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In the Wall Street Crash of 1929, many investors of stocks and shares suffered monumental losses which commonly resulted in the loss of homes and possessions, which unfortunately became one of the defining hallmarks of the Great Depression that started in 1930 in most countries, the effects of which were felt on a global scale right up until the mid-1940s.
It used to be the realm of the rich
According to legend, Joseph Kennedy sold all of his stock the day before the dreaded "Black Thursday" (29 October of that year). Was this just fortunate coincidence? Well no,legend has it that he received a tip off from a shoe-shine boy. In those days, share-dealing was strictly the realm of rich and powerful people and accordingly, Kennedy realised that something must be terribly wrong with the economy if such a boy could own shares.
These days, anyone can own shares
In the modern era, anyone can own and trade shares and that includes you! The internet has revolutionised the way in which we trade, as anyone who has a computer, in addition to enough money to open a trading account and a decent credit history, may invest in any market of his or her choosing.
You do not even require a personal broker through whom to conduct your affairs. Indeed, the fact that ordinary people are trading is no longer a sign of imminent economic calamity.
Be careful
While the internet has made trading infinitely more accessible, this does not mean that online trading should be taken at all lightly. In order to protect yourself and your money, it would highly advisable to gain an understanding of all of the basics, including the different types of online trading accounts and how to choose an online broker.
Before we look at the world of online trading, let's take a quick look at the basics of the stock market. If you've already read How Stocks and the Stock Market Work, you can go on to the next section.
What is a share of stock?
Put in simple terms, a share constitutes a tiny part ownership of a company listed on the stock exchange, and such companies are known in the United Kingdom as Public Limited Companies or PLC, for short. The price of a single share in one of these companies will fluctuate according to mixture of factors, including economic conditions, the performance of that company in terms of periodic profit and loss, in addition to the attitudes of investors.
Dividends
In the event that a company makes a profit, it will often share that profit with its shareholders in the form of a dividend. Shares upon which frequent dividends are issued are known as Income Stocks, whereas shares in companies that reinvest their profits are known as Growth Stocks.
What is a broker?
Brokers are people that are paid through commission to buy and sell shares and who are licensed to trade in shares through the exchange. A broker can perform his or her duties on the floor of a stock exchange, or can trade by telephone or online.
The process of online trading
When you trade stocks, currencies, binary options, CFD's and shares online, you are actually using a virtual broker as a substitute for a human broker. Of course, real money is still used, but instead of having a conversation about investments, ultimately, you must decide which shares to buy and sell and trades are requested specifically by you.
Do not let this put you off, as a number of online brokers offer advice from human brokers and also broker-assisted trading as part of their service.
Choosing a Broker
Before delving into the world of online trading, you must choose an online broker through which to do your trading. When chosen, your online broker will undertake trading on your behalf and will store your funds and stock in an account. While the online trading industry has been subject to an increasing number of mergers and acquisitions, there is still a great number of brokerage firms from which to choose.
Different brokers offer varying levels of assistance and advice, which is definitely something to bear in mind when considering your options.
a) How much money do you plan to invest?
Most brokerage firms have a minimum amount that you must invest in a trading account for one to be opened in your name. This is distinct from a minimum account balance, although most brokers have those in place as well.
b) How frequently do you plan to trade?
Are you going to buy a number of shares once and then hold on to them as an investment in your future? In this case, you will need to make sure that you do not choose a firm that charges a fee for accounts that are left dormant.
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