Stock Market For Dummy
Are you a dummy looking to find some valuable information about the stock market?
Are you asking" Is there advice on the stock market for a dummy?"
Then look no further as I am about to explain how the stock market works so simple even a dummy can understand it.
What is The Stock Market?
The stock market is simply a market where shares of companies are bartered for. Like any other market. there must be buys, sellers and mechanisms in place to ensure the smooth running of the stock MARKET. Each stock market has its own governing body that regulates the stock transaction and individual rules. A company lists its shares on the stock market so as to raise capital for further development. the investor buy shares in that company in the hope the companies profits will go up and the stock price will follow.
That is basically the stock market for a dummy explanation.
Your next question might be something like:
"How do I invest, trade and make money from the stock market"?
There are many different ways to make money in the stock market. There is NO one correct method. Each method has its good and bad times. some are better than others. Some actually lose more than it makes.
Let me run down some of the very basic stock market approaches:
1) Value Investing: Looking for stocks that are very cheap and buying them in the hope the market recognizes this and the stock will eventually go up. Good points: Supposed to limit losses and be a conservative safe method of trading/investing. Bad Points: You won't shake any records trading this way. And sometimes what is undervalued stays undervalued for a long time. This is Warren Buffets method.
2) Short Selling: Looking for poor fundamental stocks or stocks way overpriced which will fall in price. The idea is to sell high and buy back at a lower price. God points: 2000 there was a killing for short sellers selling all those very expensive technology stocks. Always plenty of overpriced, over hyped stocks that fall. Bad Points: The stock market has made it tricky to short stocks. In theory you have unlimited losses. I don't see it this way. As long as you cut your losses there is not a problem.
3) Technical/System Trading: These traders have no interest in a stocks fundamentals. they develop price and volume rules to enter and exit. Good points: they trade what happens in the stock market that can lead to making great trades when the fundamentals do not say so . As long as trends happen their systems will catch them. Bad Points: Too rigid. You are not really learning how to trade but to follow rules. There is nothing mathematical or systematic about the stock market. It can lead you into some very dangerous trades. Does not allow the "art of trading" to develop. Systems come and go out of fashion.
4) Fundamental Trading: Complete opposite to the technical trader. they ignore price action and look at stocks as businesses not as stock prices. they study management, earnings records, sales, business plan, etc.. Good points: They treat investing in stocks as investing in business. Usually a good long term growth. Don't get shaken out of good stocks on technical price action. Bad Points: Price action usually leads the fundamentals, Just because the company is sound does not mean the stock goes up in price. Very subjective in nature. "What makes a good company?"
5) Momentum Trading: Once a trend is in motion it usually continues. Momentum traders look for stocks that have already gone up considerably and jump in trying to catch the rest of the upward move. Almost like the technical trading approach. Good points: A very simple and profitable trading method. Doesn't take much time and research to find these stocks. Trading from price and volume action and not from tips. Bad Points: There may not be many stocks that meet a momentum traders criteria depending on the market cycle. Danger of catching moves very near the top.
What about a combination of 3,4 and 5?
Take the very best from a technical traders approach, the fundamental traders approach and the Momentum Traders approach.
What do you now have?
Momentum Stock Trading System
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