What Is the Stock Market and How Does It Work?
The stock market isn't actually one single market. It's a series of multiple exchanges from all over the globe that allows members of the public to own small, publically traded pieces of one single company. These exchanges are what's known as stock trading. The stock market is actually the network of analyses that brings all these companies together under the publically traded network.
Pieces of the companies, known as "shares" are bought and sold for a price decided by the actual traders themselves. The price is actually based on what the shareholders believe the future of the company is worth. Stock trading actually sets the market price for a company.
The more a shareholder believes in the future of the company, the more upward stock trading they end up doing. Purchases of bigger shares of the company ultimately lead to the price of each share rising, literally raising the value of the company each time this is done.
Purchasers of these shares' main goal are to ultimately sell them for more than what they paid for them. This is how profit is made on the stock market and how a successful investment works.
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Can You Lose Money In Stocks?
Anytime a purchase is made that can ultimately lead to a lower selling price in the future there is a potential for a loss in profit. Stock trading is no different. You can lose money in the stock market very easily. You can also lose money very easily in any business you own or any investment you ever make in your life. This is the nature of doing business in any way. However, I am a firm believer that this risk should never stop you from stock trading.
As with any business or investment decision, due diligence should be paid beforehand for beginners. There are key research points one can follow when making decisions on which shares to buy. Things like the cost-to-earnings ratio can foreshadow the type of return an investor can potentially be in store for.
Careful analyses of a companies performance in years past can be very helpful. Growth and loss trends based on quarterly earnings reports can be very telling when trying to predict exactly what your gains or losses will look like.
Pay careful attention to the corporate structure of a company as well. Who is the CEO? Who are the leaders of the company? By finding out who makes the business decisions for a company, you can do research on the key players and find out what their history has been as a CEO. These are important things to take into account when stock trading.
All of these steps can prevent major losses by an investor. Stock trading isn't for dummies. It's important to note that small, temporary losses are normal when playing the stock market. Picture the stock market as a roller coaster ride with peaks and valleys that ebb and flow depending on what the market looks like.
Why I Invest In the Stock Market
For beginners, the stock market can be very intimidating. I've been investing in the stock market for the better part of two decades. I have owned stock during times when the market was way up. I've also owned stock when the market was very volatile. During the recession under the Obama administration, I continued to buy and sell with no real setbacks.
The reason I'm highlighting the recession is that during one of the worst financial periods of our time, I continued to thrive as a trader. Sure, I've had way higher points and made more money during other periods. During a time where many realtors and small business owners saw their savings shrink to nothing, I was still able to navigate the stock market.
This all goes back to your due diligence. The research ended up paying off for me during this time, as it always does. With the stock market, I'm able to use graphs and charts to compare trends during volatile times on the market. Even the smallest details can key you in on what your shares may do during times of volatility. I call it becoming one with your stocks.
Careful analyses of all your shares can stop you from selling during periods of temporary volatility. You can also be clued into periods where you should sell when things look promising because past trends show you that a stock may be preparing to go belly-up. Before start investing money to stocks I would recommend read https://radiumforums.com/blog/best-financial-books-for-beginners financial books for beginners first.
It isn't a game for dummies, but there are some stock trading picks that are so safe that it's nearly impossible to lose money. If you're a beginner, safe trades are with big companies that have been giants for a long time. Think of companies like Nike, Microsoft, and Walmart. Chances are, these companies aren't going anywhere for a very long time. It's nearly a flawless pick for steady growth. This the beautiful thing about the stock market for beginners.
How Does Investing In the Stock Market Work?
Due to the explosion of online trading, navigating the stock market looks very different than it used to. Twenty-five to thirty years ago, the stock market was seen as a rich man's game. You had to have a big-shot stockbroker making your trades for you who had inside knowledge, and he was obviously taking a piece of the commission on your trades. The information age has completely reshaped the way business is done on the stock market.
Online trading over the last couple of decades has become the norm. You choose a platform you want to trade on, make a small cash investment and literally handpick your stocks. After a day or two of verifying some information, you're officially a shareholder. Stock trading is no longer just a rich man's game.
You can split your cash deposit between whatever shares you like. You don't even have to buy a whole share of the company. Whatever cash you invest on a share or portion of a share, is a tiny portion of that company you now own. Your money will rise and fall based on the performance of that company. You can find here https://sampleproposal.org/blog/stock-investment-proposal samples stock investment proposals.
You can buy more stock or sell the stock you already own at any time. The goal is to buy for a lower price and hold on to the stock until it grows to a percentage of your liking, then sell it for a profit. Short-term buying and selling is commonly known as day trading. There is a lot more risk associated with this type of trading. Personally, I look at my stocks as at least a year investment, minimum. Typically I like to pick stocks I can watch grow comfortably, with little to no maintenance required.
Formulating your picks with some careful background research will certainly eliminate uncertainty over investing. Look at moves the big shots are making and mirror their picks if all else fails. You can never go wrong following the money.
