What You Should Know About The Stock Market

Written by: Michael Thomas
07/30/2019

stock-market

There are many ways to earn a bit more money in this world, and you could even become financially free with some of those methods. Every commitment requires time and money and so those ways to make money will also require time and money. Some will require one more than the other, but you better believe that there is no such thing as something for nothing. Because that’s true, the stock market requires a commitment of both time and money, so in this article we will be discussing everything you should know about the stock market in case this is something that you want to get into.

What You Should Know About The Stock Market

When I was in college I read a book called “Think and Grow Rich” which explains that in order for someone to be successful and become “rich”, they must put it in writing. You must define how much money you want, by what date, and what you will give in return for this, i.e., in what profession do you see yourself making the money. When I read the book I knew nothing about the possible ways of making money other than getting my Mechanical Engineering degree and working for someone else. So I got on my computer and found that the majority of the world’s millionaires made their money via real estate, by starting their own businesses, and by investing in the stock market. I decided that the path for me was through business and real estate and so I let the stock market alone, but as the years went by I studied more and more about it, so now lets discuss what I have learned.

The stock market is a place where corporations offer pieces of their companies, called stocks, to the public. The stock market is made up of different “exchanges” which include some that you may have heard of such as the New York Stock Exchange (NYSE) and the NASDAQ. Each exchange acts as a market where buyers and sellers come together to sell and purchase stocks. These stocks require a broker to manage the buying orders to connect them with the selling orders and vice versa. Now, there are many different words you will have to understand if you want to jump into the stock market, but we simply don’t have enough room in this article to provide all of those, so you will have to do further research and may even want to take a course in stocks in order to get more familiar with the concept. However, here’s a few of the most important terms you should know:

BUY: This literally means that you’re placing an order to purchase a certain amount of a specific stock. When you buy, you’re “opening a position”. For example if you buy $200,000 worth of Apple stock and it was trading at $10 per stock, you would have opened a $200,000 position in the Apple company.

SELL: To sell means that you’re getting rid of the stock you previously purchased. You’re either “cutting your losses” or know that the stock will soon drop in value and you don’t want to lose money.

BID: A bid is exactly that, what you are willing and able to pay for a certain stock.

ASK: The ask is the opposite of the bid because this is what a seller of stocks is looking to sell a stock for. So if you bid a certain amount, and someone else is asking for that amount or close to it, a broker can connect both of you and you purchase and someone sells.

BULL MARKET: A bull market refers to a market that is growing. The stock prices are expected to increase in the future. You may have heard people say they are “bullish” which means they are optimistic that the growth will occur in the future. Hence one of the reasons why Wall St. has a large golden statue of a bull, because it symbolizes growth.

BEAR MARKET: This is the opposite of the bull market. In a bear market, stock prices drop and/or investors expect a drop in prices.

VOLATILITY: The volatility of a stock refers to how fast it changes its value from up to down. If a stock has high volatility, it means that one day it can increase by a lot, but the next day it can drop to the lowest its ever been.

LIQUIDITY: Just like water can get in and out of any container you place it in, liquidity refers to how soon you can sell a stock. Something that would be “non-liquid” would be a piece of real estate because in order for you to get your money back, you would have to sell the property and this usually takes a long time to do.

TRADING VOLUME: This is directly proportional to volatility. Trading volume is the amount of shares that get traded every day.

GOING LONG: This means you are holding a stock for the long term, as opposed to holding it for one day, and selling it when you’ve made a profit.

IPO: An acronym for an initial public offering, where a company goes public for the first time and allows the public to purchase its stock pool.

CAPITALIZATION: This is what the market believes a company is worth based on many different factors.

BLUE CHIP STOCKS: These include stocks from the largest companies in the world like Apple, Amazon, and Google.

DAY TRADING: One aspect of being involved in the stock market, where you purchase a stock at a certain time and sell when the price has rise, typically within hours, a day, and no longer than a week.

STOCK SYMBOL: This is the short three or four letter word for a stock. For example, the stock symbol for Tesla is TSLA.

Conclusion

Just like any other industry, there are hundreds of other words available, and understanding them gives you an edge over everyone else. The stock market has always gone up, but people get scared when it drops because they allow their feelings to get involved. If you do your homework, control your fears, and keep your greed in check, you will be a great stock market investor.


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