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Thursday, April 16, 2009

Terms used in Stock Trading

By Mara Hernandez-Capili

If you are new in stocks trading it is always best to be familiar with the different terms being used on the subject. As a brief recap, a stock trading is the act of buying and selling of stocks through a broker who acts as a medium for the client and the trader (company). The role of the broker is to find and buy stocks for his client and so as to analyze, discuss and track the current market trends. When you buy a share you become a part-owner of the company where you have instant privilege such as voting rights.

A capital gain is the term used to describe the increase rate that your capital received because of the increase in the companys profits. It is one of the reasons why people consider stock trading as an investment. Stocks can have high capital gains depending on how many shares were purchased. The higher the shares, the greater the capital gains if the market increases value.

A buy and hold strategy is the term used when a stock is bought and held for a long period of time regardless of the fluctuations or positive rise in the market. This is in belief that in a matter of years, a stock may increase its value to more than 100% of its original capital gain. Some people exercise this strategy while some dont, for they would not want to wait long enough to access their capital gains.

A current market value is the term used to describe the current worth of portfolios, stocks or shares. A share does not have a fixed value because of the fluctuations in the market. In order to have high capital gains, people wait until the stocks are priced at a minimum market value. This usually happens when the company is a new company or is just starting to be publicly listed. Over time, as the company gain its profits it is also more likely that its shares become greater in value.

The last term is the aggressive term. The term is used to describe the way an investor invests in high risk shares. The greater the number of shares you purchased, the higher the risks involved. This is mostly played by sophisticated investors. - 23208

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