learn how to make a deal
"Transaction" means: barter.
Today, we can use it to exchange goods because of the money.
The financial markets transactions are the same, such as:
Buying the company stocks. Buying stocks equals to buyingparts of the company assets.
Therefore, if the company is developing and growing, having a substantial profit or introducing of new products, its stock will be appreciation.
The investors who bought the shares will sell them with a higher price, in order to make money out of it.
Why do these stocks have appreciations? The answer is hidden in the concept of supply and demand.
For illustration purposes, we will give a simple example.
Suppose that you are going to buy an apple in a market. You are in the market now, there are ten apples left on one stall.
Although this is the only place where you can buy apples, but if you're the only customer in the market,
And you only buy one apple, the stallholder might sell the apple to you with a preferential price to ensure that he can make the deal.
Now, let’s suppose that the flow of people is soaring in the market, they all want to buy apples, the stallholder may raisethe prices.
Because he knows that demand is greater than supply.
To make sure that they can buy apples, customers are willing to spend more money.
If the customer’s bids climb, these selling price of apples may continue to rise.
Now, when the price reaches a certain height and thecustomers feel it too expensive, it will stop rising and fall to acceptable level again.
At this point, we can say that the price reaches market level, the stallholder and the customers all agree that this is an acceptable price.
However, things are not set in stone, if the apple supplyincreases, its price may fall after rise.
Say another stallholder enters the market, selling more apples; his strategies to the market is promotion with a lower price.
More and more people are buying apples from the new stallholder. In order to survive in the competition, the former stallholder has to cut price, and the price of apples are temporarily stable, or there will be some changes on the co-ordination of supply and demand.
So, how do we apply it to the financial market?
In financial industry, the concepts of supply and demand are the same. In financial markets, customers are traders, they buy and sell stocks.
If a company has achieved gratifying results and distributed the returns to its investors,
There will be more people who want to buy the stock, following by rising of the stock price because of the rising demand. Then you can sell the stock to who wants to buy it, and make money out of it.
For a long time, financial transactions are only between banks and other financial institutions, which means the financial markets are not open to anyone outside of the industry.
Nowadays, with the Internet, you can also get involved, online transactions for Internet transactions.
Anything can be online transacted, including stocks, currencies, commodities, tangible goods and all other items.
You do not need to ponder the meaning of all these nouns, as long as something can be traded, then can be used to trade, the market is open, and you can also learn how to trade.