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5 Things You Definitely Need to Know About the Stock Market

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Things You Definitely Need to Know About the Stock Market

Here’s the thing: on the surface, the stock market is easy to do. But in reality, there are so many factors that affect the prices of stocks and the bigger question would be when is the best time to buy or sell them?

There is really no definite answer, but there are possible explanations as to why the stock market moves the way that it does.

In this article, I will provide some vital information that you need to know about the stock market in having the best discount broker. Whether you’re a seasoned investor or a beginner, this can really be helpful to you in the long run. So without further ado, let’s get started.

1. The Stock Market

An article about the stock market will not be complete without discussing what it is actually all about. Simply put, the stock market is where you buy stocks (or shares) of a particular company and once you’ve acquired them, you’ve basically owned a small portion of a certain organization.

2. It is a System of Trading

The stock market is filled with traders and investors and you’re basically going to have to look at it just like, well, a market.

Just about anyone with a stock can either buy some more or sell what they have. The real issue here would be when is the best time to do both.

3. Factors that Affect the Prices

Why the market prices go up and down cannot be explained by just one answer. There are actually multiple factors that can help affect the price of a share like the opinions of well-renowned investors, political unrest, social factors, the media, and of course, supply and demand.

When we look at the stock market from the latter viewpoint, if there are more buyers than sellers, then the price of a stock will naturally increase.

Conversely, if there are more sellers than buyers, the price of the of the company shares will decrease.

4. The Stock Market is Never Predictable

The key thing to note about the stock market is that no one is ever going to predict what will happen to a particular industry sector or a particular company. One company could rise and grow even more and one company might crash and burn, leaving you with undervalued stocks.

There are three considerations when you’re going to invest:

  1. The price of a stock typically depends on the overall market activity. There are things called fair value and the actual stock value. Fair value is just an estimate of a particular stock. Suppose that a particular share costs $25 and its fair value is $30, it is actually a good buy. On the other hand, if the fair value is $30 and you’re buying the stock for $35, then it is not a good deal.
  2. There is this thing called trend reversal and it actually is the phenomenon where a particularly less profitable industry gets a sudden boom in growth. However, this can never be predicted and so if this happens, people who have shares in this particular industry sector might earn more profits.
  3. The human decision-making process is also something to consider. We may analyze things using our logic, but most of the time, we use our emotions. It is best that you balance the two so that you do not go overzealous about your decisions when trading in the stock market.

5. When is it Ideal to Buy or Sell Stocks?

The cues that you need to look at is the general feel of the market. In your particular industry, if people are optimistic, it is best that you sell your shares. If they are pessimistic, then you’re better off selling your shares.

Conclusion

My final thoughts on this matter are that the stock market, although a lucrative business, requires careful thought and decision-making if you want to earn a lot of profit.

Never blindly follow anyone’s advice and instead, follow your research, your gut, and your intuition.