The value of a financial asset (tangible liquid asset) is derived from a contractual claim. So the asset doesn’t have any value until it’s converted into cash.
Financial assets represent everything from stocks to bonds to bank deposits. It’s unlike commodities or properties as financial assets are not tangible physical assets.
So if you’re new to investing, how can you trade successfully? Here are some tips.
When you place a market order before the beginning of trading, you run the risk of paying more than you expected or receiving far less than expected. Although this is always a common risk in market orders, it’s acuter at opening times.
When the bell rings, orders usually pile up from traders who reacted to the previous night’s news. If you must trade at the opening, try to protect yourself by limiting your order.
Usually, the best time to trade is between 1 and 2:30 p.m. The reason behind this is that the whole country would have had enough time to digest the news of the day.
Both corporate earnings reports and government statistics are released in the morning, so that’s another reason why trading in the afternoon would be a better idea.
Before entering a buy or sell order, always check the bid size and ask size of an exchange-listed stock. Whenever the bid size is more than the ask size, it’s a sign of the underlying demand for the financial asset. So in this scenario, it would be better to buy quickly.
On the other side of the coin, the large position on the ask side shows that there a lot of people eager to sell. So if you waste time holding on to it, you might miss the opportunity to sell.
Money from pension funds and dividend reinvestment usually flows into the market between the 18th and 22nd of each month. This is when prices tend to be at the lower end of the spectrum.
If you’re planning to sell, it’s best to do most of your selling in April and early May.
As you get more comfortable with investing in financial assets, you will start noticing these patterns in the market.