order to buy a stock, you may order it using the bid price (in that case you get queued with everyone bidding), or you can use the ask price (buying it instantly from those who have expressed willingness to do so. Once you've bought the stock, you then watch if the price of the stock will go up or go down.

In monitoring, you have to take note of the opening, high, low and closing prices. The opening price is the price at which the stock was being traded upon opening of the stock market. Take note that the PSE opens at 9:30 am and closes at 12:00 noon. The closing price is the price at which the stock was trading upon closing.

The high and low prices on the other hand are the highest and lowest prices at which the stock was traded during the day. All these, together with the volume and value of the trade, provide you clues on when to buy and sell a certain stock. To know more, visit Investopedia.com's Stocks Basics.

10 comments:

Sodexho_NPH said...

hi gibo,

very straightforward and concise explanation about stock trading basics, I did go through investopedia's link to know more since am keen to venture into stock trading and it seems exciting yet risky and tricky as well, it may be silly asking this, but you would forgive me considering I have no experience about stock investments yet, what if you are to sell your stocks then nobody wants to buy it? I bet I need to do loads of reading and research... :)

Gibo said...

hi. thanks for visiting my site. the way i understand it, the bid prices represent the pending orders for the stock. so, if you sell at bid price, that means there is a buyer out there who will take your stock.

the problem is when there are very few orders on the board. the law of supply and demand will then drive the bid prices down. if you really need to sell, you may have to sell at a loss.

thegrapebunch said...

hope you'll be able to go to the next chart analysis forum of www.absolutetraders.com. ;) missed you in our launching!

Sodexho_NPH said...

it seems I still need loads of research to truly understand how stock market works......another query, would it be possible to invest in stocks of a foreign company or invest in foreign currency through Philippine Stock exchange, am just wondering what will be the options present for would be investors like me who is currently overseas......thanks gibo.....

Gibo said...

hi gwen. i do plan to attend the next events/seminars of absolute traders. still saving up for the registration fee. to sodex... i think guys like you who are abroad can do the online trading. you can just start with a small amount and try to learn the tricks first. to learn more, check out philstocks.ph and absolutetraders.com.

Sherwin said...

hi gibo, i like the way you explained the process :-) more power and hope you get your "feet wet" soon in stocks trading/investing!

Tony Chai said...

Hi :

Just take note that stocks with low liquidity have wide bid/ask spread and you would probably not be able to buy at bid price for such stock.

So in order to buy stocks at bid price (usually thru a limit order), you'll need to look out for stocks with high volatility, trading may be 1,000,000 shares a day (I'm referring to US stocks).

But trading shares is not based significantly on getting the best price to buy. You should focus more on selecting the best stocks with good earnings growth, good service/product & a competent management.

Yours Truly,

Tony Chai
My Options Trading Blog

Anonymous said...

hi, just wondering. is there any seminars i can attend to regarding stock trading? would really love to make this as a profession :D

arvin said...

Well, it’s amazing. The miracle has been done. Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done.
stock trading seminar

Anonymous said...

Hey guys, if you would like to know more about stock investing you could visit the PSE academy website. It is a smart start to investing.

http://pseacademy.com.ph/

PSE Academy, the official market education website of the Philippine Stock Exchange, Inc. (PSE) created in partnership with the PSE Foundation, Inc. It is designed to provide a comprehensive investor web-based education for market participants, would-be equity investors, and the public in general.