Please explain how to buy and sell stocks and show me two examples of buying and
ID: 2718259 • Letter: P
Question
Please explain how to buy and sell stocks and show me two examples of buying and two examples of selling. By examples I mean show me exactly what you did to buy the stock and exactly what you did to sell the stock. I think to buy stock if the stock is selling for 20.01 and you want to buy 100 shares that means you say $20.01 * 100= 2001. Therefore, 2001 dollars will have to be invested. I don't understand the selling part at all. Please explain it to me like your talking to someone who has never heard of the stock market. It's very important that I'm able to understand it. Thank you.
Explanation / Answer
THE FUNDA IN SIMPLE AND EASY, PLEASE GO STEP BY STEP AS BELOW:
The buying and selling of the stocks is done through Stock Exchange and the brokers associated with these Stock Exchanges. These brokers helps the general public buyers to buy the stock and if some general public person having some stock, the brokers help them to sell the stock.
The purpose (for all Investors) of buying and selling of stock in the stock exchange / stock market is to make profit on the money you have invested in buying the stock. You make profit only if you buy stock/shares at lower price and sell these bought stock/shares at higher price.
As you have mentioned and already know " I think to buy stock 'A' if the stock 'A' is being sold by some other person for $20.01 per share in the stock market and you want to buy/invest in 100 shares that means you say $20.01 * 100= 2001. Therefore, 2001 dollars will have to be invested." Thus you have made an investment of $2001 in Stock 'A'.
Now, on the merits of the stock 'A' have brought, some time after, the demand of the stock 'A' comes up and the other investor/buying quotes a price $23.01 per share in the market. Through the Brokers so attached with Stock Exchanges / Stock Market, will help you to know the current market quotes/rates of the Stock 'A' and sell in the same at that quote/rate to person demanding. Now, you sell the stock 'A' at $23.01 per share and get total amount $23.01 * 100= $2301 and earn a profit of $3 per share (i.e. $23.1-$20.1) , so to say total profit on 100 shares of $3 * 100 = $300.
Now about the expense over and above the buying price (i.e. $20.1 in your case), you have to pay a minimal cost of 2% on the total investment (in case of purchase) made and total selling amount (in case of sale). In your case, the bought amount is $2001 and selling amount is $2301. So you have to pay 2% on both these amounts to the brokers i.e. $86 the brokerage cost. In net you get a In-hand income of $214 i.e. $300 - $86.
The more you let the stock price to go up, the more to earn profit on it. Say, if you wait a little more and the price of the stock 'A' raises to $26.01 per share, then you able to double your profit that made earlier i.e. instead of $3 you make profit of $6 per share.
So, this is the whole funda of Buying and Selling of Stock in the Stock Exchange / Stock Market through the associated Brokers and the purpose of all these activities is to earn profit as your stock price rise on rise of the stock demand in the stock market.