If you are new to the stock market, the numbers and terms thrown around from the markets section of your favorite news site and channels can be utter gibberish to you. Terms like ‘all time highs’ and ‘earnings movers’ do not mean much to an average investor and in most cases shouldn’t. If you have entered the industry for the long-term, then you don’t have to worry about this lingo or the flashes of green and red that cross the bottom of your television set.
However, if you are in for the short-term gains, it goes without saying that you need basic knowledge of how the stock market works.
Stock Trading Basics:
The stocks market consists of exchanges such as Nasdaq and NYSE. Stocks are listed on particular exchanges which bring the buyers and sellers together, thus acting as markets for shares of the stocks. The exchanges track the demand, supply and the price of each stock.
However, this is not your conventional market and you cannot just appear and take your shares off the shelf like how you would at a grocery store. Individual investors are usually represented by a broker. You basically place your stock trades through the broker, and then they deal with the exchange on your behalf. Today, however, there are online brokers or platforms, which have made trading easier for the younger investors.
What Causes the Prices Rise & Fall?
There are numerous factors that cause the stock prices to go up and down. These include social and political unrest, supply and demand, natural disasters, media influence, opinions or reputed investors and risk. The combination of these factors in addition to all relevant information creates a particular kind of sentiment (either bullish or bearish) as well as a corresponding number of buyers and sellers. If there are more buyers (Bulls) than sellers (bears), the prices will rise and the opposite will occur if there are more sellers than buyers.
Stock Trading Basics: Bull vs. Bear Markets
A bull market means the price is rising while a bear market means it is falling.
You might be familiar with the phrase bear market, but if you’re new to stock trading, then you are unfamiliar with the experience. In the past 9 years, we have been in a bull market, making it the second largest in history. Of course, it started after the great recession, but generally, that’s how the markets work: Bull markets are always followed by bear markets and vice versa. The good news, however, is that bull markets far outlast the bear markets, which is why it’s possible to gain profits by investing in the long term.
Now, the information in this post is just a tip of the iceberg and so, it’s important to learn as much as you can before investing in stocks. The prices of stocks can rise and fall for various complex reasons and so, avoid the ‘hot tip’ talk in the office or in your stock trading group.
You may also want to find a mentor, who can guide you through this industry. It might seem unnecessary, but going into an unknown region alone can often cost you more than you would expect.
bad move they make during a week to figure out how they really are as a trader. Are they overly pessimistic and too cautious? Too optimistic and ignoring certain danger sign over and over? Do they really understand the technical charts they are looking at and trading off of, or trying to cheat with general trend lines?
While this may seem an obvious step in the “how to trade in the stock market” guide, it is the most important aspect of this activity. The first step to any effective trading is to open a trading account with an online stock broker. It is recommended that one conduct some research into the stockbroker before committing to their service. Only a reputable broker should be used, and once the account is opened one should become familiar with the account interface. The more beneficial brokers will offer virtual trading training as part of their packages.
important to mention, however, that these apps, while worth a much closer look, focus on exchange traded funds or ETFs. In other words, they aren't for purchasing individual securities.