You can compare the stock market to an auction. Herein you will find that you will pay less money whenever there is more supply than demand. Of course, you will also pay more money whenever there is less supply and a higher demand. However, instead of buying an actual item from this auction, you will actually be purchasing ownership within a company. Nevertheless the brokerage firm that you use to purchase your stock through can still be compared to an auctioneer in that they are responsible for having someone on the floor of all of the major stock exchanges, including the NYSE (New York Stock Exchange). Here is where they will take orders from those who wish to buy and sell stocks. They are also responsible for matching up those who wish to buy a certain stock with those who have that particular stock for sale. This is what is known as a stock trade.
Many people find the stock market to be intriguing. If you are one of these people, you may wish to get involved in trading stocks. This is something that only you can determine your success in. If you wish to be truly successful, then you are going to need to learn the basics first.
The reason why you can determine your own success in the stock market is that it is a free market system. This means that the stock market is ran by the forces of supply and demand. Of course, there are also some other things that help to run the stock market. These things include: technical factors, “acts of God” and company fundamentals which include revenue, profits, assets and liabilities. For this reason, it is beneficial to have some knowledge of both accounting and economics before you begin buying and trading stocks. This knowledge will help you be better prepared to interpret the aforementioned things and they will also help you to have a better understanding of the various companies’ profiles. Thankfully you can learn this knowledge on your own and fairly quickly. Once you have learned it you will be able to be quite successful within the stock market.
Once you have spent some time learning the aforementioned things, you will want to either work with a well-known stock brokerage firm such as Charles Schwab or do your own trading through a web site like eTrade.com. You will have to decide whether you want someone to do all of the work for you or if you would like to use a proactive approach and do this work yourself. After you make this decision it will be time to find your first company to invest in. You will want this to be a company that you know something about or that you trust. Either way you will still want to do some of your own research in order to ensure that this company will continue to be successful in the future. You will be able to tell this by looking at the company’s earnings to make sure that they are continuing to increase each year.
There is something else that is important to know about the stock market as well: The long-term value of a stock will be completely dependent upon its fundamentals. While you are going to see highs and lows, ups and downs, with stocks it is important that you are confident in your belief that the stock will pay off in the end.
It should be clear by now that you cannot take your decision to invest in the stock market lightly. You will get lots of advice along the way but before acting on any of it, make sure to do your homework. In the end, the only person who you can truly trust with your stock portfolio is yourself. If you keep this in mind you will have given yourself permission to learn from any mistakes that you do make along the way.