So, What is This Stock Market Thing Anyway?
We've all heard of the stock market and probably have a general idea of what it is and how it works either from high school economics classes, television financial reports, and the countless film depictions of what happens on the floor of the New York Stock Exchange. But how does it really work and what is meant by "playing the stock market?"
The Stock Market in a Nutshell
Companies sell shares of stock as a means of raising capital. For example, let's say that the XYZ corporation, makers of the finest whatsidoos and thingamabobs in the country, wants to open a new factory. Doing so will require a hundred million dollars. The company can get a loan from a bank, but it would wind up in debt. So, instead of borrowing, it decides to offer additional shares of stock. As investors purchase the stock they are giving the company the capital it needs to do business. In return the stockholders actually own a part of the company and have some say in its activities. If XYZ does well in the thingamabob market, its stock will raise in value as more people will want to have a piece of XYZ for themselves. If it doesn't do so well (maybe it gets undersold by the Ichi Nee company, a Japanese conglomerate that has found a way to make smaller, cheaper thingamabobs), less investors will buy the stock, current stockholders may try to sell, and the value of the stock drops. The price of individual stocks will rise and fall several times a day. The price for a certain stock you may see on the evening news for any particular company represents where the stock was valued at the end of the business day. It will also tell you whether that price rose or fell from the previous day. It can be enough to make an investor tear his hair out. Didn't you ever wonder why nearly all economists are bald?
"Playing" the Stock Market
You may have heard people refer to "playing" the stock market as if it were all a big game of Monopoly. This is an adequate term because that's exactly what some people do, but the game is more like Roulette - sometimes of the Russian variety. People who "play" the market typically invest for short periods of time in the hopes to get a quick return. They will buy some stock, wait fro the price to go up, then sell right away and invest in another stock and await the next profit. They may do this several times a day in some cases as prices fluctuate. This can be a very risky way to behave because a lot of money can be lost, but a lot can be earned as well. It's almost like a trip to Vegas without Wayne Newton.
Investment Tips by Mika Hamilton - Read more free investment tips, tutorials & reviews at http://www.Global-Investment-Institute.com.
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
The Secret Art of Backtesting
If you have not back tested your trading system, you might as well trade with your eyes close. In fact, whatever technical analysis criterion you use to trade with, be it moving averages, candle sticks, volatility breakouts, fibonacci retracements or any other trading system you have devised you're going to need to back test your trading system thoroughly and objectively in order to remove any possible doubt about it's capability.
Ignore Stock Market Talking Heads
You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing! What stocks do they talk about? - The same old group, every day of every year - Why? Because they don't know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news -WHY?They aren't going anywhere.
How to Evaluate Load vs. No Load Mutual Funds
If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, "load" simply refers to the commission paid to the broker selling the fund.
VIX
No, this is not a symbol for some Latin number. The Wall Street mavens talk about this market timing device as if they knew how to use it to determine which way the stock market is going - up or down.
Stock Market Education; Day Trading for Beginnners; How to Pick Stocks
The trading method you employ to approach the stock market can make a big difference in your results.Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation.
The Holy Grail (of Investment)
Every year I go to the Money Show in Orlando, Florida. Thousands attend.
Inverted Interest Rates
Inverted interest rates? What's that? Who cares? Even if you don't understand what Mr. Greenspan is saying (and almost nobody does) it is important to you because it could mean you might lose you job next year or have to cut back on some of the things you want to acquire.
Perfect Storm
Having lived aboard a sailboat for 2 years I was stricken when I saw the movie "PERFECT STORM". I know these are things you want to avoid at all costs.
The Secret to More Winning Trades is as Simple as Avoiding This Common Mistake
If you're a normal human being, your need to feel good about yourself probably causes you to sell your winners too soon - and -- your need to avoid feelings of regret, causes you to hang on to your losers too long.At one time or another, we're all guilty of letting our emotions dictate our investment decisions.
You Wont Like This
Why? Because I am going to shatter your conventional wisdom as I have many times in previous columns about the lies that Wall Street continues to tell you. This time we are going to go deeper into the economy to unearth the truth about lies the politicians are telling you.
How To Pick A Mutual Fund
Mutual funds by definition are a mixed bag of stocks, bonds and a little cash. Their price per share is the NAV, Net Asset Value of the total amount of money in the mutual fund divided by the number of shares.
Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market
In a previously written article, we expanded the use of the term "Trading Baskets" to include stocks from different sectors or industries. Now I want to share with you an approach to day trading or swing trading that I had some success with back in the wild and woolly, pinnacle days of day trading that may still work today.
Overvalued & Underbought
With all the bad news that has been dumped upon the economy for some reason the stock market is going up. Why?The SEC (Securities and Exchange Commission) has just set up new guidelines for core earnings.
How Covered Calls Turned a Trader Around
Sidney felt sick as she looked at her latest OptionsXpress trading statement. In just 8 months, she had managed to turn her $120,000 account balance into less than $70,000.
Stock Market Investments
If there is one term over-used when talking about making investments in the stock market I would think that term would be: buy low, sell high.Buy low? Sell high? How low is low and how high is high? I like the term buy low, sell dear, much better! But better still are the terms buy and hold, and dollar-cost-averaging (buying the same stock at different prices through the years).
My Stock - Right or Wrong
We all know the expression, "My country, right or wrong", but have you ever thought about the stocks or mutual fund you own and said to yourself, "My stock - right or wrong" and held on to your position even as you saw your hard-earned money disappearing?This is the Buy N Hold strategy and, in case you haven't noticed, lost from 40% to 60% and more of investors' money from 2000 to 2003. Fortunately, for the past year stock markets around the world have gone up and folks have recovered about 25% to 30% from those low numbers.
How We Eluded The Bear Of 2000
The date October 13, 2000 will forever be embedded in my mind. It was the day after our mutual fund trend tracking indicator had broken its long-term trend line and I sold 100% of my clients' invested positions (and my own) and moved the proceeds to the safety of money market accounts.
Trading vs Investing
I often hear from people, "I don't trade. I invest.
Shadow Bull
As one of my regular readers you know I have been a stock market bear for the past 2 years and have encouraged everyone to put their money into a money market account or a short-term no-load bond fund and for the more adventurous what is called a bear mutual fund that goes up when the market goes down. Just being in cash as outlined in my book would have saved 40% or more of your money.
Oil Stocks As A Long Term Investment
The demand for world oil is increasing while world reserves are decreasing. This is a known fact.