Who is a Stock Broker?

Broker?

A broker is an individual or an enterprise who contacts two parties, usually a buyer and a seller, and make a transaction happen between the two. What's in it for the broker? The brokerage. A considerably small fee charged from either both parties or based on the whole transaction value (usually a small percentage of the whole transaction).  

Stock Broker?

A Stock broker is the one who connects the stock investor/trader with the stock market. An individual cannot directly deal with the share market, hence he must go through a stock broker. A stock broker is usually a firm consisting of agents. Once we register ourselves at an agent, he will be our guide and middleman to the stock market.

Services

• Buy and sell shares on-behalf of  his clients and only on the approval of the client. (a stock broker does not have the freedom of buying and selling shares for his clients without the approval of them).
• Investment/Trading advising. Since the brokers deal with the market 24*7 it's wise to consult them before making our buying/selling decisions.
• Discretionary Dealing- this is where the client has given the freedom to the stock broker to make his own decisions based on the investment/trading objectives of the particular client.

Best Stock Brokers/Brokering Firms

America

1. Merrill Lynch & Co. Inc.
2. E. F. Hutton & Co.
3. Bache & Co.
4. Paine Webber & Company
5. Francis I. DuPont & Co.
6. Dean Witter Co.
7. Goldman Sachs
8. Bear Stearns

Sri Lanka

1. Bartleet Mallory Stockbrokers (Pvt) Ltd. 
2. Asia Securities (Pvt) Ltd.  
3. J B Securities (Pvt) Ltd.
4. Asha Phillip Securities Ltd.

When to Buy and Sell your Shares?

This has the been the most famous and age old question regarding Stock Trading. Simply due to the fact that 'When to Buy and When to Sell' is the core function behind stock trading and if you're an expert at deciding this, you can easily be a Pro at trading and end up unbelievably rich!!

Sorry to disappoint you though, but there's really no hard and core rule regarding when to buy and sell. That's the harsh and cold truth. Some may call it intuition, luck or sometimes pretty decent hard work and thought and decision making skills. However it is said and done, there are really a few basic things that you should know that could actually save your life in the stock market and hopefully not end up making losses for you. 

When to buy?

Actually most people think or it may seem very appealing to buy a stock which has it's price moving up. It may logically seem valid. The price is moving up so it will continue further more and when I have enough profit I'll sell it. Just like that. But that's not the correct way to approach the market. You should always focus on stocks that have decreasing price movements. or more like stocks that have lost it's market price and fallen down to a low value. Why? Simply because, if a share was performing well and had dropped to a lower level, it has a HUGE potential to reach back to it's previous price or even further more. A price that is already increasing only has a huge potential to drop. So always we should eye for stocks that have recently lost it's value. Buy them quickly and wait till the prices recover. You cannot loose this way, because the price was already down it wouldn't go any further down but only up. So guaranteed you will end up with a profit.

When to sell?

Buy and sell may seem like two opposites, and it is, but the same core rules as of buying shares apply for selling shares. This doesn't mean that you have to sell when the prices have dropped. The ideal time to sell a stock would be when it shows signs of dropping price. Now, if you picked a stock at a lower value as I've mentioned above any increase in price would earn you a profit, so when the stock shows even the slightest signs of dropping prices, sell them. Don't wait thinking it'll recover, just sell it. You won't loose anything since you bought at a lower price.

So that's about it.

This is NOT buying/selling recommendation. 

Further Reference:

Investing or Day Trading?

Investor or a Day Trader?

We may have heard these terms numerous times from numerous people. It may have everything to do with the Share Market, but still it's two totally different approaches to the market. Lets see in depth what these two terms mean.

