Stock Market 101 For Beginners
The way to understand how the stock market works is by looking at the stock market chart. The stock market chart shows how all the stocks of companies are performing.
The stocks in the mutual funds are the same as the ones you have in your IRA and 401K. The same companies in mutual funds are the same in the S&P 500 Index which is the stock market. The S&P 500 Index is a list of the 500 largest companies in the world such as Target, AT&T, Apple, BP, Coke and hundreds more. By watching the S&P 500 Index you can see what and how the overall stock market is doing. Other indexes are the Dow Jones Index but it only has 30 companies and the Nasdaq Index which has many small companies. These two Indexes follow the direction of S&P 500 Index because of its more well known companies.
To see how the stock market works is go to any website financial page and click on the name of this index. Next is to set the time frame for months. When you are viewing the stock market over the last 12 months with the month to month price rather than the day to day price you will find all the zig zags are gone.
Today stock markets can be found in every developed and most developing countries. The United States of America, England, Japan, India and China are some of the biggest stock markets in the world. The value of the world stock market was estimated as staggering US $36.6 trillion in October 2008.
While some stock exchanges function as non profit corporations, for example the New York Stock Exchange (NYSE), others are profiting businesses that earn money for the trading services they provide. Such examples include the National Association of Securities Dealers automated Quotation (NASDAQ) and the Toronto Stock Exchange (TSE).
After finding a suitable brokerage firm, you will find that setting up an account with them is no more complex than opening a bank account or creating a new email address. The sum of the deposit required for accounts varies with each firm. Once you've set up shop, your money is placed in an interest-bearing account and it is yours to command.
When you buy stock, you have the option to have it listed under your name or under the name of the brokerage firm. No matter which you pick, the dividends, profits and losses all go to you.
The answer is right in the chart because this is physical evidence of what is presently occuring every day. These are real companies with their stock prices going up or down. When most or all stock prices are starting to decline, it is the sign that the investors are selling. The reason they are selling is because these companies are about to be earning less money than before. Stock prices go up when companies increase theirs earnings and they down when their earnings are decreasing. You can this yourself by looking at the S&P 500 Index chart.
This all points to our economy. Our economy is base on the gross domestic product. This is the increasing and decreasing of services and products that are produced by business services in the U.S.A. The Government have Economist study how the U.S. economy is performing every month. These reports show how the manufacturing of products, employment, business services and retail goods are performing currently and in the past. It easy to see if the U.S.A. economy is in a recession by comparing it to the stock market.
Don't trade against the trend. As a novice, it doesn't make sense to trade against the trend. If you look at any stock in an uptrend, you will see that it is met with very weak pullbacks. This means it is not a good situation for shorting. On the other hand, any stock in a downtrend is met with very weak rallies. This is possibly the worst situation to buy stocks. Therefore, it is wise to always trade with the trend.
You should always consider the previous day's trading range when making a decision. Regardless of your strategy, you should use this as one of the last steps in your checklist to verify your strategy. It is a simple trick. It is a fairly simple task that will bring great benefits.
Article Source: FxTradingStock.com
About the Author
For other sources visit: Stock Market Timing or http://market-timing.org/stock.aspx
by: Arthur McCain
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Word Count: 748
Date: Sat, 17 Jul 2010
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