In the business world, stocks represent the ownership shares of a company. In common, these shares are also called as equity. A single share of stock signifies fractional ownership in percentage terms of the company’s shares to which ownership is connected.
The ownership structure of stocks may be limited or unlimited. Under limited ownership, the shareholders own only a definite number of shares and the same number of shares cannot be owned by more than one shareholder. Likewise, there are two types of stocks – common stock and preferred stock. Common stock is represented by the stocks that are listed on the New York Stock Exchange or the NASDAQ, while preferred stock represents the stocks that are listed on the London pragmatic play Exchange or the OTCBB. Common stock and preferred stock have similarities, but they differ in number of shares permitted to be owned by an owner.
In a general perspective, the process of buying and selling of stocks on the stock market can be made more convenient and fast by using the services of companies that offer online trading of stocks. By using these services, investors can purchase shares at a time of their choice and sell them at another time. This type of trading is known as day trading.
One of the features of these services is stock volatility. It is the speed with which stocks can move up or down in the market. Speculators use this to predict the direction of the price movement of a particular share. If the speculators are right, the price of that particular share will go up, and if they are wrong, the share will drop.
Online stock exchanges help increase the liquidity of stocks and create opportunities for shareholders to raise funds through capitalization of their accounts. Through such stock exchanges, investors can buy and sell shares at the times when they choose. These stock exchanges also provide investors with information on the changing share prices and trends.
To make money through stocks, it is important for investors to know how a share is valued. The price of a common stock represents the value of all outstanding shares of that company. The price fluctuates depending upon the current demand for that particular stock and expectations from the company regarding its growth. However, there is no guarantee that a rising stock represents future value for the company.