The stock market is something that a lot of people talk about, but not many people actually understand. For most, it's a mysterious place where fortunes are made by already rich people who have somehow figured out how to change the space to suit their needs.
However, the truth is that this market isn't as much of a mystery as it might seem. It’s all about knowing the best stocks to watch, and when to capitalize on them.
Before you can come to terms with things like penny stocks or intraday highs, you need to get used to the basics of trading, and what it really means to be involved with this kind of investing. Although you may be able to enter the market with limited funds, much like gambling, it’s good to have a budget and only invest what you can afford.
It’s always good to get the advice from a professional, but we've put together this quick guide to help beginners find their feet in the world of trading, bonds, and investments.
What is the Stock Market?
First and foremost, the stock market is a financial environment that's made up of exchanges, like the Nasdaq, and the New York Stock Exchange. In general, assets are listed on specific exchanges, based on where the company decides to sell. These exchanges attract buyers and sellers from around the world, and encourage them to trade securities for money, and vice versa.
The exchange where shares are hosted will also track the supply and demand of each security, which has a direct impact on the price that you'll pay for a stock. Individual traders are usually represented by brokers (usually located online).
To start trading, you place an order through a broker, who agrees on a deal with the stock exchange on your behalf. That's how you buy and sell the assets that you want for your portfolio.
How Does the Stock Market Work?
The space opens between the hours of 9:30am in the morning and 4pm Eastern Time, with pre and after-hours trading sessions available from some brokers. However, understanding the trading world means knowing a lot more than when it opens and closes.
This environment is where you go to trade your stocks and make money, and to do that, you need to know whether the stock market is up or down. This environment is where you go to trade your stocks and make money, and to do that, you need to know the pros and cons of swing trading and whether the stock market is up or down.
When someone references the stock world being down or up, they're usually referring to one of the major indexes that the space tracks. An index is a component that measures the performance of a group of stocks, which either represent the area overall, or a specific sector.
You'll probably have heard of things like the Nasdaq composite, the S&P 500, and the Dow Jones Industrial average before - all of those are used as proxies to determine the performance of the market.
Investors can use the indexes available to benchmark how well their own portfolios are performing. In some cases, indexes are also used as a way of informing important trading decisions. The more you learn about the indexes, the easier it is to get started with building wealth.