Basics of Stock Market

Stock Market Basics 

posted by faayiz mohamed 

Before looking into the stock market, let us know some basic information.

.What is a private company? 

A company is made up of two types,

.If only one person makes a business, it is private business.

.If some people do business together, it is called a stock company.

.What is company? 

The above mentioned partnership can only be done by people who know the face. This means that the Company is the company to be created for the purpose of doing business with many unknown people.

These companies are registered with Registrar of Companies. It is therefore not responsible for the company's liabilities, the shareholder's responsibility. (Partners are explained below)


OK! Let's see about the stock market

.What is stock (What is meant by share?)
.What is the stock market? (What is meant by Share Market)
.What are the varieties of the stock market? (Types of Share Market)
.What is a partner (Stock Holder)
.What is the stockbroker? (Stock Broker)
.What is the grass market? (What is meant by BULL market?)
.What is a market? (What is meant by BEAR market?)
.What is the reason for the stock price change? (Why does stock price varies?)


What is stock (What is meant by stock?)

The above mentioned companies mean the role of shareholders to be added to the unknown.

What is the stock market? (What is meant by Stock Market?)

Trading is usually a stock exchange. Here are small investors, brokers, and the largest investors and brokers.

For example, the famous stock markets in India are the Bombay Stock Exchange and the National Stock Exchange. Globally, the New York Stock Exchange, the London Stock Exchange, the NASDAQ and the Hong Kong Stock Exchange.

The stock market will be classified into two different types of stock market

· Primary Market

A company is the primary stock exchange for issuing first stocks to public. This means IPO - Initial Public Offer.

· Second Stock Market - Secondary Market

The stock exchange should be purchased to sell or purchase shares of the stock market. A company will be listed on the stock exchange after the IPO is over (Will be listed in stock market). After that, investors can sell shares of the company in the stock market. Depending on the current stock price, another investor can buy.

What is a partner (Share Holder)

Companies to issue shareholders will release shares called shares. They will administer a specific home price (P). These are the shareholders who buy or sell the home price.

Stock brokers? (Stock Brokers)

Participants are the members of the stock market. Only these can be traded on behalf of the individual or company who thinks buy / sell shares. So one who wants to buy shares should approach the stockbroker. An investor must start an account with the broker.

What is the grass market? (What is meant by BULL market?)

A bull market is a group of securities in which prices are rising or are expected to rise. The term "bull market" is often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies and commodities. Because prices of securities rise and fall essentially continuously during trading, the term "bull market" is typically reserved for extended periods in which a large portion of security prices are rising. Bull markets tend to last for months or even years.

Understanding Bull Markets

Bull markets are characterized by optimism, investor confidence and expectations that strong results should continue for an extended period of time. It is difficult to predict consistently when trends in the market may change. Part of the difficulty is that psychological effects and speculation may sometimes play a big role in the markets.

There is no specific and universal metric used to identify a bull market. Nonetheless, perhaps the most common definition of a bull market is a situation in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline. Since bull markets are difficult to predict, analysts can usually only recognize this phenomenon after it has happened. During this period, the S & P 500 rose by a significant margin after a previous decline; As the 2008 financial crisis took effect, major declines occurred after the bull market run.

Characteristics of a Bull Market

Bull markets generally take place when the economy is stronger or when it is already strong. They tend to happen in line with strong gross domestic product (GDP) and a drop in unemployment and will often coincide with a rise in corporate profits. Investor confidence will also tend to climb throughout a bull market period. The overall demand for stocks will be positive, along with the overall tone of the market. In addition, there will be a general increase in the amount of IPO activity during bull markets.

Notably, some of the factors above are more easily quantifiable than others. While corporate profits and unemployment are quantifiable, it can be more difficult to gauge the general tone of market commentary, for example. Supply and demand for securities will be: supply will be weak while demand will be strong. Investors will be willing to buy securities, while some will be ready to sell. In a bull market, investors are more willing to take part in the market in order to gain profits.

Bull vs. Bear Markets

The opposite of a bull market is a bear market, which is characterized by falling prices and typically shrouded in pessimism. The commonly held belief in the origin of these terms suggests that the use of "bull" and "bear" to describe the animals attack their opponents. A bull thrusts its horns up into the air, while a bear swipes its paws downward. These actions are metaphors for the movement of a market. If the trend is up, it's a bull market. If the trend is down, it's a bear market.

Bull and bear markets often coincide with the economic cycle, which consists of four phases: expansion, peak, contraction and trough. The onset of a bull market is often a leading indicator of economic expansion. Because public sentiment about the future economic conditions drives stock prices, the market frequently rises even before broader economic measures, such as gross domestic product (GDP) growth, begin to tick up. Likewise, bear markets usually set in before economic contraction takes hold. A look back at a typical U.S. recession reveals a falling stock market Several months ahead of GDP decline.

