Basics Of The Stock Market For Beginners

Basics Of The Stock Market For Beginners

No one wishes to lose their money. Whenever a person considers investing in the stock market, the thought of incurring loss might upset them. However, there are several things one should consider when you invest which will increase the chance of winning. Also, there is an automated trading robot one can check out if you don’t wish to get into full-time trading. For a beginner, the first thing he should learn is about the stock market.

Stock market

A stock market or share market is quite a complex system wherein publicly-traded company’s shares are bought, sold and issued.  It is a collection of hundreds of investors who have diametrically opposing views. When one person wishes to sell a security, there is always another who is willing to buy it. In short, when one investor makes a profit, the other one will incur a loss. Hence, it is very much important that you are well-versed and knowledgeable about the investment that you are planning to make.

Why does the share price go up and down?

There are various factors that determine the rise or fall of the stock prices. These include natural disasters, social and political unrest, views of well-known investors, demand and supply, abundance or lack of suitable alternatives and risk.  Compilation of all these factors creates a particular kind of sentiment known as bearish and bullish. Simply put, in a market if the number of sellers is more than the buyers, then the prices of stock will fall.  On the other hand, when the number of buyers is more than the seller, the prices of stock will rise.

Why it is tough to predict the market?

Let’s assume that the prices of stocks are rising for many years. Investors would be expecting that the correction will come which will result in price fall.  What the investors don’t know is that what will trigger selloff and when exactly will it occur. Hence, there are few investors who wait for the opportunity to come to get in, while others who are ready to take risks jump right in. Then the question arises is, if you are waiting in the sideline, how would you know when to get in and if you are already in, how would know when to get out? To answer this, the investor should consider the following three things:

  • Understand the point when the prices of stock will be fairly valued
  • Events which can cause a downturn
  • Understand human-decision making process