You can trace the stock market all the way back to the infancy of the United States in 1700. With its origins in Philadelphia, the first stock exchange was created as a way to encourage commerce in the new world. Before long the idea had spread and the New York stock exchange was born and the creation of the New York Stock and Exchange Board helped to make the New York Stock Exchange what it is today.

When you buy stock you become a shareholder, a owner of part of the company. The company then put the money that the investor has put into the company to advance their holdings and profits. Checking the price of a company’s stock is a great way of checking on the health of the company as a profitable company will cost more to buy into than a struggling company. An investor who owns stock in a company that has seen a lot of growth should think about selling his stock so that he can make a profit on the price he paid for it.

This has been the basic idea of the stock market since it was founded. Brokers used to setup deals between potential investors and the companies selling their stock. Access to the stock market today no longer requires brokers as you can get to it via a massive network of computers.

The lure of online stock trading is that it offers them the chance to setup an account online with any brokerage house that exists. When considering buying stock online it is vital that you choose to sign up with an online brokerage house that has a good reputation. Before you can open an account with a brokerage house you need to build a relationship with them so that you may access the stock market. Through the site you can then buy and sell stocks, set yourself financial goals and begin to build your portfolio. There are added benefits to investing money in this manner which include, accurate stock quotes and research about the company and the stocks they are selling.

The most considerable bonus are the low brokerage fees. Costing as little as $7 -$10 per trade online stock trading is considerably cheaper than the traditional alternative. With another added bonus being the choice over how you manage your portfolio it is not hard to see why online stock trading has become so popular.

The brokerage house will provide tools that will allow any investor to keep and eye on their stocks as well as read any information about that companies they have invested in. The most obvious benefit of investing money online is that you can do it from the comfort of your own home.

Both investors and brokers need to keep up with the stock trading world as it evolves to incorporate new technologies. Through the internet the stock market has become more accessible than ever before.

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Both short term trading and long term trading can be effective trading strategies, however, long term trading has several significant advantages. There are several benefits to long term trading, which include compounding and its effect on pricing, the chance to earn from dividends, a mitigated impact of price fluctuations, more alacrity in making necessary corrections and less time required to keep track of stocks.

Compounding

Time is of the essence, and indeed that holds true for the investor, as it lets compounding time manifest itself. Compounding can be described as a mathematical concept wherein interest that is already charged on the principal would accrue interest on it, thus adding up to the total principal.

Dividends

You can also hold a stock and thus accrue dividend payouts – this is a second way in which you can boost the value of your investment. Because there are companies that would allow you to reinvest your dividends with more share purchases, you can easily add to the existing value of your investment with little to no hassle. Dividends are also quite indicative of a business’ game plan and its overall success, a much better barometer than the invariably ambivalent market trends that often lead to price fluctuations.

Reduction Of The Impact Of Price Fluctuations

Long term investment has investors less impacted by short-term, albeit volatile price fluctuations. The market tends to address all factors that keep changing in the short term. So a person involved in long term investment or trading will not be affected as much by short term instability due to factors such as liquidity, fancy of a particular sector or stock which may make the price of a stock over or undervalued. Good stocks that may have been affected by several short term factors would then be able to bounce back in the long term and produce sufficient returns.

Long-term investors, especially those whose investments are more diversified than others, would be able to ride out the proverbial storm and make the most out of a down market – any drop in their performance would usually be negligible.

Faster Correction Process

It is highly likely that you could achieve a constant return over a long period. The reality is that there will be times when your investments earn less and other times when you make a lot of money in short term. There may also be times when you lose money in short term but as you are in quality stocks and have long perspective of investment you will earn good returns over a period of time.

If stocks fail to achieve the desired results not just once, but several times, then it would be justified if you would pull out of that investment. With a long term perspective based on quality stocks, it is easier to make decisions to change in a more timely manner without the urgency that accompanies short term and day trading strategies chasing volatile changes.

Investors that are able to plan ahead and stay in the market would invariably be the ones who ride the storm out and make the most out of those upward trends in the market – all they have to do is adapt a long term perspective of things with long term trading strategies.

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Penny stocks get their name from their price range, each priced between 1 cent and $5 and they are traded through the Pink Sheets or the OTC Bulletin Board. These stocks are also traded through foreign and other securities exchange on a regular basis. When you begin to trade penny stocks there are certain rules that you will need to follow that are different from the rules the regulate trading stocks on the major exchanges.

The following rules have been set down by the SEC or the Securities and Exchange Commission and they pertain, specifically, to the trade of penny stocks.

The SEC needs the brokerage house to secure a written agreement with their client abut the transaction and their client must be in a position to complete this agreement.

The brokerage house must provide their customers with documentation outlining all the potential risks that are involved with penny stock trading.

Consumers must be informed about whether there is a market quotation on the stocks they want to purchase and what that quotation is.

The brokerage firm must also disclose to their customers what their commission will be for the trades.

The SEC requires that each brokerage house provides it’s customers with a monthly statement outlining the market value of each of their penny stocks.

