Stock Market Basics - Details

As you start to invest and make your money grow you would need to have to learn the stock market basics to trade effectively and without losing your shirt in the mad place called the stock exchange.

A lot of people say that owning stocks is like owning the company, which is true but that may be because you have what is known as the passive investment strategy whereas some investors like a more aggressive strategy of selling and buying and make money on a short term.

I will cover both of those and several others in investing styles lesson. The other lesson to learn is called the risk appetite of a person. That is what essentially drives the behavior of a stock trader. Some like to play a risky game as they more cushion of money and some like to play it safe. They say that risk pays which is true as stock market is all about what you think and sometimes no pain and no gain theory is very relevant in the context of stock market basics.

Then there are several types of stock exchanges that are available to us where we can trade and they can be NASDAQ or American Stock exchange or the NYSE. Nowadays you can also trade overseas with the opening up of the new economies like INDIA, China and Brazil.

Next is the type of stocks that the companies issue and as a beginner you should know the basics of investing in these kind of stocks. The factor that drives how you make profit is the way companies go public and those are known as IPO’s. These initial public offerings make sure that promoters dilute their stake and the public gets the equity in the company. I will detail those later in a separate lesson.

Secondary market where the action is and you would ask me what is secondary market and that is what I will again detail in a separate lesson. Most stock exchanges are examples of a secondary market.
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Then there are various types of analysis which people do for buying or selling a particular stock. I can look at the behavior of the stock for a period of time and say what is happening and then buy when I feel based on the past historical data that the timing is right or for that matter sell also. This data patterns is what in the stock market basics terminology is known as technical analysis. There are various types of software available for doing this technical analysis on a stock by stock basis.

Some people base their decision looking at the companies’ management or by looking how the company has performed in the industry it is competing. Some look at the macro economic as well as micro economic indicators affecting the economy and in turn how it will affect the company. This type of analysis in the stock market basics is known as Fundamental Analysis.
It is this type of analysis whic ha made Warren Buffett as th second richest man in th world.He is known as the Oracle of Omaha for this reason only. He ia known for his stock picking abilities and basic understanding of stock markets.

The stock market basics terminology is a very important thing to learn as you would keep hearing the terms bulls and bears. Bulls are positive persons by nature of what they think of a stock and bears are taking a negative view of the stock.

The next thing you need to learn is to understand how the stock market works as in why people sell, why people buy and then what are brokers, online trading and how the commissions are charged. The whole working of the stock market should be clear including what are settlement dates and what is rolling settlement and what is clearance.

As you have known by the now you best source of information on the stock market is the newspaper or even news channel. How to read those newspapers or decipher the information given in them is essential as an active or passive stock market investor. Also read all about quick money making ideas so that you get the perspective about making money.

As a trader you would other software and tools which I will discuss in detail in later lessons.

Welcome to world of stock market basics and make money through stocks.