Introduction to the Stock Market

Discussions about the stock market probably sound like mumbo jumbo to a newbie. In order to understand this business, it is crucial to learn the stock trading jargon. If terms like ‘Arbitrage’, ‘Pink Sheets’, and ‘Bear Market’ don’t make sense, you clearly have a lot to learn before being part of this movement. Trading stocks is not like a card game or barter system where you exchange goods. The stock market is a place where buyers and sellers meet to invest in a prosperous future. Buying and selling stocks is nothing like going dress shopping at the mall; you can only participate through a licensed brokerage. Many people make a handsome living out of trading stocks alone, but the affair is dicey. Some even compare it to gambling; however, the potential losses are considerably less. Nonetheless, someone who is good at gambling may strike favorable luck in the stock market too.

When visualizing a stock market, one might think of New York’s bustling Wall Street. However, the modern stock market largely exists online on a virtual network. Buying and selling usually occurs without any physical interaction. Computers are better and faster at keeping track of orders and undertaking their completion. Dealing in the stock market requires a lot of knowledge and understanding of the statistics; otherwise, you will become an easy target for investment scammers. Fraud and embezzlement are common White Collar crimes in the corporate world. You need to be sure that the broker involved in the transaction is genuine and reliable.

Stock Exchange is not merely a game of numbers, but the chances of winning are greater for someone who enjoys math. Just because the value of a stock looks promising today, doesn’t guarantee that it will be rewarding tomorrow. Investors refer to market indexes to assess the overall performance of their stocks. Stock market professionals tend to diversify their portfolio, i.e. they rarely stick to a specific sector. It would be smart to buy shares in materials, IT, and energy at the same time. Similarly, betting all your cash on a single company can lead to a disaster on one bad day. It is best to start small and work with long time investments. Open a separate account for stock investment, so you don’t go over budget. When you invest in stocks, you shall prepare yourself to lose some and win some. Avoid penny stocks at all costs, i.e. stocks traded at $5 or less, as they almost never hit the jackpot. Anything around $50 is a good place to begin with.

Two major aspects of the stock exchange are the ‘bull market’ and the ‘bear market. The bull market concerns stocks where economic growth seems eminent, whereas the bear market concerns stocks where price drops are expected. A stock market crash refers to a situation where the value of stocks decreases beyond 10%. When this happens, many investors tend to take out their money to escape further loss. However, if you have purchased stocks with a long-term investment in mind, it is best to leave it as it is. The sudden decline in your overall stock value might feel heartbreaking, but the chances to bounce back in the long run are usually strong.

Many old players in the stock business practice day trading, which involves buying and selling stocks on the same day, even multiple times on certain occasions. Day trading is a dangerous endeavor for newbies, as it requires extreme dedication and strategy. Taking advantage of several minute profits can be lucrative, but you need to transform into a mastermind before you attempt this technique.