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Definition of stock exchange Meaning of stock market Terms used in stock market Market , limit & stop order Types of operators Bull & bear market Trading Buying & selling Procedures 7 way to survive stock market correction Conclusion
More rational traders More Will be rational trading
In other words
A stock exchange is an entity that provides "trading" facilities for stock brokers and traders to trade 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 shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.
STOCKS
A stock is a certificate that certifies ownership of a certain portion of a firm. When a firm issues new shares of stock, it does not add to its debt. Instead, it brings in additional owners who supply it with funds.
BONDS
To make a large purchase, a firm can borrow the funds from a bank, but it can also issue a bond. A bond is a document that formally promises to pay back a loan under specified terms and a given period of time.
However, if our owner did not have necessary funds to start their own business they could finance their operation in one of two ways: 1. Issue stock (or certificates of partial ownership in his company) to people who may be interested in helping their venture out in return for a proportional share of the profits that the company might generate. 2. Borrow money that will need to be paid back with interest.
Advantages of issuing stock: 1. A Company can raise more capital than it could borrow. 2. A Company does not have to make periodic interest payments to creditors. 3. A Company does not have to make principal payments.
Disadvantages of Issuing Stock: 1. The principal owners have to share their ownership with other shareholders. 2. Shareholders have a voice in policies that affect the company operations.
6. Creation of Employment Opportunities 7. Evaluation of Securities 8. Industrial Development 9. Clearing House of Securities 10. Facilitates Flow of Capital
MARKET ORDER & LIMIT ORDER A market order is an order to buy or sell a stock as soon as possible at the best price available. In a fast market situation, a market order can be very risky. A limit order is the safest way to trade in a fast market because it's an order to buy or sell a stock only at the specified price (the limit price) or better.
STOP ORDER
A stop order is an order to buy or sell a stock when the price reaches or passes a specified point (the stop price). When that happens, a stop order automatically becomes a market order and is executed at the best price available. In fast markets, however, after a stop order hits the stop price and becomes a market order, it can keep climbing or drop sharply - and ultimately be executed much higher or lower than originally specified.
Types of operators
1. 2. 3.
Brokers:
Buys/sells on behalf of outsider Charges Brokerage Not specialize in particular security
1. 2. 3. 4.
What Broker-Dealers Are Not Allowed to Do Churning: Excessive trading of a client's discretionary account to increase the broker's commissions. Use deception or manipulation to trade securities, or failing to state material facts Recommending low-priced, speculative securities without determining whether they are suitable for the customer Make unauthorized transactions
Guarantee that loss will not occur Try to talk clients into buying mutual funds inappropriate for their means and goals Use fictitious accounts to disguise trades State that the SEC has approved or judged positively either the security or the broker Not promptly transmitting the client's money or securities
Bear Markets
Bear markets are the opposite--stock prices are falling, and the view is that they will continue falling. The economy will slow down, coupled with a rise in unemployment and inflation. In either scenario, people invest as though the trend will continue. Investors who think and act as though the market will continue to rise are bullish, while those who think it will keep falling are bearish.
Trading
Open outcry system 1. Trading post 2. Jobber Screen-based system 1. Informational efficiency 2. Full view of market
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Buying shares
Procedure for buying shares: 1. Locating a Broker
(Client registration form & member-constituent form)
2. Placement of order
(Limit order or market order: -Day order -week order -month order Open order)
Selling shares
Procedure for selling shares: 1. Placement of order
(Sale order ;limit order & market order)
2. Execution of order
(contract note)
3. Internet Trading
(ICICI Web trade)
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9. Portfolio Management. 10. Other functions: There are some other functions also which are as follows:(i) It prevents unfair trade practices relating to the securities market. (ii) It gives training to intermediaries in the securities market. (iii) It promotes investor's education. (iv) It conducts audits of the stock exchanges. (v) It also conducts inquiries, and inspections.
The growth rate of GDP would have been around 2.8% instead of 4.5%
Seven ways to survive a Stock Market Correction 1. Stop Listening To Analysts 2. Stop Staring At Your Portfolio Every Thirty Minutes. 3. Be Patient 4. Speak To Actual Investors With Experience 5. Stop Following Crazy Tips 6. Understand Market Cycles 7. Follow The Guru
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Thank You