Trading for Beginners

Getting Started

To trade on the stock market you will first need to setup a trading account with a recognized stock broker. You may be able to trade stocks through your current bank as most major banks have stock trading facilities. If your bank does not offer a trading facility, simply setup a trading account with any of the quality discount brokers listed in our links. Once you’ve setup your account you will need to fund the account with the money that you plan to trade with.

** CAUTION: We advise all novice investors to fully understand that stock trading involves an inherent risk. Please carefully read our disclaimer .

Trading Terminology

There are 8 major trading terms that all beginners must become immediately familiar with. These are:

• 1. Long Trades


• 2. Buy Long

You are buying a stock with the expectation that its price will increase and you will sell it sometime in the future for profit/gain. NOTE: you will actually take ownership of the stock in a long trade.


• 3. Sell

You are selling a stock that you actually own. You have already bought this stock and have now decided to sell it and realize the gain or loss consequences; you have either made money, broke-even, or lost money.


• 4. Short Trades


• 5. Sell Short

Can be defined as "selling something that you have borrowed with the expectation that you will pay it back to the owner very soon." By selling a stock that you do not own, you expect to buy-back the same stock at a point in the future at a cheaper price than you sold it for so that when you return it to the original owner, you keep the difference between the price you sold it for and the price you bought it back for. Example: you borrow a quantity of "Stock A" from your broker and sell it for $1,000; a few days later you buy-back the same quantity of "Stock A" for $800 and return the stock to the broker. In this case, you keep the difference of $200. This is your profit. Selling short can have serious consequences. Please fully understand the "unlimited loss" consequences of short-selling.


• 6. Buy to Cover

The term simply used to describe the pay-back trade that a short-seller must do to pay back the stock that was borrowed.


• 7. Margin

Margin is essentially "borrowing money" that you do not own to trade more stock than you could have traded by using a 100% of your own money. As with all "leverage" or "gearing" trading with money in excess of what you own can have serious consequences. Please fully understand the consequences of margin trading.


• 8. Commission

All trading activity has a cost. The most common cost of making either a buy or sell trade is the trade commission. Commissions range from $5 to $45 (or more!) depending on your broker. Discount brokers can provide a cost-effective facility to trade stocks and there are many quality firms listed in our links.

Dhynosoft recommends that users seriously take in to consideration the actual costs associated with making either a buy or sell trade as these may become significant.

Summary: If you have already setup a trading account and are familiar with the above 8 terms – you are now in a position to start trading. Please see our article on “How to Trade Using Dhynosoft” and refer to our Glossary of Terms for more details about terms and abbreviations we have used on our site.