I am sure you’re anxiously seeing the stock indices volatility and gross downturn past few weeks. Is it abnormal? Naturally, stocks do vary. For example, there are dividend stocks or defensive stocks. A good beginning stock is dividend stocks which give buyers a long-term return. A defensive stock is a good beginning stock for a long-term investment like water, electrical, or utility stocks.
I am not panicking with the recent market downturn. Neither should be you. We need to understand how these markets work. The loss you are seeing now re all paper loss, you don’t make a loss till you sell your positions. I am holding tights on to my stocks and funds.
To learn how the market works, you have to jump in and get your feet wet. Learn as much as you can to develop a buy and sell understanding of its continual activities.
For the beginners’ here’s a quick recap of the stocks market and the whole process.
What is the Stock Market
When you own a particular stock, it means that you own a piece of or a share of that company. To get that stock, you go to the stock market where people buy and sell stocks.
To buy or sell, you must contact the stock market through any brokerage company. The market also deals with bonds, finances, or commodities (mix of goods like precious metals, grains, electricity, oil, beef, etc.).
You by your stocks through brokerage firms, like ETrade, Scottrade, Meri Lynch, etc. Brokerage companies buy the stocks on your behalf from the stock exchanges.
in the USA, The stock market’s key stock activity is accomplished through the New York Stock Exchange (“NYSE”) and the National Association of Securities Dealers Automated Quotation System (“Nasdaq”) Exchange.
Stock Market Language
As a buyer of stocks, you are called a shareholder. When your stock shares perform well, then you have a profit increase. In the world of stock market trading, prices rise and fall daily.
As a shareholder you want your stock prices to be greatly increased far beyond the initial price that you paid for it.
When you learn stock market terminology, it is the same verbiage used by neophytes and professional traders.
Here’s some ABCD of the stock market
A: Bear and Bull Market
the stock market is commonly known to be a bull (“bullish”) market or a bear (“bearish”) market. Bull means that your stock shares have risen. Investors are feeling confident in the market and this influences other investors to buy-in.
A bear market is the opposite of a bull market. Bear means that the market is falling, which is an indicator that stock market investors, as the young people say, “are just not feeling it,” meaning there is no confidence in how the market is performing.
The bid is the per share money that a trader will pay for a particular stock.
Close stands for the time that the key NYSE and Nasdaq exchanges close for each day. They close at 4:00 pm but there is special trading for high-end traders taking place until 8:00 pm.
Parts of a specific company’s stock earnings paid to shareholders based on quarterly or annual earnings.
This is the difference between the bid price and the asking price of a stock. In other words, what a shareholder will buy a certain stock for and what another shareholder will sell it for.
An example is if I trade Zippy stock for $5 and you buy it for $4, then the spread is a $1 gain.
Volatility stands for its name – the stock market rises and falls every day. Known as “vol” the stock market measures these up and down changes, known as fluctuations on a high and low stock price basis.
The definition of volume does not change even in the stock market. Volume is defined as how much something is. In the market, volume stands for the number of shares of a traded stock in a certain time frame.
Volume is needed in the process of buying and selling stocks and/or securities at the price and at the time that you decide to trade.
The stock market is based on how you and I buy and sell our stock investments. It is based on how we feel about the world economy and our fears or elations about the market.
As in the historical stock market crash, if you and I feel negative about market events, and the market starts to fall drastically, then the government will intervene to try to make you and I feel confident about our future.
The operation of the stock market is just that simple, yet just that challenging! But the stock market does work well for individual trading and the country’s economy.
In addition to the USA, there are stock markets on nearly every continent: South America, Asia, the U.K., Canada, Europe, and Africa.
They all affect each other’s economy. To answer the question of whether you can buy foreign stocks – yes you can. Talk to your broker.
Now that you have the basic idea about stock markets, you can read more on the subjects you’d like to know in detail. As far as the current holding goes, I am not selling and unless you need immediate money, you shouldn’t sell either.
We had depression and 3 years long down market, but then look at what happened after that? A 10-year long bull run. So, be informed, be wise and take your decisions after careful thought.