The stock market is simply, just that --a marketplace for buying and selling shares of stock in companies. Similar to the grocery store, price and value is most important. However, unlike the grocery store, the buyer can immediately turn around and become the seller of the very same shares of stock he or she just bought. Here are some basic concepts of how the stock market works.
Purchasing Stock
Buying shares of stock is like making a bet. You are working under the premise that the stock you buy today will be worth more in the future, when you will sell it. Buying shares on under this concept is often called a long position, and is the simplest way to perform a transaction. However, you can also sell stock you dont even own yet--this is called a short position, and is considered more risky
Price for Shares of Stock
Here are some terms you should know before buying or selling shares, and that is 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.
Purchasing Stock
Buying shares of stock is like making a bet. You are working under the premise that the stock you buy today will be worth more in the future, when you will sell it. Buying shares on under this concept is often called a long position, and is the simplest way to perform a transaction. However, you can also sell stock you dont even own yet--this is called a short position, and is considered more risky
Price for Shares of Stock
Here are some terms you should know before buying or selling shares, and that is 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.
About the Author:
Carrie Sommer is a regular contributor to WallStreetSWAT.com, your "special weapons and tactics" in a troubled financial market. At http://www.wallstreetswat.com you can find more about the stock market for beginners.
