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.
Tags: earnings report, how to buy and sell stocks, major indices, money, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, stock markets, stock trading, trading stocksRelated posts
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.
Tags: nasdaq, penny stock, penny stocks, security exchange commission, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, stock shares, stock trade, stocks research, trading stocksRelated posts
Stock Market Basics – Core Position
In learning stock market basics, you will improve your returns and minimize your loses. Of course none of us want to lose any money, but it’s part of trading stocks. Everyone loses money at times in the stock market and if someone tells you that they’ve not lost money in the stock market, he’s only telling you half the story.
I’ve lost money over the years and in the beginning in bothered me quite a bit. Whenever that happened, I’d look at what I did and looked to see where I went wrong. Sometimes it was my research wasn’t thorough enough, other times it might have been the way I bought into the company. There were also those times that I didn’t do anything wrong, but because of the condition of the stock market as a whole, I would be on the losing end. Either way, I learned something for the next trade. Education is the key to wise money investments especially when you’re a beginner.
In this post I want to talk to you about “core position”. A core position is the stocks that you originally buy at a particular price. I’ve mentioned before about buying your shares incrementally and not all at once. So the first batch that you purchased would be considered your core.
In this example I’ll talk about company “XYZ”, which has a a price per share at $50. For this example I will also state that the cash in my portfolio is valued $50,000.
I never put more than 15% of my portfolio in any one stock. With that in mind, it would mean that I won’t invest more than $7,500 in “XYZ”. That tells me that I can only purchase 150 shares of “XYZ”. My first purchase will be 50 share at the price of $2,500, while keeping the rest for later buy-ins. The stock drops $5 per share in the nest week. I will go ahead and buy another 25 shares of “XYZ”, which will cost me $1,125. Another week goes by and the stock has been going up and down between $45-$50. I will simply sit on the sidelines and wait before doing anything. If the stock takes a dive because the markets have dragged it down I’ll buy my next buy at $40, costing me another $1000.
I now own 100 shares of “XYZ” with my average cost basis being $46.25. I’ve only invested so far $4,625 into the “XYZ company. If I had bought all of the shares at once, it would have cost me $5,000 (saving me $375).
When the stock goes back up to $50, I’ll only sell 50 shares of the stock (the ones the I bought at $45 and below). I will make a profit of $375 for those shares that I sold. While at the same time I continue to hold on to the original 50 shares.
When the price drops back down to the $45 range I will again pick up another 25 shares and start the process all over.
It the price had gone up after buying the first 50 shares that would have been fine also. I would pick up another 25 shares at $55. Once it rose above the price I would either waited for the price to drop back at the $50 level or if it kept going, I would just ride out the gains as it went up in value.
Tags: core position, cost basis, money, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, trading stocks