What is the Next Step If You Have a Brokerage and You Know How Stock Market Works?

In order to start off with the trading, it is worth knowing some stock market basics. There are a few definitions and terms you would like to get yourself acquainted to with, before beginning with stock trading. Knowing the price of the stock and assessing it is one of the most important and elementary things you would need to know before starting out.

If the price of the stock you are interested in is pegged at $75, it might not be the real price. There are usually two costs associated with a stock. One is the ASK, which is the cost quoted to you by the dealer, and other is the BID, which is the cost at which you can sell the stock.

Spread is the term used to refer to the difference between the BID cost and the ASK cost. Spread is also the amount of money that actually goes into the market. Therefore, whenever you consider buying a share, always remember to factor in the spread. Spread is probably the most important factor in determining the cost. Suppose, for example, a company issues some good statistics and the general cues force you (and a lot of other players) to buy that stock.

Brokerage firms, in anticipation of more buying, try to raise the spread of such stocks. This ensures that they get a good share of commission while others trade heavily on the stock. Therefore, to put it in simpler words, always factor the spread of the stock and consider both ask and bid costs before actually buying into a stock.