The rules governing the trade of penny stocks were put in place to ensure that trades were fair and that investors knew about the risks before investing. These rules were set in place by the SEC to ensure that new investors knew what they were getting into and that they wouldn’t get in over their heads.

The control of monies paid to a broker for use for buying stocks in your name is in the brokers hands as outlined in Rule 15c3-3 or the Customer Protection Rule. Brokers will need to figure out on a regular basis how much of the money they are holding belongs to their customer or was gained via stocks owned by the customer. If the broker decides that there is more money on their books than what is owed to the customer or if the customer has over paid, the excess must be placed into a reserve bank account. The money in this account is for the sole benefit of the customers. This vital rule helps to stop brokerages from using their clients money to further their own business interests.

These rules are designed to protect all aspects of stock trading, the investors as well as the brokers and also the stock market. If a broker breaks any of the SEC’s rules that they will be the subject of SEC investigations and that can spell trouble for the brokerage house as well. learning these rules and making sure that your broker is following them means that you will know that your investments have not been compromised in any way.

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There’s a question that is generally asked by people who are new to financial markets and is debated by experienced ones. What is the difference between trading and investing? The two are very similar.

In my book, The Essentials of Trading, I point out that the only difference is definition. They are both very simple ways to gain capital. When buying a stock, one expects to either earn dividends, or increase in price. Trading has one main difference, being that one expects to exit. This might be in the form of price targeting or in terms of length of time the position will be held. The trade seems to always have a finite life. Investing leaves for open endings. An investor buys a company’s stock with no predefined notion of selling.

For the sake of demonstration, here is an example. Warren Buffet is an investor. He buys a company that is undervalued, and holds on to his positions until he stops liking their prospects. He doesn’t think in terms of a price to exit the stock. George Soros is a trader. He thought the British Pound was overvalued and ready to be withdrawn from the European Exchange Rate Mechanism. His position was based solely on circumstance. Soros exited with a good profit when the Pound was devalued in market. Because an exist strategy was in place, this would qualify as a trade.

Trading can also be defined as another way. It has to deal with how capital is expected to produce a return. The appreciation of capital is the objective in trading. You buy a stock at 10 and expect it to go to 15, expecting it to go through a capital gain. If dividends or interest are paid out along the way, that is fine, but likely only a minor contribution to the expected profits.

Investing, however, looks more toward income over time. The major focal point is income production. So, do investors experience capital appreciation? Unlike in trading, that is not the main motivation, but yes.

Consider what people think of as their biggest investment, being their home. A home doesn’t produce income, though, so is it really an investment? It definitely produces more expenses, with electricity, upkeep, and mortgage. A home is a trade. We buy it and hope it’s value will appreciate. People generally move in for a few years, then sell, which makes it more like a trade. If, of course, you own rental property, it is more of an investment. As mentioned earlier, trading and investing seem very similar. Selling and buying are pretty much the same when it comes to mechanics. Sometimes the analysis that a person does to make decisions is the same as well. Investing and trading are merely different because of definition.

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Created by individuals who not only want to pool their funds together to make a joint investment but would also like to gain knowledge on the various types of viable investment opportunities that are available in the market are investment clubs. Periodically, each member of the club contributes an agreed amount of money to purchase growth stocks by means of a dollar cost averaging approach.

Usually reinvested to gain more interest are the dividends as well as the capital gains. The club members are the ones who vote for security purchases. Aside from that, this is another way of decreasing the personal risk of club members. Also, there are investment clubs where non-investors are allowed to participate in larger investments of the club provided of course that the non-member investors receive a much lower share of commissions.

Don’t forget the fact that assisting their club members in becoming more knowledgeable in all aspects of investments is another of investment clubs. A well-known trade group for investments clubs is the National Association of Investors Corporation (NAIC) which is a non-profit organization that provides guidance as well as imparting investment knowledge as part of its membership.

A good choice of investment clubs are those that have been around for many decades already and have a track record of having a continuous increasing interest in the stock market. Small investors are given the opportunity to increase their buying power, share their collective knowledge and socialize while earning from their investment when they join investment clubs. Investors are not expected to invest a great deal of money but still will be able to receive a greater amount of interest that is usually possible if you have similarly invested a big lump money and this is another good benefit that’s derived from investment clubs.

Once a month, a typical investment club would usually meet and during this time, members are given individual responsibility of researching investments and then sharing their ideas with the other members of the club. Not to mention that these meetings will also serve as an occasion for members to contribute to their monetary fund, which is intended for purchasing stocks, mutual funds as well as other types of feasible investments.

When it comes to an investment club, one of the main goals and objectives is the opportunity to learn. A great deal of effort and time in research is spent by most investment clubs since they believe that a well-researched investment plan has a much greater chance of success. When joining an investment club, risk is also minimized because of this very reason.

Starting an investment club is not really that difficult and does not require any special knowledge. In fact, an investment club can even be set up by a group of friends and co-workers. Usually, this is a good place to start since you will know the people you are dealing with.