General Knowledge

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General Knowledge Explore Financial Fundamentals

 

Dive into the foundational concepts of finance and investing with our General Knowledge tab. Unravel the intricacies of accounting, learn the dynamics of the stock market, and understand essential trading strategies. Whether you’re a novice investor or a seasoned trader, this tab provides valuable insights to enhance your financial literacy and navigate the world of finance with confidence.

Accounting and Accounting Ratios

Accounting is the process of recording, summarizing, and analyzing financial transactions of a business. It provides a framework for understanding a company's financial performance and position.

Accounting Ratios are tools used to evaluate a company's financial health and performance. They help stakeholders assess aspects such as profitability, liquidity, solvency, and efficiency.

Finance and Equity Share Trading

Finance involves managing money, investments, and other financial activities. It encompasses various areas such as personal finance, corporate finance, and public finance.

Equity Share Trading refers to the buying and selling of ownership stakes (equity shares) in publicly listed companies. Investors trade these shares on stock exchanges, aiming for capital appreciation (increase in share price) and dividends.

Stock Market

The stock market is where investors trade shares of publicly listed companies. Participants include retail investors, institutions, and market makers. Key mechanisms like bid-ask spreads and market indices drive trading. Government regulation ensures fair practices and protects investor interests. Understanding these basics helps investors make informed decisions.

 
 
Forex (Foreign Exchange)

The forex market is the largest component of the financial markets, where currencies are traded over-the-counter. Forex trading involves buying one currency while simultaneously selling another, aiming to profit from fluctuations in exchange rates.

Stock Index

A stock market index measures the performance of a group of stocks, representing a particular market or sector. Indices help investors track market movements and assess overall market sentiment. They are calculated based on the prices or market capitalization of constituent stocks.

How to Open a CDS Account

The Central Depository System (CDS) allows investors to hold shares electronically. To open a CDS account, investors need to complete and sign an account opening form with a Central Depository Agent (CDA), providing necessary documentation such as photographs and identification.

How to Trade Shares on Nairobi Stock Exchange (NSE)

Trading shares on the Nairobi Stock Exchange requires three key components:

  1. Trading Account (CDS Account): A CDS account enables investors to hold or transfer shares traded at NSE. It's necessary to open a CDS account to participate in stock trading.

  2. Stock Broker: A stock broker facilitates transactions on the stock market. Choose a broker with a positive reputation and attractive trading fees.

  3. Funds: Investors need money to purchase shares. The minimum number of shares per trade is typically 100.

    Brokerage Fee

    A brokerage fee is the charge imposed by a broker for executing trades on behalf of investors. It compensates the broker for their services, which may include advisory or transactional assistance.

Trading Strategies: Long Trading vs. Short Trading

Long Trading involves buying stocks at a lower price and selling them at a higher price to make a profit. It's profitable when stock prices are rising.

Short Trading involves borrowing stocks from a broker, selling them immediately, and buying them back at a lower price to return to the broker. It's profitable when stock prices are falling.

Capital Markets Products

Capital markets offer various financial products, including stocks, bonds, derivatives, and commodities. These products facilitate investment, capital raising, and risk management activities.