Stocks 101
Learn the fundamentals of equity investing and trading.
What Is a Stock?
A stock represents ownership in a company. When you buy shares, you own a small piece of that business — its assets, its earnings, and a claim on its future.
Why people own stocks:
- Capital appreciation — the share price rises over time as the business grows.
- Dividends — some companies pay a share of profits directly to shareholders.
- Voting rights — shareholders get a say in major company decisions.
- Long-term wealth building — the historical average annual return is around 10%.
Stock Markets Around the World
Every region has its own exchange, trading hours, and settlement rules. Toros lets you trade across all four:
- NYSE: the world's largest exchange by market cap, ~2,400 listed companies, 9:30 AM–4:00 PM EST, tracked by the S&P 500 and Dow Jones.
- NASDAQ: tech-heavy, ~3,500 listed companies, home to Apple, Microsoft, and Amazon, tracked by the NASDAQ-100.
- Currency: USD. Settlement: T+2.
- Founded in 1861, ~1,500 listed companies, 9:30 AM–4:00 PM EST, tracked by the TSX Composite.
- Strong in energy and banking, with a growing tech sector.
- Currency: CAD. Settlement: T+2.
- Founded in 1801, ~2,200 listed companies, 8:00 AM–4:30 PM GMT, tracked by the FTSE 100.
- Strong in financials and energy, with many multinational corporations and high dividend yields.
- Currency: GBP. Settlement: T+2.
- NSE: India's largest exchange by volume, ~2,000 listed companies, 9:15 AM–3:30 PM IST, tracked by the NIFTY 50.
- BSE: the oldest exchange in Asia (1875), ~6,000 listed companies, tracked by the SENSEX.
- Currency: INR. Settlement: T+1.
How Stock Prices Work
Prices move on supply and demand. More buyers than sellers pushes the price up; more sellers than buyers pushes it down. What shifts that balance:
- Company earnings reports
- Industry news and trends
- Economic conditions — interest rates, inflation
- Competitor performance
- CEO announcements and forward guidance
- Overall market sentiment and investor psychology
Buy vs. Sell: Trading Directions
Buying (going long) means you believe the price will rise. You profit as it climbs; upside is unlimited, and your maximum loss is your entire investment.
Selling short means you believe the price will fall. You borrow shares, sell them, and aim to buy them back cheaper. Profit is capped at the sale price, but loss is theoretically unlimited if the price keeps climbing — this is an advanced technique, not a beginner one.
Key Stock Trading Terms
- Price — the current market price per share.
- Volume — shares traded today; higher volume means more liquidity.
- Bid/Ask spread — the gap between buy and sell prices; tight spreads are easier to trade.
- Percent change — how much the price moved from the previous close (e.g. +2.5% on a $100 stock is +$2.50).
- Green / Red — price up / price down since the previous close.
- 52-week high/low — the highest and lowest prices over the past year.
- Market cap — price × shares outstanding; large-cap ($100B+) tends to be stable, small-cap (<$2B) tends to be volatile.
Trading Strategies for Beginners
Buy and hold
Buy quality companies and hold for years. Profit from long-term growth plus dividends. The least stressful approach, with a historical annual return around 10%.
Dollar-cost averaging
Invest a fixed amount on a regular schedule regardless of price, which automatically buys more when prices dip and smooths out volatility over time.
Value investing
Buy stocks trading below their intrinsic worth. Requires real financial analysis skill, but historically has produced 15–20% annual returns when done well.
Growth investing
Buy high-growth companies — tech, biotech — and accept higher volatility in exchange for larger potential gains.
Mistakes to Avoid
- Emotional trading — panic-selling on dips or FOMO-buying spikes. Fix: decide your plan before you trade, and stick to it.
- Putting everything in one stock — a single crash wipes you out. Fix: diversify across 10–20 names.
- Ignoring fees — high commissions quietly eat 2–3% of annual returns. Fix: use low/zero-commission brokers.
- Trading too frequently — every trade has a cost. Fix: hold conviction positions for a year or more.
- Not understanding what you own — never buy a company you can't explain. Fix: read the quarterly reports.
Getting Started: Your First Trade
- Choose a company you actually understand.
- Research recent news and look at the 5-year price chart.
- Start small — $100–500 into one position.
- Place the order — a market order fills immediately.
- Check the position weekly, not hourly. Reduces stress and impulsive decisions.
- Set exit goals in advance — e.g. "I'll sell if it drops 10% or rises 20%."
Key Takeaways
- Stocks represent real ownership in a company.
- Prices move on supply, demand, and news.
- Green means up, red means down.
- Long-term investing beats short-term trading for most people.
- Diversification reduces risk.
- Avoid emotional decisions.
- Start small and learn as you go — invest money you won't need for 5+ years.