The lure of letting money work for you is simply hard to resist. That's why a lot of people want to venture into the world of stock trading.

But there's more to it than buying and selling stocks. No one can just go into stock trading without at least some basic level knowledge on how it works. If that's what you're looking for, then this article is for you...

When you buy stocks, you're actually buying ownership in a company. You can either buy a common stock or a preferred stock. Common stocks make you a shareholder in a company, allowing you to have voting powers for every share you own in the election of the board of directors in the company's annual meeting. The profit you earn from common stocks is based on the number of shares you hold. The downside of buying common stocks is that whenever a company folds, you'll be the last to get paid (if ever you do get paid) and that would mean losing your investment.

While more expensive than common stocks, preferred stocks guarantee investors a dividend in the company profits, and thus provide more security. In case the company fails, preferred shareholders will definitely be paid ahead of the common stockholders but only after the company has settled its debts with banks and other financial institutions.

A stock price rises or falls based on the demands of the market relative to the supply. If the demand is high and the supply is short, then there is a corresponding rise in stock market prices. When you want to buy stocks from a company, it would be well-worth your time to check out its track record. One of the most important factors to take into consideration is its earnings per share over time since that will definitely tell you a lot about the value of the stock you're planning to purchase.

So how do you buy stocks? You could work with brokers or buy it directly from the company. The advantage of working with full-service brokers is that you get the benefit of their expertise and experience through personalized attention. They tell you what stocks to buy, when to buy it and when to let it go. Dividend Reinvestment Plans and Direct Investment Plans are usually offered by companies so that you can buy stock and securities directly from them or reinvest any dividend you receive to buy more shares.

Investing in stocks gives you an opportunity to amass great wealth, but it also gives you an equal chance of losing your investment. The information that you read here is certainly not enough - you have to understand all the facets of stock trading before you actually go into the process of buying and selling stocks. It is also important to keep abreast of the news since stocks are influenced by political, social and economic events. Learn all you can before you take the dive. The more you know about how it works, the greater chances you'll have of financial success.