How to Start a Stock Exchange Business

Stock market business is by far the fastest investment all around the world. Provided you know little bit of economics, understand the opportunities and risks, have enough idle savings to invest, investing in stocks can yield extremely high profits. Many of us are preoccupied with the idea that stock business is a complicated affair. In fact, once you start up the business with good preparations, you'll find it very comfortable to live with. Here are the steps to start a successful investment in stocks.

While wealthy brokerage houses and banks dominated trading for the better part of the 20th Century, the advent of new technologies has made investing more accessible than ever before, allowing small firms and individual investors to trade easily. With online brokers usually charging less than $10 per transaction of common stock, one could start investing with as little as $100, and, with over $62 trillion trading in the worlds stock markets at their peak in late 2007, there is plenty of money to be made.

A stock exchange is a form of exchange which provides services for stock brokers and traders to buy or sell stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets, with buyers and sellers consummating transactions at a central location, such as the floor of the exchange.

To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only.

The initial public offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks.

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

In recent years, various other trading venues, such as electronic communications networks, alternative trading systems and "dark pools" have taken much of the trading activity away from traditional stock exchanges.

Instructions:

Step 1

Conduct research to learn about the different markets and industries, the economic cycle and the usual fluctuations that the stock market experiences. The timing of your investment in relation to this cycle will greatly determine your portfolios short-term performance.

Step 2

Set up an account with an online brokerage. There are several established brokerages that provide a range of tools and services for investors. The transaction costs and other fees also vary modestly between the different discount brokerages and usually amount to less than $10 per trade of common stock. Applicants are required to provide either a Social Security Number or Individual Taxpayer Identification Number. For IRAs, you will also be asked to provide your beneficiary's information. Applications tend to take less than 15 minutes to complete.

Step 3

Do a little study. You need to understand the business from a beginner's point of view. Look for books, publications etc meant for starters. The Internet is a big source from where you can start. Understand the market, the business and related terminologies. Sail from easy to hard topics.

Step 4

Link your new account to an existing bank account. Linking accounts allows you to fund your trading account and facilitates transfers and withdrawals. You will need your bank account information and your banks ABA or routing number to complete this process. Because it is often advised that you clear a test transaction when linking accounts, this setup could take a few days. When completed, fund your trading account with enough money to not only meet your investment goals but to pay the required transaction fees.

Step 5

Develop clear goals and a strategy for reaching them. Think about the amount of returns you hope to achieve and the level of risk you are willing to accept. A good investment strategy balances the two based on the investors goals. If you hope to achieve high growth quickly and can tolerate risk, you may consider investing in emerging stocks. If you rather protect your savings and earn slightly higher returns than banks provide, you may consider an index fund or exchange traded fund.

Step 6

Research individual stocks, funds, and other investment opportunities that compliment your strategy. Many of the brokerages provide analysts reports with information on the securities past performance and their outlook. Consider a security's historic worth, volatility, dividend or other payment policy, and transaction costs before making a decision. For funds, also consider their management team as they will be managing your investment.

Step 7

Buy shares of the stocks once you have thoroughly researched them. While day-trading remains a popular trend, longer-term investing is usually more profitable. Remember to diversify your portfolio by buying stock in different companies and industries to decrease your exposure to risk.

Step 8

Check your account periodically. How often you check should depend on your strategy and the securities you hold in your portfolio. More volatile securities should be monitored closely while long-term investments can be checked with less frequency.

Step 9

Decide on the amount of investment. Stock market is a volatile one. There are profits vs. losses, risks vs. opportunities. In this backdrop you must be able to do the appropriate apportionment of the savings into stock investment.

Step 10

Decide on the type of investment. Basing on the local or national market, understand whether you want to invest in shares, mutual funds, commodities or other types of stocks.

Step 11

Choose a broker for you. There are hundreds of broker houses and all of them don't perform in the same way and give you the same benefits. Talk to agents of different brokers and make a comparative analysis before choosing one. Things like commission rate, margins etc. will be helpful in choosing a broker.

Step 12

Open an account with the chosen broker. This will be needed for ordering buying/selling of stocks. Submit all the necessary documents required to open the account. Keep money receipt, copy of account opening form and any other contractual papers in safe custody.

Step 13

Deposit your apportioned cash to the broker account and obtain a money receipt/acknowledgement. Opt for an online transaction system if available.

Step 14

Analyze the market for some days. Read enough news, follow the market trends and talk to your closest friends and relatives before you place your first buy order.

Step 15

Start buying and selling of chosen stocks. Keep your buy/sell orders noted and confirm them after the orders are executed. Maintain an online/offline portfolio of all your stocks. As a starter, remember the golden rule of "buying at low, selling at high".

Step 16

Keep a close observation on your stocks in your portfolio. Constantly monitor company information like performance, newer ventures, AGM/EGM, dividends etc. Make a habit of watching/reading financial TV programs, news, online articles, websites etc.

Tips & Warning:

It is important that you understand the following information. It relates to investments and money…

• This site has been designed to help you the 'average man on the street'. It was designed to aid and assist you in the management of your money. Any views expressed on the site are the opinions of the author and should not be taken as a specific recommendation to either buy or sell. If appropriate, you should seek advice that will help you and your specific financial situation from a competent professional before making any monetary commitment.

• Financial markets change. The value of assets (shares, bonds, currencies, etc), their yield and purchasing power can rise as well as fall. This means that any capital invested may be at risk. Any investment that you make should be analysed carefully and the effects that losing the money may have to your lifestyle should be assessed.

• You should do all that you can to gain at least a basic understanding of the financial markets and investment options. It is, after all, your money and as well meaning as any financial consultant may be, you do have ultimate responsibility as to its management.

• While the information contained within the site is periodically updated, no guarantee is given that the information provided in this website is correct, complete, and/or up-to-date.

• The materials contained on this website are provided for general information purposes only and do not constitute legal or other professional advice on any subject matter. We do not accept any responsibility for any loss which may arise from reliance on information contained on this site.

• Permission is given for the downloading and temporary storage of one or more of these pages for the purpose of viewing on a personal computer. The contents of this site are protected by copyright under international conventions and, apart from the permission stated, the reproduction, permanent storage, or re transmission of the contents of this site is prohibited without prior written consent.

• Some links within this website may lead to other websites, including those operated and maintained by third parties. We include these links solely as a convenience to you, and the presence of such a link does not imply a responsibility for the linked site or an endorsement of the linked site, its operator, or its contents (exceptions may apply).

• This website and its contents are provided "AS IS" without warranty of any kind, either express or implied, including, but not limited to, the implied warranties of merchant ability, fitness for a particular purpose, or non-infringement.

• Reproduction, distribution, republication, and/or re transmission of material contained within this website are prohibited unless prior written permission has been obtained.

Reference

• How to Start a Stock Exchange Business
• How to Start Trading on the Stock Market