Dipping into the market is a great way to take control of your financial future. You can be a casual investor or a more focused active trader, but either way, you want to understand the trading process inside and out. Fulling getting the different because the NYSE, OTC markets and other exchanges is important on your journey to be a responsible financial citizen. When you learn how to approach the market with risk management in mind you can make it work to your advantage.
Any investor needs to start with a broker. Selecting the right broker for your needs is vital. Do as much research as you can about the brokers and find the one that fits your needs. Once you find the right platform, you then can research and select the company or financial instrument you want to put your money into. This is a vital part of the process. Let’s say you pick a security, like a stock or mutual fund, where you actually own the underlying asset.
Then you need to choose how to make the order. You can either pick a limit order, where you instructor your broker to buy the security at a specific price, so it will not be executed until the the price of the security reaches the price that is specified in the order. Or you can go with a market order, where the trade is executed as quickly as possible by the broker.
When you are dealing with stocks on the OTC markets, you want to stick with limit orders. That gives you more control over the trade. OTC markets are inherently more risky than other, larger exchanges, because the companies are smaller, less subject to financial disclosure regulations and more prone to the financial hype machine. It is prudent to approach these markets carefully.
After the order is place, the broker dealer puts the order through a number of internal steps to make sure it is executed properly. The broker can either place the trade and back it with their own funds, try to find another broker to take on the deal or change the quote on the trade. If the broker needs to change the quote, it can get hairy. There is usually no central exchange that oversees this process.
Once the trade is agreed upon by the broker, other brokers or the owner of the security, the entire trade must be settled. That means that the funds must be delivered to the owner of the security and the security must be delivered to the buyer. That entire process is the responsibility of the broker/dealer. That is why selecting the proper broker is so vital, especially if you are in the OTC markets.
Starting out as an investor, whether you are trading your own funds or trying to become an active day trader, can be an intimidating process. It makes sense to find a trading education site that allows you learn strategies and techniques that help manage the risk inherent in trading. The risk is always going to be there, no matter what. Understanding and accepting the responsibility of risk management is part of being a trader.