How To Take Advantage of a Bull Market

Investors who want to benefit from a bull market need to buy early in order to increase the rising prices and sell them when they've reached their peak. Although it is hard to determine when the bottom and peak will take place, most losses will be minimal and are usually temporary. Below, we'll explore many prominent strategies investors use during bull market periods. However, because it is difficult to assess the state of the market as it exists, these strategies involve at least some degree of risk as well.

Buy and Hold

One of the most basic strategies in the process of buying a particular security and hold onto it, potentially sell it at a later date. This strategy is essentially the confidence of the investor: why hold onto a security unless you expect its price to rise? For this reason, the optimism that comes along with bull markets helps to buy the buy and hold approach.

Increased Buy and Hold

Increased buy and hold is a variation on the straightforward buy and hold strategy, and it involves additional risk. The premise behind the increased buy and hold approach is that an investor will continue to add his or her holdings in a certain security so long as it continues to increase in price. One common method for growing holdings suggests that an investor will buy an additional fixed amount of shares for a pre-set amount.

Retracement Additions

A retracement is a short period in which the general trend in a security's price is reversed. Even during a bull market, it's unlikely that stock prices will only be ascend. Rather, there are likely to be shorter periods of time in which small dips occur as well, even as the general trend continues upward. Some investors watch for retracements within a bull market and move to buy these periods. The thinking behind the bull market continues, the price of the question will quickly move back up, retroactively providing the investor with a discounted purchase price.

Full Swing Trading

Perhaps the most aggressive way of trying to capitalize on a process known as full swing trading. Investors utilizing this strategy will take very active roles, using short-selling and other techniques to maximize gains as a result of a larger bull market.

Key Takeaways

A bull market is a period of time in financial markets when the price of an asset or security rises continuously.

The commonly accepted definition of a bull market is when stock prices rise by 20% after two decines of 20% each.

Traders employ a variety of strategies, such as increased buy and hold and retracement, to profit off bull markets.

Bull Market Example

The history of American history began with the stagflation era in 1982 and concluded during the dotcom bust in 2000. During this secular bull market - a term that denotes a bull market many years - the Dow Jones Industrial Average (DJIA) averaged 16.8% annual returns. The NASDAQ, a tech-heavy exchange, increased its value five-fold between 1995 and 2000, rising from 1,000 to over 5,000. A protracted bear market followed the 1982-2000 bull market. From 2000 to 2009, the market struggled to establish footing and deliver annual annual returns of -6.2%. However, 2009 saw the start of a 10-year bull market run. Analysts believe that the last bull market started on March 9, 2009 and was mainly led by an upswing in technology stocks.

What is the reason for the stock price change? (Why does stock price varies?)

Stock prices change everyday by market forces. By this we mean that share prices change because of supply and demand. If more people want to buy it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a stock and dislike another stock. This comes down to figuring out what news is negative for a company and what news is negative. There are many answers to this problem and just about any investor you ask has their own ideas and strategies.

That being said, the principal theory is that the price movement of a stock indicates what investors feel a company is worth. Do not equal a company's price with the stock price. The value of a company is its market capitalization, which is the stock price multiplied by the number of shares outstanding. For example, a company that trades at $ 100 per share and has 1,000,000 shares outstanding has a little more value than a $ 50 but has 5,000,000 shares outstanding ($ 100 x 1,000,000 = $ 100,000,000 while $ 50 x 5,000,000 = $ 250,000,000). To further complicate things, the price of a stock not only represents a company's current value-it also reflects the growth that investors expect in the future.

The most important factor that affects the value of a company is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. It makes sense when you think about it. If a company does not make money, they are not going to stay in business. Public companies are required to report their earnings four times a year (once each quarter). Wall Street watches with rabid attention at these times, which are referred to as earnings seasons. The reason behind this is that analysts base their future value of a company on their earnings projection. If a company's results are in expectation, the price jumps up. If a company's results disappoint (are worse than expected), then the price will fall.

Of course, it's not just earnings that can change the sentiment towards a stock (which, in turn, changes its price). It would be a simple simple world if this was the case! During the dot-com bubble, for example, dozens of Internet companies rose to have market capitalizations in the billions of dollars without ever making even the smallest profit. As we all know, these valuations did not hold, and most all Internet companies saw their values shrink to a fraction of their highs. Still, the fact that prices did move that affects other than current earnings that affect stocks. Investors have developed literally hundreds of these variables, ratios and indicators. Some you may have already heard of, such as the P / E ratio, while others are very complicated and obscure with names like Chaikin Oscillator or Moving Average Convergence Divergence (MACD).

So, why do the stock prices change? The best answer is that nobody really knows for sure. Some believe that it is not possible to predict how stocks will change in price while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing we know as a certainty is that stocks are volatile and can change in price very rapidly.

Posted by Admin-faayiz mohamed