Stock Market Guide For Beginners

 

Stock market can be a very scary place for new investors. There are hundreds of terms and acronyms and it is very difficult for a beginner in stock market to remember them. There are a few things which the beginners need to know even before they start investing their hard earned money in the stock market. Since investing in stock market can be a risky preposition, it is always better to understand the basics of stocks and how stock market works.

In layman language, stock trading is nothing but buying and selling of stocks of a particular company. The aim of any investor is to buy the stock at a lower price and then sell it off at a higher price to make profits. The stocks can be bought and sold in designated exchanges like New York Stock Exchange (NYSE) or NASDAQ. All these exchanges have at least one index which usually portrays the general health of overall market. Some of these indices are Dow Jones, NASDAQ 100 and S&P 500 index.

It is not possible for a retail investor to buy or sell stocks directly in an exchange. Therefore, he needs to take services from brokers and brokerage houses. There are various online brokers with whom you can open a brokerage account to start doing online trading. There are some discount brokers who charge less brokerage fee and then there are full service brokerage houses. These houses are costlier but provide added services like analysis, advice and stock recommendations.

While picking up the stocks to buy, investors use different types of analysis techniques. Some analysts believe in fundamental analysis of stocks while others favor technical analysis. Stock screeners are a great way to shortlist the potential candidates to buy. These screeners shortlist the companies based on the input parameters provided by the investor like market capitalization, PE ratio, PB ratio, volume of trading and other financial factors. The investor need to understand these ratios and terms in order to shortlist the stocks.

Different investors believe in different types of investment strategies. Some investors and analysts believe that long term investing is the best way to make profits since stock market gives better returns than any other form of investment in a longer term. This is also known as buy and hold strategy. The other type of investment strategy is known as top down strategy in which the investor starts from a market, then select an industry and then drills down to shortlist the potential stock. One more strategy which is common is the bottoms up strategy. This is exactly opposite to the top down investing strategy.

The author writes articles on investing and finance including details about stock trading books and how to learn to invest stocks.

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