What is a stock and stock market: Many private companies when needs some capital goes public by offering some value of the company to the public. Generally its in share value which are initially very low value. This is called as stock of the company. The place where people can but these stocks and sell them its called as stock market. The stock market is different for each country and its name is also different but the companies can list themselves in the local stock market as well as the global stock market.

Trading: Trading is the name for selling and buying the shares from one person to another person. It is of two types generally inter-day and intra day. Inter day trading means you can buy few shares keep them with you for some days or months even years and sell them. Intra day means you but the shares and sell them on the same day. The both types are associated with some charges.

Risks involved in the share market: Share market is the game of life. It can make life’s as well as it can destroy them. Common people usually keep themselves away from the share market. I have seen people getting millions of dollars a day and also seen they lose it.

How to do share trading: There are many emerging markets world wide where you can invest money and get good returns like India. You can get lots of info on line in investing in indian stock market. Just get a good study of all first and then invest. After all its the game of life.

]]> http://capitalaction.org/stock-market-a-overview/feed/ 0 http://capitalaction.org/has-the-stock-market-had-too-big-a-run/ http://capitalaction.org/has-the-stock-market-had-too-big-a-run/#comments Sat, 03 Apr 2010 16:27:23 +0000 GuestPoster http://capitalaction.org/?p=514 If you take a look at the DJI right now on 4/3/10, you will see it is just shy of 11,000. That is a long way up from just a year ago when it hit it’s bottom of around 6,500. Anyone who has bought stocks in 2009 and so far in 2010 has probably done pretty well.

It seems that many people have forgotten how bad things got just a little over a year ago and maybe the market has come up too fast. Any new investor looking into buying stocks for the first time probably doesn’t remember the daily punishment people took in their 401k’s and other stock invesments and just how much people lost. Many older investors are still reeling from the big decline and haven’t come close to regaining what they had.

People log onto the Internet every day trying to find the best stocks to buy right now. They might not take into account the overall health of the market and the current state of the economy. Afterall, in a big down market, even a hot stock may not go up. With all the political turmoil, jobs uncertainty, and companies under tremendous pressure to just stay in business, it is hard to imagine how the market can continue to rise.

One of the factors that helps the stock market is the fact that interest rates are so low. If you have money and want to get some sort of a decent return, you can’t put it in a bank certificate of deposit or in Treasury bills because they are paying next to nothing. Putting your money in stocks is about the only place you have that may give you some sort of a return. However, if the economy doesn’t start to turn around, investors may regret putting new money in stocks at this time.

When stock trading you mitigate risk by never risking more than 2% of your account on a given trade.  By setting stop losses you can control your losses while allowing unlimited upside potential.  For example, if a stock is $50 per share, but you put your stop loss at 50 cents per share with an account worth $50,000 you can risk $1000 on one trade.  In order to lose $1000 you’d have to buy 2000 shares or $100,000.  Essentially you borrow $50,000 and invest your $50,000.  If your stop loss is hit you lose $1000, however if the stock goes up 5% you’ve gained $5000 or a 10% increase.  The leverage doubled return, kept you full invested with only one trade, and still managed your risk.

Obviously if the trade went the other way and you forgot to put a stop loss on the trade you can face the dreaded margin call.  A margin call is simply a broker selling your stocks to pay your loan back ensuring they receive their funds back.  Usually this forces you to sell stocks at a low which goes against what you are taught when you first learn the stock market.  You know, buy low sell high.  A call on your account does the exact opposite.

If you are going to use leverage to increase returns you need to spend more time on research because you need your win percentage to be improved, you must always mitigate risk with stop losses, and you need to watch your borrowing fees so they don’t eat all of your returns.

If you are a beginner in this industry, you may feel uncomfortable and you will find yourself grasping for help when you face some problems along the way. Here is a simple beginners’ guide for you to find success in this complicated industry.

The first thing that a beginner should know is how to make a killing at the stock market. The potential investor should know which should not be overemphasized for both the novice and expert traders alike. Basically, this will mean that they will want to buy shares in a certain stock that has the lowest price, and when it has recovered and improved they can then sell it in a higher price.

The second thing is that you should to always formulate a plan or follow your entry and exit plan while trading. Basically, with this you will set your limit on how much you can profit from a trade which will tell you when to seize the opportunity.   It will also tell you how much you are willing to lose and when to cut your losses.

The third is to request professional advice, most especially when you already have a hard-earned investment capital at stake. These professionals can help you in many forms but then it will be up to you to choose which would be the best decision that will suit your needs.

Lastly, when you are already engaged in this industry you will always need to use your head. This is necessary for you to study and understand the movement of the stocks and also this will allow you to do your homework and prepare for a tough fight.

If you are an investor you need to do the fundamental research on the company you are going to invest in before you make your purchase.  Are you going to hold onto this stock until you retire, collecting dividends the whole way?  Are you going to sell the stock ten years from now?  What if the price of the stock doubles, is that enough profit?  These are the questions you must answer if you are looking at a stock as a long term investment.

If you are trading on a shorter time horizon then you need to consider other factors as well.  First check out the fee schedule for your broker.  Are you paying more in commissions than you need to be?  An active trader can spend thousands of dollars a year on commissions alone, so it pays to look into the cheap stock trading sites.  If you can cut your commissions down from $10 a trade to $5 a trade you could save yourself over $10,000.00 a year if you regularly make 40-50 trades a week.  As stock traders, there are so many things we think about on a daily basis that it is good to take a look at the basics every once in awhile.