Learn about the Stock Market - Beginners Guide

By Carrie Sommer

The stock market is simply, just that --a marketplace for buying and selling shares of stock in companies. Similar to the grocery store, price and value is most important. However, unlike the grocery store, the buyer can immediately turn around and become the seller of the very same shares of stock he or she just bought. Here are some basic concepts of how the stock market works.

Buying Shares of Stock

When you purchase a stock, you are taking on risk. You think that the stock you buy today will be worth more in the future, at which point you will sell it and make a profit. Buying stock on this premise is often called a long position, and is the simplest way to invest. However, you can also sell stock you dont even own yet--this is called a short position, and is considered much more risky.

Pricing

Here are some terms you should know before buying or selling shares, and that is the pricing structure.

Opening Price. The price of the stock when the market opens on a day of business. Closing Price. The price of the stock when the market closes. Bid. What a broker pays for your stock, and excludes the brokers commission. Ask. Your price. This includes the brokers commission. Spread. The difference between the bid price and ask price, which amounts to determining the brokers commission.

What Should I Buy?

This question is the most difficult of any you can ask. There are books written about this question, and none have answered it completely. However, there are some things you can study to help you make the best decisions when purchasing stock.

Technical Analysis.

When studying technical analysis, you are learning about the trends of a particular stock, its trading history, and various charts to learn about what the trading future might look like.

Fundamental Analysis.

This type of analysis looks at the company itself. By delving into the financial operations and decisions of the company--such as earnings, growth, sales, assets, debt, etc.--a follower of fundamental analysis believes he or she can predict the companys future which will affect the stock price.

While fundamental and technical analysts often disagree, a new student of the stock market would do well to understand both and perhaps consider both when making trades.

Now you can see the importance of understanding the market before you buy or sell. Therefore, your first investment should not be in a stock, it should be in your education. Read all you can, then make your decisions. - 23204

About the Author:

Carrie Sommer is a guest contributor to WallStreetSWAT.com, your "special weapons and tactics" against a troubled financial market. At http://www.wallstreetswat.com you can find more about the stock market for beginners.