Stock Basics Concepts

New traders find it simple to learn market trading by starting with basics. They study those first. Advanced ideas and guides then feel easier. That's because they already know the simple stuff before moving on.

The basics that traders should learn and know first before beginning trading are:

What's Indices?

An Index represents the simultaneous purchase and sale of one financial product against another. Traders engage in these transactions for speculative purposes and in pursuit of profit generation. Traders elect to purchase indices they anticipate will increase in valuation and sell those they project will decrease in worth.

Traders buy index instruments when they look cheap and sell when they seem too pricey. This forms the core of index trading. As a newbie, success comes from buying low-value indexes and selling high-value ones. Many skip this idea. They buy pricey indexes as prices climb higher. They sell cheap ones as prices drop further.

Just like in the stock market, successful traders buy stocks when the cost is low and sell them when the cost is high. This is the same idea that traders should stick to when trading indices.

What is Stock Index?

Index trading swaps one financial tool for another at the same time. Indices appear as special symbols called index instruments.

What is a Quote?

Because indices are traded in symbols, the price at which they are traded is shown by the quote that is provided.

Stock Indices is quoted in the format of decimal places.

What's a Pip?

Stock indices are quoted with decimal places. The second to last decimal point denotes a Pip, which represents the smallest change used for calculating trading gains and losses during market fluctuations.

Pip means Price Interest Point: it's a one point move in the quote.

What's a Lot?

Indexes trade in lots. Mini lots are smaller parts of standard lots. Micro lots are even smaller fractions.

What's Leverage?

Because not a lot of traders can afford to trade the standard contracts which require a lot of money to trade, there's trading leverage in Indices which means that stock indices traders can borrow money and use the borrowed money to make trades with. For example leverage of 100:1 means that a trader with capital of $10,000 can borrow up to 100 times using the 100:1 leverage ratio & henceforth after borrowing using this leverage the online trader will now have a sum total of $10,000 multiplied by 100, which means a trader will have sum total of $1,000,000. This leverage is what makes accessible to retail traders because retail stock traders can begin and start with little amount of capital of their own and use leverage to borrow the rest of the funds required for trading. Money that the trader deposits is referred to as a trader’s margin & a trader can continue borrowing money using this leverage option as long as they have the required margin in their trading account. This is why the online traders must have the required account balance in their account to open the trades they want to.

What's Margin?

Margin is the specific sum of money a trader needs to reserve to keep holding a trade that uses borrowed money. Margin can also be described as the deposit a stock index trader needs to maintain to keep their trades active. This margin is a percentage of the money in the account that must be saved and used as margin for the open trades held by a stock indices trader.

Learn More Tutorials and Guides:

Trade Stock Indices