Financial Markets For The Rest Of Us|
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
want to sell your 20 shares. In that case you place an order with your broker to sell your holdings
20 shares x $60 per share = 1,200
for a gross profit of $200. Of course the same types of fees would apply to sell your shares. So your real profit would be $200 minus the costs of buying and selling the shares. There you have it. Pretty simple. Of course the stock's price could have declined (as they did due to the Firestone affair), in which case you would be left with a loss if you decided to sell. We will cover more on buying and selling stocks in a bit. But for now you get a feel for what it means to trade stocks.
Trading (Buying And Selling) Stocks (Part II) - Margin
By now I have probably whetted your appetite to delve into trading stocks. Here I will try to explain some more details of trading. Again, approach stocks (or any other financial instrument) with caution. It all comes down to calculated risks. Remember that it is your money that you are risking. Also remember that my description, while sufficient, is by no means complete. Consult a financial adviser before making any investments.
Depending on the brokerage and the rules of trading (set forth by SEC, the exchange, and the broker), your account would be either cash or margin. Cash means that you can only trade with the amount that you have deposited in your account.Margin means that you can borrow money from your broker on top of your cash position to trade. The margin amount depends on the stocks traded but in many cases it equals 100% of your account equity. Put another way, your equity (cash) to holding ratio would be 50%. In other words if you have $1,000 …
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