Stock Market Basics

Stock Investing Basics

Many new investors and traders are always looking for different ways to beat the stock market, but the truth is that if you can learn the basics and study the trend of the markets, that all you really need to know to make it in the stock market. What are the stock investing basics? Well there are quite a bit of them, but I will try to give you just some of them in this post.

One of the key thing you need to know before you start trading stocks is that you need to do research on each of the companies that you want to invest in. You can’t just say I like a particular stock and buy shares of the company. You have to know if the company is doing the right thing and making a profit. Is the Chief Executive Officer (CEO) a successful businessman? Does he have what it takes to make the right call for the benefit of the company and it’s shareholders? Is the industry that the company in on an upswing or head in a downward motion? A company can be doing the right thing, but if the industry and it’s competitors have a bumpy road ahead of them because of the economy, it’s most likely that they may suffer along with the rest of them. Of course that is not the case all the time, but it can play into the price of the company’s stock.

When you go to build a position in the company, you must do it incrementally. You have to figure out how much you are going to invest in the company (usually no more than 20% of your portfolio). Buy 20% first just in case the stock pulls back a little. After a healthy pull back (typically 5-8%) you invest another 30-50% of your total investment in the company. if it continues to pull back, well then you buy the remaining shares to help lower your cost basis ( average price per share).

Another Stock market basic you need to realize is that there is no sure thing as a good stock tip. If anyone has inside information on a certain stock, they wouldn’t be telling you. It’s against the Security Exchange Commission law to divulge any information that could give anyone a leg up on the other investors. Martha Stewart went to jail for insider trading within her own company.

In future posts I will list a few other stock investing basics to help you get better and to make more money in the stock market.

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Stock Market Basics Of Online Trading

When it comes to getting involved in the stock market, there isn’t that much that you need to know to get started. If you’re trying to be successful in doing online stock trading, you’ll need to know much more than just buying low and selling high. Having an understanding of the stock market basics will help you so much more than listening to anyone with a “hot stock tip”.

It’s the same way with these websites that seem to be popping up on what seems to be a daily basis. With the overall market being down so much from it’s high in 2007, there are many traders out there that are trying to make their money back by starting these subscription base websites. In doing so they not only make money on the website’s traffic, but also in the stock that they are pumping at any given moment.

I’m not saying that every site out there is doing this type of shady practice, but I know that there are quite a few out there. You as an investor/trader need to take responsibility of your portfolio and your actions instead of expecting someone else’s decisions to make your stock purchases. Yes, it’s a lot more work for you to research stocks and to do your due diligence on a daily/weekly basis, but at least you know where your money is and who it’s invested with.

No matter who you may open an account with for your online stock trading, you need to use the tools and other resources that the site provides to really know who you should and shouldn’t be investing in. You should also use other sites to affirm your research. Don’t ever rely on one site to do all your research on. Some sites will list things different than others and in some cases, you’ll find information on one site that you couldn’t find on the others. Remember, knowledge is power and someone else’s knowledge will only take you so far.

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Stock Market Basics – Four Tips

If you’re trying to understand stock market basics, I’d like to start you off with just four tips that will help you become a better trader.

1. EMOTIONS- If you involve your emotions into trading stocks, it will impair your judgment as well as cause you to over-react in your trades. You do not buy a stock because it has a sentimental meaning to you. If a stock that you like is going up in value, don’t worry about not getting in on the gains and jump into it after it’s gone up 5% or better (it will come back to you in time). If you see that the stock you bought is losing value, don’t instantly panic and dump you shares (it may be temporary).

2. RESEARCH- Like I said before, don’t just buy a stock for a emotional attachment to it. The only reason you get into a company’s stock is that you did the research and the company has strong fundamentals. You need to look into the company very closely before making a decision on if it’s a good investment.

3. ADVICE (TIPS)- Don’t just take the advice of someone who says he/she has a great stock tip. There is no such thing as a great tip. If the person tells you that they received a HOT tip on a particular stock and say that you need to get in on it. Don’t do it until you do your research on the company to confirm what the person said is true. If you think he has information that you are not privileged to, don’t think that since if he did have inside information and shared it, it would be legal and both of you would be in a heap of trouble.

4. BUY INCREMENTALLY-Never buy into company all at once. When you do buy all at once and the stock loses value by 3%-8% you won’t have any capital to buy any more and reduce your cost basis.

I know that these tips will help you as you trade stocks. They have helped me many times over the years.

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