How to buy shares for beginners on the primary market?

How to buy shares for beginners?

In order to be able to buy shares on the primary market, a company must give its consent to the issue of new shares. If the issuer, in this case the company, decides on a public issue and directs it to individual investors like us, we will be able to participate in it.

All information about the issue, plans, issue price, subscription schedule, risks associated with the purchase of shares and financial results can be found in the prospectus, which is a source of information about the company.

In the era of computers and the ubiquitous Internet, we can more and more often place subscriptions for shares via the Internet at the appropriate brokerage house. The only condition is the need to have a brokerage account. The next step is to accumulate sufficient cash for the purchase of shares. It is worth noting the popularity of the offer and interest among investors. The bigger the offer, the greater the possibility of subscription reduction.

A reduction is a restriction of the allotment for subscribed shares. If there are more buyers than the planned issue, the reduction will take place, i.e. we will get fewer shares than we would like. If you place a subscription order for one hundred shares and the reduction is 50%, you will receive only half of what you have subscribed for.

In order to receive a hundred shares, we would have to subscribe for two hundred shares. As for the planned offers on the primary market, we can find them on the Internet on the websites of dealing with the issues of the stock market, including the primary market.  In the appropriate section of the website you will find companies that are planning to debut on the primary market, as well as those that have already done so.

Will the next years on the primary market be as successful as the previous ones? Certainly, the number of new listings will depend on the economic situation and the moods prevailing on the stock exchanges. As for profitability, however, based on the statistics from the past, it can be concluded that it will be possible to earn money from them.

Forex - currency market

Forex is derived from the English Foreign Exchange return and means international currency exchange. Trading on the foreign exchange market, unlike the stock market or futures market, does not take place in one place, but is an OTC (Over The Counter) market. Thanks to globalization, computerization and computerization, transactions are concluded via the Internet - using appropriate trading platforms made available by brokers.

Trading lasts 24 hours a day, 5 days a week, from Sunday from 23.00 to Friday to 23.00. It is the largest market in the world, the volume of daily trading on the currency market reaches about 4 trillion dollars. Thanks to this, many banks use it to make money and diversify their portfolios. On the other hand, the prices of currencies, which we see so often in currency exchange offices, are nothing more than a consequence of demand and supply on relevant currency pairs.

The currency market is often called the game of the gods. It is intended for the most experienced participants of financial markets. What adds to the taste of everything is the possibility of using huge leverage, the so-called financial leverage, which in the case of the currency market can be as high as 1 : 200. Such leverage means in practice that when you invest 10 000 USD with a leverage of 1 : 200, in reality you "have" an amount (contract) of 2 000 000 USD. So if you have $200 and you trade on the Forex market for a specific currency pair with a leverage of 1 : 200, you will increase the amount to $400 with a leverage of 1 : 200. Thus, with $200 you can buy currencies for $40,000 (leverage effect).

Currency pairs

On the foreign exchange market, transactions are made on specific currency pairs. In the case of the EUR/USD pair, we say that the euro is quoted against USD at a certain rate, and each transaction means buying one currency and automatically selling the other.

The exchange rate of a currency pair itself is nothing more than the ratio of the exchange rate of one currency to the exchange rate of another, where the first currency is the base currency in relation to the second currency, to which the exchange rate of the quoted currency is set.

Main currency pairs

EUR/PLN
EUR/GBP
USD/PLN
EUR/YPY
EUR/USD
AUD/NZD
EUR/CHF
AUD/USD
USD/CHF
USD/JPY

When we make money?

As in the case of futures contracts, we can earn money on the currency market by both rising and falling exchange rates. If we predict that the euro will strengthen in relation to the PLN (e.g. due to a drop in GDP and economic slowdown in Poland), we place a purchase order for the EUR/PLN pair. Once our expectations are fulfilled, we will make a profit and earn money.

However, if it turns out that the reports on the economic situation are not so bad and the decline in Poland's GDP is not a threat, the situation will probably change and PLN will become stronger. Then we will automatically incur a loss. When concluding a transaction, one should remember about the aforementioned financial leverage, present on the foreign exchange market, which, even in the case of small percentage fluctuations, may significantly affect the value of the portfolio, at the same time increasing the investment risk.

Therefore, earning money on exchange rate fluctuations is a very difficult activity, requiring skills, knowledge and experience. A person who does not have sufficient "investment awareness" should think twice before deciding to become an active participant in the foreign exchange market.