Stock Market Basics

Learning The Stock Market Basics

Don’t think that trading stocks are too hard for you to do it yourself? Once you know the stock market basics, the rest is easy. What is the rest? Research, doing your homework, due diligence or staying informed about the company that you invest in.

If you read the other posts that have been put up on this site, you should have a pretty good idea on how to buy and sell stocks and how to decide which stocks you want to put your money in.

How to make your nest egg even bigger is by staying on top of the news that is released on each of the companies that you’re in. Just because the company is doing good at the time that you purchased the shares doesn’t mean that it will stay that way.

Throughout the day, week, and month, every stock will rise and fall in value. Depending on what is going on in the stock markets themselves will effect your stock in one way or another. This is where your research will come in. If you see that your stock has lost 10% of it’s value in a day or so, your research will have told you if it’s because of the company or just a healthy pull-back. If it was a pull-back because of profit-takers or that the major indices brought it down, then you should go ahead and buy more shares at the lower price to take advantage of the situation.

If the price fell because the company came out with a bad earnings report or lowered it guidance for the future, well then you will have to decide to either sell or just hold o to the shares you have until there’s some sort of rally before getting out.

Like I said, stock trading is easy if you just do the research and stay on top of the news to keep yourself in the loop of things.

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Stock Market Basics Online

If your looking to learn the stock market basics, you can find everything online. Where to look is the real question. If you’re new to stock trading then you most likely don’t have an account to buy stock online. You need to know who you’re going to do business with beforehand. With the internet it’s easy to look around and check out all the different online discount brokers.

What is a online discount broker? You see their advertisements all the time, it just a matter if you’re aying attention to the commercials. TD Ameritrade, Scottrade, Zecco are just a few for now and it’s a good place to start.

Not only will they brokers assist you in opening an account, but they will help you in what you need to know if you want to succeed. All of them offer many tools to help you do your research and find the right companies to invest in.

In an earlier post I said that it’s very important to stay on top of your investments and by that I don’t mean just looking at the balance of the account. You need to know the latest news that is being released. Just because the company is doing good for the last three months doesn’t mean that it will be doing good for the next three months. From one quarter to the next things can change and quite often does, especially during slow downs in the economy.

I’ve used one of these types of brokers for years and have learned a lot from the representatives that are available. If you’re lucky, you’ll click with one that you can build a relationship with and get a few perks along the way.

These online discount brokers are the way to go no matter how much money you have to invest. Who ants to pay high fees and commissions to some of these brokerage houses? I know I don’t and never will. Look around and find one that’s right for your trading needs.

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Stock Market Basics – Penny Stocks

In many cases, when the average person starts trading stocks, they trade what is known as penny stocks. Penny stocks is where you can learn the best lesson in stock market basics. You can do very well or really bad when buying penny stocks. How and what you buy will make the difference between the two.

What is a penny stock? A penny stock is just like any other stock that you would buy in a company. The difference is the value of the shares in the company. Basically it’s a stock that is valued less than $1 per share (some would say less than $5).

When you look into penny stocks online, you mostly see these site that tell you that they made a 300% gain on a stock trade and typically that can happen when you deal with stock shares that are less than $1. If the price per share was $0.25 and it gained $0.15 in one day (which could happen a does), you would be up 60%. Quite often stocks that are valued in this price range will have those types of moves, but what often happens is that in just a few days of gaining anywhere from 60% to 150% it will drop back down to it’s original price before it made those gains.

Penny stocks are usually companies that are relatively new and are trying to raise capital to increase the size of their business. Since they are new it can fail in it’s attempts and close their doors forever. How do you know which companies to invest in when you want to but into these types of stocks?

Research is the key. Most times it’s hard to find any information out on these companies because they are new. Most of them don’t trade on the big boards (DOW, NASDAQ), so they don’t really file their financial reports on a regular basis. In some cases you will find that these companies don’t even operate in the United States, so they don’t follow the rules of the SEC (Security Exchange Commission).

What you can do at times (which is something that I do), is to call the company and talk to the highest executive that you can to get a feel for the condition of them. You will be amazed to see how much you can learn from the person with just a few phone calls. I do have to say that if you call, you must let then believe that you are a shareholder or they’ll think twice about really talking.

Be careful when dealing with penny stocks, you can get burned more times than hitting it big. Remember, it’s estimated that nine out of ten business’ fail.

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