Stock Market 101 For Beginners
To novices and experts alike, the stock market can sometimes be erratic and enigmatic. We can erase the mystery that clouds the topic and let you know how the market can be unpredictable, and how you can take advantage of this trait.
The words ‘stock market’ bring to mind a collage of institutions, long calculations, jagged graphs, stacks of paper, harried traders and bright screens. When a new corporation is established capital can be generated in many ways. One possibility is for the entrepreneurs to contribute. Another possibility is to get banks and venture capital investors to invest in your company. Or one could issue bonds, which is a way of selling debt. The most advanced method is to issue stocks i.e. shares of the company’s ownership. This gives rise to trading opportunities in the stock market.
Unlike today, those corporations were only government owned companies. Asia’s first stock exchange was established in 1875 in Bombay and still functions today as one of the most important markets in the world. Privately owned corporations began in the United States of America, United Kingdom and in other countries in Western Europe in the 19th century.
Today stock markets can be found in every developed and most developing countries. The United States of America, England, Japan, India and China are some of the biggest stock markets in the world. The value of the world stock market was estimated as staggering US $36.6 trillion in October 2008.
To know when the stock market is declining and losing money is to look at the 1 year low. The 1 year low means the stock market price is below the same price it was 12 months ago. It also means no money was made in your retirement fund. When the stock market is above its 1 year low in the past 12 months you can rest assure that the stock market has stopped declining.
After finding a suitable brokerage firm, you will find that setting up an account with them is no more complex than opening a bank account or creating a new email address. The sum of the deposit required for accounts varies with each firm. Once you’ve set up shop, your money is placed in an interest-bearing account and it is yours to command.
When you buy stock, you have the option to have it listed under your name or under the name of the brokerage firm. No matter which you pick, the dividends, profits and losses all go to you.
Do keep a positive attitude. Remember that a good player will always expect and accept losses gracefully. Those who brood over losses will always miss the next profitable opportunity. Always accept failure as a step towards victory. Don’t be afraid. When you enter the market you need to be confident and firm with your decisions. Remember that in trading, there are ‘the quick and the dead’! A strong strategy will be your first step towards building the confidence you need
Don’t get in and out of the market. If you have made mistakes and suffered losses, be strong, learn from your mistakes and improve. But if you decide that the stock market is not really the thing for you-leave and leave forever. You don’t want to lose more than you already have. Do remember… “It’s just business- nothing personal! Have you taken a loss today? Forget it. Have you taken a profit today? Forget it even quicker! As an investor, don’t let your ego, fear and greed come in the way of clear and rational thinking. To be a successful investor you must always practice patience, determination and rational thinking in the face of challenges.
Investing points are:
Here is one way of calculating your chances of success. It is known as the Average Profitability per Trade (APPT). APPT measures the average amount a trader can expect to win or lose per trade using a simple mathematical formula. It is based on historical trading results. The formula is as follows: Average Profitability per Trade = (Probability of Win x Average Win) – (Probability of Loss x Average Loss).
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