Starting in the stock market might seem fairly intimidating at first. There are many things to know, especially if you want to get the most out of trading. You need to know when to buy, when to sell, and when to hold.
Luckily, there are many resources for beginners, including stock picking services that can take a little bit of the guessing game out of the process. While you’ll have to pay for these services, you will still generally come out with a much higher profit than what you would get on your own.
However, before you get started, you should do some research first to get a better understanding of the stock market. It might take some time, but if you dedicate yourself to learning the ins and outs of financial trading, you can gather all the knowledge you need to make informed and calculated decisions based on the factors you observe.
What Is It and What Does It Mean?
If it’s a bear market, it’s not the best sign for some, but it could be a golden opportunity for others. Unfortunately, this means that the market is facing a downward trend. Stock prices are falling, which can be discouraging for those who have already invested.
On the other hand, it’s the perfect time to buy. When prices are low, this is your chance to purchase shares for cheap. You might even be able to invest in a company you simply couldn’t afford before.
A bull market is when things are good, and stock prices are steadily increasing. In this case, it might not be the best time to buy, but it could be the perfect time to sell. After you gain some experience, you’ll be able to start noticing how the trends fluctuate and what triggers them, allowing you to make more informed decisions.
Day trading is a common method of buying and selling numerous stocks within a short period. The goal is to capitalize on the small changes throughout the day to make a small profit when the market closes.
For example, you might see that a stock is low, so you buy some of that stock. Not much time goes by before it increases. Instead of holding onto that stock with the possibility of it increasing or decreasing, you sell it, netting yourself a small profit.
While some people take on this task when they have a moment during the day, it’s more beneficial if you can dedicate a lot of time. Many people consider day trading to be a full-time job.
In simple terms, after-hours trading is exactly what it sounds like – trading after-hours. If the regular market closes at 4 p.m. EST, it is still possible to trade for four more hours. After-hours trading is possible thanks to electronic communication networks (ECNs) that can forgo using a traditional stock exchange to match buyers and sellers.
There are some additional risks, such as:
- Increased volatility
- Wide spreads
- Less liquidity
Benefits of this method include:
- Able to react immediately to news events
The spread is the difference in price between how much the seller wants to sell the stock and how much the buyer wants to pay. If a trader offers stock for $15, but the potential buyer only wants to pay $12, there is a $3 spread.
Initial Public Offering (IPO)
An initial public offering happens when a company decides to go public. This is the first opportunity for the public to invest after it was previously only privately owned. However, this isn’t as simple as flipping the switch from private to public. Companies must first adhere to several strict rules established by the Securities Exchange Commission (SEC).
The stock market in the United States opens at 9:30 a.m. EST every day. But this isn’t the earliest you can trade. Like after-hours trading, there is also an opportunity to begin early – at 4:30 a.m., which is called pre-market trading.
What are all those letters on the bulletins and scrolling tickers? Each stock has up to a four-letter abbreviation, which is sometimes called a ticker symbol. Examples include “V” for Visa and “WOOF” for Petco.
You might initially think that penny stocks are stocks sold for a penny, but it is actually stock trading that is done for less than $5 per share. While the stock could very well be for a penny, it doesn’t necessarily have to be – and commonly isn’t.
A portfolio is a compilation of every investment owned by an investor. When we think of a portfolio, the first thing that comes to mind is an envelope with numerous documents inside. However, yours can just be one investment and still be considered a portfolio.
A rally is a sudden and quick increase in the market price, but it is also only a short-term change. Continuous and steady growth is not considered a rally.
Not too interested in handling this on your own? Maybe you just want a little help with some trading choices while leaving some of the decisions to yourself. You can hire a broker, a person you pay to buy and sell stocks for you. They will use their vast knowledge of the stock market to make the most informed decisions possible.
Short selling is the practice of borrowing shares from a broker with the intention of returning them. If you sell these stocks, you get the money, but the shares go to the broker. While this strategy does have some advantages, it can be risky. If you’re a beginner, it’s highly advised to avoid it.
The Bottom Line
If you are just getting your foot in the door, you have a long road ahead in your journey through the stock market.
This article is just a first step, but you need to start somewhere. While these are some important terms and phrases to get accustomed to, there’s still a lot to learn about stocks, trading, and investing.
While everything might seem a little confusing at first, it will probably come easier to you than expected with the right resources and professional help.