Investing/Investor

Basically Investor approaches the Share market with a more long term view and plan in mind. The contrasting factor between the Investor and a Day Trader IS the Time factor. So an Investor will seek for shares/stocks that will generate large profits or benefits in the long run. He will sacrifice his current income in view of a much larger and a profitable flow of cash in the long term. The long term here may refer to a period of usually over 5 years. They will take into consideration of the long term business plan or model of the business, it's Vision and Mission and stably factors. Investing requires a lot of long term vision and patience.

Day Trading/Day Trader

This means the exact opposite of what Investing is. That is, Day Trading involves buying and selling shares/stocks within one business day. Yes! All buying and selling activities should be completed within the same day. No shares should be held for the next day in view of better profits and such. So this is a very tricky business. Day Trader has to be extremely vigilant of the behavior of the market or could end up loosing everything earned in one single day. But in turn, if done correctly Day Trading is the most profitable and successful way of earning easy money. Don't let that last statement ease the weight of the risk of this form of trading. As I've said before Day Trading is an extremely risky business. And equally benefiting if you know the game.

Bull Market and Bear Market

What is Bull Market and Bear Market?

Bull/Bear markets indicate different market situations prevalent in a Stock Market. The names have been derived from the fighting/attacking positions or ways of the two animals in comparison to the market behavior. 

Bull Market

As we can see in the above picture as a Bull attacks, it's horns point upwards. This has been used to signify an upward or positive movement in the Stock market or the share prices. this could be of a single stock, a group of stocks or the market as a whole. A Bull is a fierce and forceful animal, and so is the rising prices of shares in a Stock market. So that's why rising prices, a good performing market is called a Bull market.

Bear Market

In the above picture we can see the Bear laying down and defending itself. Bears can be fierce animals but generally they are slow, sluggish and lazy animals. And so is the stock market with decreasing prices/performance. A Bear stands up when  it attacks, so it attacks down towards the earth with it's claws. So this had been used to indicate dropping prices of the market. So that is how a sluggish or a market decreasing in performance got it's name 'Bear Market'.

What is the Stock Market/Stock Exchange?

Stock Market

Stock Market or commonly mentioned as Stock Exchange is the market where stocks/shares of listed (Quoted Public Limited Companies) companies are being traded or bought or sold among buyers and sellers. It's as simple as that. But the process is much more complicated than that. 

Let's see how a company enters the Share Market. There are basically two ways, namely;

1) IPO - Initial Public Offering

2) SPO - Secondary Public Offering

IPO

An Initial Public Offering is where a company ENTERS the stock exchange with a share issue to the public. If the share issue is successful (meaning if all shares are bought by the public) it will be considered a valid share issue and the company name will be listed in the stock exchange and allowed to function as a PLC. However if the shares are not fully subscribed (bought) by the public, the IPO will be considered void or a failure and the Stock Exchange will not allow the company to proceed with it's business activities. 

Entering the market with an IPO involves some risk due to the above factor. If the public doesn't feel like the company is a safe and worthwhile investment, they will not buy the shares and the company will be forced to shut down. Why? Because a share issue is the main mode of capital generation for a company and when it comes to an IPO, it is the step which a company tries to generate capital to START a company, so if that fails there's simply no money to start the business. To avoid this companies use a method called "Under Writing". Under Writing means prior to an IPO, the company gets a bank to sign a deal with the company to purchase the shares of a company in the event the public refuses to buy the full amount of shares. This deal offers security for the company as-well-as some assurance for the public that if the bank trusts the company we should not worry too. So Under Writing works in those two ways and help IPOs get successful.

SPO

Secondary Public Offering is where a company ALREADY LISTED in the Stock Exchange issues shares to the public. A company could have many number of SPOs in it's life time. All the share issue except for the first and foremost share issue will be falling under the category of a SPO. SPOs generally do not involve very much risk so Under Writing agreements are not of necessity and even if a SPO fails, it will not threaten the existence of the company. Usually a company goes for a SPO to generate additional capital maybe for expansion activities, new researches and developments and activities like that. So that's about the two main methods a company gets enlisted in the stock exchange.