The Stock Market for Beginners

The Stock Market for Beginners

Posted on 01. Jul, 2010 by in Stocks

If you are interested in learning how to invest in the stock market but currently don’t know anything about it, don’t worry.  The stock market is not difficult to learn.  You don’t have to have a master’s degree in finance or be able to read a ticker tape machine to be able to buy and sell stocks profitably.  Although there are many different methods you can use to profit from the stock market, the best method for a beginner to learn is probably one you’ve heard of many times:  buy low and sell high.  That’s it.  Even the most sophisticated stock traders still use this tried and true method to consistently earn profit in the stock market.

But how do you know when a stock is at a low point?  How do you know when a stock is “on sale?”  There are a couple of easy ways to tell when a stock is a good buy.  First, you can watch the news reports and be on the watch for negative news about a company.  Negative news will drive a company’s stock price down.  Usually, the negative news will create a temporary reduction in the company’s stock,  which will eventually go back up as time passes.  A product recall due to a safety issue is one of the many things that could cause such negative news.  When something negative like this happens, the company’s stock price will drop and then settle down as time passes and news reporters move on to other things.  When the price appears to have found a bottom and looks as though it might be ready to rebound, it’s considered to be “on sale” and is a good buy.

Another way to know when a stock is at a low point is by examining a stock’s historical trend on a chart.  This is not as hard as it may sound.  Just a few short years ago it was necessary to purchase expensive charting software to do this.  This is no longer the case.  You can now view any stock’s historical trend on a chart by going to the Yahoo.com web site and then selecting Yahoo Finance.  You then simply enter the stock’s abbreviation (or full company name if you don’t know the abbreviation) and it will take you to an information page for that particular company.  From there, just click on the “chart” option and you will be able to see that’s stock’s prices over a period of several days, weeks, months or years.

In order to buy or sell stock you will need to open a stock trading account.  Opening an account is now a very easy task since there are so many great online stock brokerage firms who are competing for your business.  This competition has also dramatically driven down the cost of trading commissions as well.  To do a stock trade just a mere decade ago you would have had to actually call up your stock broker on the phone to place the order.  Your broker may have charged you hundreds of dollars for that simple trade.  You would then be charged a substantial fee again when you sold the stock.  Today, due to the competition created by the online brokerage firms, fees are usually no more than $10 per trade, often less.

Another great benefit of the online brokerage firms is that they provide new traders with a lot of educational opportunities at no extra cost.  They do this because they want you to be successful.  They want you to keep coming back and making more trades.  For every trade you make, they earn a commission.  It’s truly a win-win situation.  Most online stock brokerages will have a tab on their web sites for the educational programs they offer.  With the online stock brokerage firm Scottrade, for example, which only charges $7 per trade, regardless of how many shares you are buying, has a tab on its website called “learn.”  If you click on this link, you can sign up for a free stock trading newsletter, free seminars and other free educational opportunities.

Finally, the best way to learn the stock market for beginners is to simply read a book on the subject.  There are many great ones to choose from.  Stock Investing for Dummies, by Paul Mladjenovic, is always a great one to start with.

So, if you’re totally new to this, don’t worry.  It’s not as difficult as you may think.  Get a good beginner’s book on stock investing, grab a cup of your favorite beverage, sit back in a nice, comfy chair and start your journey into a rewarding and potentially lucrative form of investing.

Related Posts:

Tags: , , , , , , , , , , ,

Comments are closed.