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Free Online Stock Trading Tips For Beginners

1a. What are shares – Shares can be defined as the individual portion of the capital and by a shareholder in order words it is the interest in which a shareholder has in a company.

If I say I have interest in a company it means I have shares in the company.

If I step into my broker’s office and purchase $1000 dollars worth of Microsoft shares I automatically become a Microsoft shareholder and you know what a company may not necessarily be a publicly listed company to have shareholder, private companies do have shareholders.

b. Outstanding shares – this is the total shares issued by a company based on shareholders subscription demand.

If you multiply the outstanding shares by share price of a company you get the company’s market value.

c. Types of Shares

Ordinary Shares – These are shares with ordinary status, no voting rights.

Preference/Premium Shares – These are shares with special status, voting rights and special dividends are given to shareholders in this category.

Shareholding Types

Sole shareholding type – Here an individual owns 100% equity of the company.

Majority and principal shareholding type – Here an individual owns majorly equity of a company it can be 20%, 50%, 70% or more.

Equal Shareholding type – Here a group of shareholders hold equal shares in a company 50% to 50%.

Concept of shareholding – I believe the concept started during the biblical days of Abraham and Lot.

We also have the rothschild financial dynasty of over 400 years, the brothers were shareholders of the firm.

In the 19th century, we had rockefeller and partners, Andrew carnegie and partners.

HP, walmart, intel, Microsoft, Apple, GT bank all had partners who were shareholders.

What is stock trading – it is the art of buying and selling shares for profit.

Who is a stock broker – A stock broker is a person or firm that initiates the buying and selling of shares on behalf of an investor.

What is the stock exchange – This is the place where the buying and selling of shares takes place e.g. NYSE, Nigerian stock exchange.

Who are stock registrars – These are firms that manage shareholders on behalf of listed companies, they keep record and issue dividend warrants.

2a. Types of Market

Primary Market – this is the market where companies directly sell shares to the public.

Secondary Market – this is the market for trading in existing shares already issued during the primary market.

Trading periods

Short term – from 1 day – 6 months (from buying shares to selling)

Medium term – from 6 months – 2 years

Long term – 2 years – 5 years

Keeps – no selling

Trading Techniques – We have two major trading techniques

Fundamental analysis – as the name implies this trading technique involves the investor knowing the fundamentals or value the company is bringing to the table, values like assets, profitability, dividend payment e.g. two most important fundamental indices 1. Earnings per share E.P.S 2. Price earning ratio P/E ratio

Technical analysis – Here you use chart to determine the support & resistance price of any stock you want to trade in.

Stock terminologies

Outstanding shares – is the number of shares a company has that have been fully paid by investors.

Earnings per share, E.P.S – this is the profit an individual unit of a company’s shares generates.

P/E ratio: price earnings ratio; that shows the relationship between company’s stock price and its earnings. The lower the P/E ratio the cheaper the company is.

Dividend: Is the portion of the profit after tax that is shared to an investor according to his holding.

Share capital: Is the capital represented by ordinary shares.

Stock split: Is a process of shares management whereby a company increases its outstanding shares, reduce it share price for affordability but value remains the same.

Reverse split: Is a process of shares management whereby a company reduces its outstanding shares, increase its share price, but value remains the same. E.P.S1, increases here.

IPO: An acronym for initial public offer: is the offer of a company’s shares for the first time to the investing public, a requirement to get listed in the stock exchange.

Support price: The lowest price a stock gets to after a fall . iix; Resistance price – The highest price a stock gets to after a rise.

Ex-dividend date: The date the stock will be marked down for dividend payment, the value of the dividend will be subtracted from the stock price.

Market cap: Is the value the market has placed on a company, gotten by multiplying outstanding shares by closing share price.

3a. When to buy shares

1. when a company is forming partnership with an international company

2. when a company is about to be acquired by a large company

3. when a company has completed a brand new factory

4. when a company has settled its debt

5. deregulation in a particular industry

6. during stock split or reverse split

7. support price

8. after a loss you can take position, for loss could be temporal

When to sell

1. if the stock hits your price target

2. if there is deterioration in the fundamentals

3. a better opportunity comes along

4. after a merger or acquisition

5. tales of bankruptcy.

Have a nice day.

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