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Introduction To The Stock Market

A share market, also referred to as a stock market or equity market, is a coming together of buyers and sellers of shares and securities listed on a stock exchange. In simpler terms, stock is a share in the ownership of a company, which is a representation of a claim on a company’s assets and earnings. Owning stocks is among the best tool for building wealth as you embark on your journey to realise financial freedom. The beauty of investing in the stock market is, no work is required from as all you have to do is sit and watch as your company grows while collecting dividends. In recent years, the stock market ha witnessed massive changes driven by constant improvement in trading technology. Anyone can now own stocks given the high popularity of this lucrative investment plan. However, people do not fully understand how the stock market works and there is a common misconception that it is magic answer to all your financial problems. Just like any other investment, investing in the stock market needs a thorough research of the market before committing any of your money.

Ownership. Being a holder of a company’s stock means that you are among the many shareholders of the company and, as a result, you have a percentage claim of everything that the company owns. Once you buy a share, as proof of your ownership, you will be issued a stock certificate. With modern technology, however, you won’t get to use this certificate since all records are kept electronically and with a click of a button, you can buy or sell making shares very easy to trade. Owning stock does not mean that you have a say in the daily running of a company. It means that you get to vote for the board of directors in every annual meeting and that you will receive dividends from the company’s profits depending on the number of shares you own.

Types of stocks. There are mainly two types of stocks.

1. Common stock. This is the form in which majority of stock is issued. It is the common type of stock with simple features. They represent ownership in a company and dividends claim as a portion of the profits. The investor get to vote to elect board members who will run the company and oversee the management duties. In case of bankruptcy or liquidation, the shareholders have limited liability, meaning they are not personally liable for any losses. However, the shareholders will not receive any form of payment until all creditors, preferred shareholders and bondholders are paid.

2. Preferred stock. These represent a greater ownership in the company but without the same voting rights. Ownership of preferred shares means that, you are entitled to payment of a fixed amount of dividend for the rest of the company’s life. Preferred stock holders will be paid off before common stockholders, upon bankruptcy or liquidation. Preferred stocks are callable, which means that the company can purchase them from the stockholders at any time for a given reason.

Trading and buying of stocks. Buyers and sellers meet on exchanges where stocks trade, and decide on a price. Exchanges can be physical locations on a trading floor where transactions take place or can be virtual, where trades are made electronically by computer networks. It is also important to know the difference between primary market and secondary market: A primary market is where a company issues an IPO by creating securities, while a secondary market is where investors trade the certificates of ownership issued to them, without involving the company. Stock prices constantly change due to the market forces of demand and supply. If may people want to buy a stock, its demand goes high making its supply low thus its price goes up. Conversely, if there are many people selling a stock than those buying it, the supply will be greater than the demand and the price will fall. You can buy stock using two types of brokerages. Full-service brokerages charge a lot but will give you expert advice on how to manage your account. Discount brokerages are cheaper but pay less attention to your investment decisions. You can also buy stock through dividend reinvestment plans and direct investment plans where some companies allow stockholders to purchase shares directly from the company.

Day Trading on the Stock Market

You have heard it all before about how you can make a fortune with day trading in stocks. What you do not hear is how quickly you can lose your life’s savings if you are not careful in what you are doing. We are going to go through some stock day trading tips and warnings so you can make the best informed decision on how you want to trade in the stock market.

The Securities and Exchange Commission has issued several warnings to individuals who hope to make their fortune in stick day trading. Day traders buy and sell stocks quickly throughout the day using borrowed money in the hopes of making minuscule profits per stock but large payouts by the sheer volume of shares traded. You have to have enough funds and the right temperament to make any kind of money at day trading and you have to be able to sense the market and how it is going to turn at any given point in the day.

There are experts that will sell you stock tips for day trading. You should avoid these kinds of tips at all costs. You need to get to the point to be able to trust your own instincts when it comes to trading. One of the best trading tips I have ever heard was the recommendation that before trying day trading you should have some experience in either the futures or forex markets so that you can get a feel for the flow of the market – both up and down. Having looked over several sites on day trading I have come up with several traits of successful day traders.

Learning these traits or already possessing them is again on of the best stock day trading tips I can offer today. The best day traders always take responsibility for their actions and trades and keep an even temper at all times. This can also be referred to as having a poker face in other areas. A great day trader does not get depressed if he loses on a trade and does not shout exultantly when a trade hits it big. He makes note of the strategies that worked and keeps working those while discarding the strategies that result in losses.

Other excellent stock day trading tips are having a definite business plan, keeping a journal, focus on no more than 3 successful techniques, become comfortable with risk and uncertainty, and always use risk capital (someone else’s money). Having a definite business plan involves determining when you will trade, what your maximum loss will be what techniques to use, what are the total expenses and what your final objectives are.

Setting everything out in a professional written business plan will make your job that much easier and clearer on a day to day basis. Keep a journal on all your trades. When you got in and what price, when you got out, what price and how much you made or lost. Over time you will find trends that will enable you to be more successful and you can fine tune your trades so that you will minimize any further losses.

Top 10 Bear Stock Market Investing Tips

1. Find Undervalued Stocks – Stock market investing in a bear market can be tricky because the entire market seems to be on the decline. Look for undervalued stocks which have a price lower than the anticipated stock value in the near future. If the company is solid and shows promise but has a very low stock price it may be a good choice, especially in a bear market.

2. Engage In Short Selling – This investment method involves a complicated process which utilizes the loaning of stock shares. The investor borrows the shares with an agreement to deliver the exact same number of shares at a later date. The shares are sold by the investor and then repurchased when the price of the stock drops. This short sale means a profit because the investor sold at a higher price than the stock is repurchased at.

3. Watch For Signs of A Bull Market Approaching – Both bull and bear markets are cyclical, and eventually a bear market will turn bullish. Smart investors watch the market carefully so that the first signs of the market turning can be detected and acted on quickly.

4. Invest For The Long Term – Successful stock market investing will usually look at the long-term prospects of a stock, and this is true in a bear market as well as a bull market.

5. Avoid Margin Positions – A bear market is not usually the best time to take margin positions because of the expected market decline. Most professionals and experienced investors advise that margin positions should be closed and avoided until the market conditions turn more favorable.

6. Be Cautious with Ratings Systems – Many investors use ratings systems to help pick ideal stocks to invest in. A bear market can cause these systems to be unreliable, and may result in large losses instead of better stock picks for an investor.

7. Be Alert For Any Market Trends – Successful stock market investing when the market is bearish means noticing market trends right away. Roughly 75% of stocks on the market will follow any trends that occur. Detecting any trends early can make the difference between success and failure.

8. Don’t Hold a Losing Position Out of False Hope – Some investors refuse to sell even when the losses continue to pile up, either from emotions like fear or out of false hope that the market may turn around soon. Be realistic about the stock prospects, and sell if this step seems like the best choice.

9. Don’t Panic and Start Selling Everything – A big mistake made by many investors is to start selling stocks indiscriminately when a bear market hits. This is done in an effort to minimize the investment losses, but eventually the market will turn around and most stocks on the market will rebound.

10. Only Choose Stocks from Solid Companies – Successful stock market investing means performing extensive research on each stock considered. Only including quality stocks from solid companies in the investment portfolio will help protect the investment value over time regardless of any short-term market changes.