A Beginners Guide to the Stock Market
What is the stock market? Most simply, exactly what it says it is--a market for buying and selling shares of stock in companies. Just like your grocery store, price and value is important. Contrary to the grocer example, buyers can turn around and become the seller of the very same shares of stock just purchased --almost immediately. Here is a basic outline of how the stock market works.
Buying Stock
When you buy a stock, you are taking on risk. You think that the stock you buy today will be worth more in the future, at which point you will sell it and make a profit. Buying stock on this premise is often called a long position, and is the simplest way to invest. However, you can also sell stock you dont even own yet--this is called a short position, and is considered much more risky.
Pricing
There are some terms you should be familiar with before buying or selling stock, that relate to the pricing structure.
Opening Price. The price for the stock when the market opens. Closing Price. The price of the stock at the point at which the market closes. Bid. This is what your broker pays for the share of stock, and excludes his commission. Ask. Your price. This includes the brokers commission. Spread. The difference between the bid price and ask price, which amounts to determining the brokers commission.
What Should I Buy?
This question is the most difficult of any you can ask. There are books written about this question, and none have answered it completely. However, there are some things you can study to help you make the best decisions when purchasing stock.
Technical Analysis.
When studying technical analysis, you are learning about the trends of a particular stock, its trading history, and various charts to learn about what the trading future might look like.
Fundamental Analysis.
This type of analysis looks at the company itself. By delving into the financial operations and decisions of the company--such as earnings, growth, sales, assets, debt, etc.--a follower of fundamental analysis believes he or she can predict the companys future which will affect the stock price.
While fundamental and technical analysts often disagree, a new student of the stock market would do well to understand both and perhaps consider both when making trades.
This indicates the importance of understanding the market before you buy or sell. Therefore, your first investment should not be in a stock, it should be in your education. Read all you can, then make your decisions. - 23199
Buying Stock
When you buy a stock, you are taking on risk. You think that the stock you buy today will be worth more in the future, at which point you will sell it and make a profit. Buying stock on this premise is often called a long position, and is the simplest way to invest. However, you can also sell stock you dont even own yet--this is called a short position, and is considered much more risky.
Pricing
There are some terms you should be familiar with before buying or selling stock, that relate to the pricing structure.
Opening Price. The price for the stock when the market opens. Closing Price. The price of the stock at the point at which the market closes. Bid. This is what your broker pays for the share of stock, and excludes his commission. Ask. Your price. This includes the brokers commission. Spread. The difference between the bid price and ask price, which amounts to determining the brokers commission.
What Should I Buy?
This question is the most difficult of any you can ask. There are books written about this question, and none have answered it completely. However, there are some things you can study to help you make the best decisions when purchasing stock.
Technical Analysis.
When studying technical analysis, you are learning about the trends of a particular stock, its trading history, and various charts to learn about what the trading future might look like.
Fundamental Analysis.
This type of analysis looks at the company itself. By delving into the financial operations and decisions of the company--such as earnings, growth, sales, assets, debt, etc.--a follower of fundamental analysis believes he or she can predict the companys future which will affect the stock price.
While fundamental and technical analysts often disagree, a new student of the stock market would do well to understand both and perhaps consider both when making trades.
This indicates the importance of understanding the market before you buy or sell. Therefore, your first investment should not be in a stock, it should be in your education. Read all you can, then make your decisions. - 23199
About the Author:
Carrie Sommer is a regular contributor to WallStreetSWAT.com, your "special weapons and tactics" against a down economic market. At http://www.wallstreetswat.com you can find more about the stock market for beginners.
posted by X - Men @ 2:13 AM
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