Stock market trading-- what, how, why

Since the beginning of human civilisation, individuals and businesses have traded all kinds of goods and services. Among all the other types of trading, the idea of stock market trading is a more recent development. The world is constantly changing and with it, the way we invest is also shifting. So, if we want to grow our wealth, we need to invest our money. When it comes to investing for outstanding growth, the stock market often emerges as a primary consideration offering opportunities for investment growth in a dynamic financial landscape.
But do we really understand what the stock market is or how it works? Do we know what steps to follow or what procedures to go through to invest?
A stock market is essentially an auction house that operates according to the laws of supply and demand. The prices that the purchasers provide in their bids are also known as bidding prices. When an asset is purchased for a lower price and then sold for a greater price, investment is successful. Capital gains are used to describe this form of return on investment. One strategy to make money by investing is to generate returns by achieving capital gains or selling assets for a profit. Appreciation is the term used to describe the increase in value of an investment between the time it is purchased and sold.
Bangladesh has two stock exchanges- the Dhaka Stock Exchange (DSE) and the Chottogram Stock Exchange (CSE). The most common practice of trading shares in the country is by taking support from brokerage houses. One thing is for sure-- there is no magic rule to find the right stock to buy. Different people use different tactics to find the right stock. Which stock is right for you depends on the type of investor you are, the kind of analysis you believe in, your preferences and expectations, the market conditions, and more.
Although trading strategies and market dynamics can be overwhelming for newcomers, it is still crucial to understand exactly how the market works to avoid impulsive trading. One can easily refrain from impulsive decision-making by thoroughly researching risk management. Newbie investors can get help from brokerage firms or capital market experts to diversify their investments. To be on the safe side, it is advised to seek a smart brokerage firm that will provide the exact information required to make trading more seamless.
Some people invest only after plenty of investigations regarding the overall state of the economy, the market, and the company. Also known as fundamental analysis, this type of analysis is very common. On the other hand, some look at the prices and volumes of different stocks. This type of analysis is called technical analysis. In recent times, behavioural analysis and market sentiment analysis have also gained traction, considering how investor behaviour and collective sentiment can influence market dynamics. Some people follow other esteemed investors, whereas others just purchase the stocks that are in the highest demand.
On the flip side, too much information is one of the reasons why capital market prices are so volatile. So, instead of falling into the trap of market volatility, one must remain extremely cautious and balanced.
The stock market is crucial to a nation's economy. Generally speaking, but not always, the stock market and economy move in sync with one another. It is quite possible for stock prices to fall in good economic times as well as rise in bad ones; this is because of market volatility. The stock market prices are likely to reflect the same sentiment if the GDP is increasing and the economy appears to be improving, even if not always in the short term. As a key economic pillar, the stock market has a significant impact on the development of business and industry. This, in turn, has a substantial impact on the overall health of a nation's economy.
For all these reasons, sophisticated knowledge is important for stock market trading. Investing is definitely an effective way to put your money to work and potentially build wealth. 'Smart investing' is imperative, especially for Bangladesh, as it may allow the money to outpace inflation and increase in value. Whether it was years ago or now, in the contemporary world, the core idea of investing is the same- conduct enough research.

Zobayed Al Mamun Hasan is Managing Director at NBL Securities.
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