Trading on The Stock Market | What is Stock Market | IFCM Iran
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Trading on the stock market

A stock market or securities market is an aggregate of people (participants), rules and operations related to the issue and circulation of securities. There exist an exchange and OTC markets of securities. The traditional stock market is an organized securities market, and trading on the stock market determines the behavior of the financial market as a whole. The securities of reliable issuers that have passed the procedure of listing are traded on a stock exchange market. The predominant part of securities is circulated on the OTC market of securities, and it is considered to be an alternative to the stock market. Those are basically securities of the companies which have not been or do not have the desire to be listed on the stock market.

Trading on the stock market started from the medieval bill of exchange fairs (precursors of contemporary stock exchanges), then, appeared the first exchanges in Antwerp and Lyon, and the first stocks of the largest companies in Europe were released. Stocks are still considered to be the most popular investment instruments.

In the past, very few people were engaged in stock trading, but, recently, with the development of electronic technology, it has become available to almost everyone. An electronic system for trading securities allows to follow stock trades in real-time, buy and sell securities by profiting on price movements.

Making deals:

Individuals have the opportunity to make deals only through an intermediary (a broker). An order to buy or sell securities is made through the stock terminal of a brokerage company. An exchange automatically checks all the received orders, finds counter orders and makes deals, as a result of which the security passes to a buyer. Information about the deal made is displayed on the exchange terminal of a user. The whole process usually lasts for 1-2 seconds.

How to Choose a Stock Broker?

There are many criteria to choose a brokerage company, but the main ones are the reliability, the size of commission and the size of leverage. Actually, no one can determine the reliability of a company by 100%, but one should at least check the experience of a company on the market and traders’ reviews.

The size of commissions is very significant in case you are going to trade intensively and not to invest in securities for a long-term.

Unlike the currency market, on the stock market the size of leverage is low: from 1:1 to 1:10.

→ Learn more about What is Leverage

In addition, it is very important that the broker provides its clients with information and analytical support, as well as a reliable and convenient program for trading.

What to Trade in Stock Market?

The classical instruments of trading нon the stock market are considered to be stocks and bonds. There are many other assets existing on the market, including derivatives, but they are much more risky.

Stocks – on the stock market, there is a great number of stocks of various companies the purchase of which should be conducted according to the following principle: illiquid shares have large spread, therefore, short-term trading would be expensive. These kinds of shares might be suitable for a long-term investment. For active trades, highly liquid stocks are more suitable. In case of long-term investments, the income is generated due to the increase of prices on stocks and dividends paid by an issuer.

Bonds are attractive due to the fixed period of circulation and fixed income which allows calculating the future size of return from investments. Unlike stocks, bonds are less risky instruments, but their profitability is less respectively.


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Author
Raul Laghari
Publish date
18/09/23
Reading Time
-- min
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