The first thing a new investor should know in learning the basics of understanding the stock market is what a "stock" is: the smallest unit of corporate ownership. The exact interest represented by a share of stock varies from one company to another, but if you own even one share of a corporation's stock, you are considered an owner of the corporation.

Don't worry - a primary reason for buying stock is the concept of limited liability. It is key to understanding the stock market to know that if you buy stock, your total risk is the amount you paid. If the company goes under, you lose your initial investment, but creditors can't seek anything further from you - your other assets are completely safe.

There are two types of stocks: common and preferred. Common stock is what most individuals own, and it gives you, the "shareholder", certain rights, such as the right to receive dividends, and to vote on corporate policies. All publicly-traded corporations have common stock, and it's what you think of when you hear that a stock price has risen or fallen. Preferred stockholders have the right to receive dividends before common stockholders. Typically, preferred stock is purchased for the dividend income, rather than profitable trading.

There are several "stock markets", including the New York Stock Exchange, the American Stock Exchange, and the Japanese Nikkei. Each stock is registered with a certain market, and is only sold there. Each market has professional traders, called "brokers". Typically, investors place "buy" and "sell" orders with their broker, who acts as their agent in the transactions.

Most brokerages require that you open an account with a minimum balance, which may be a significant amount. Some firms cushion that blow by offering free stock trading, meaning they won't charge their commission on the first few transactions made for you.

You must know the basics before you ever begin trading. Whether you have taken classes or read books, try practicing first. You can follow the market and trades to make sure you have a full understanding of what is going on. You must understand it all before you start investing.

Thus, the best stock trading is a product of a combination of luck, education, and analysis of market trends. Many market analysis tools are available, and a good broker - and a good investor - uses several of them in each investment decision. Any investment carries some risk of loss; but careful research can cut down on that risk, and having a reputable broker can mean the difference between serious loss, and serious profits.

The key to stock trading is to remember that there is no guarantee. The stock market is very volatile and always changing. Good luck and invest great.