Advantages and Disadvantages of stock Trading Tips

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Published: 07th January 2011
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Companies across the world issue shares
in order to increase the capital. When a company issues shares, then public is allowed to buy or sell these shares. These dealings are called share trading. There is always a broker involved. The prices for these shares keep changing. It can rise and it can fall drastically depending o the market forces of demand and supply. As the coin has got two sides, share trading also have got its own advantages and disadvantages. Let us understand both the sides.

Advantages:

1. Good Returns: one can expect good returns if the shares are purchased intelligently. One can buy the shares when the prices are low and can sell them when prices rise. Hence one can control good returns by holding the shares.

2. Easy: the concept of share trading is not very complex. As a new investor, one can easily understand this trade and can earn money through it.

3. Wide Variety: There are array of companies to choose from. There are numerous companies who issue shares almost everyday. The demand for buying shares is high in the market. With this kind of huge variety, an investor can choose the best one which matches his strategies and planning.

4. Electronic Exchange: One gets an option of buying and selling shares online through electronic exchange option. The broker is involved here also. A person can save, time, fuel and energy through this option.

5. Brand Name: Companies have a advantage of shares. They can show the growth of the company through price fluctuations f the shares.

Disadvantages:

1. Limitation to Short Sell: Yes, this kind of limitation is faced by traders in this case. It is essential for a investor to wait till the price rise of a particular share before he can actually short sell it. This acts like a limitation for the trader.

2. Loss: One can face losses if the value of shares purchased instead of increasing falls down. A person needs to sell the shares at a price more than the price he bought the shares for. In case, he sells the shares at a lower price then it is always loss for him.

3. Uncertainty: There is a lot of uncertainty involved in share trading. This is because a lot of things can impact the prices of the shares. Things like government polices, political pressures etc can change the price of the shares. Hence, everything is very uncertain. It is a risky trade with only two outcomes: profit or loss.

People who involve in this kind of trade should always be prepared to face risk. More risk means more profit and vice versa.
Top Stock tips

Regards,
MoneyMantra stock (India)

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