In our previous article, we discussed the basics of trading the stock market for adolescents. in this article, we shall be going in-depth on this topic and continuing from where we left-off.
Let’s jump right in.
Stock Exchanges
When a business decides to go public by offering shares of stock to investors, it typically does so on a stock exchange. Buying and selling shares of a company is possible in nearly every country through a centralized or decentralized stock exchange.
Shares of Apple, Amazon, and Microsoft trade on the Nasdaq, while the New York Stock Exchange (NYSE) is where companies like Home Depot, Visa, and Berkshire Hathaway call home.
Selling shares on a particular stock exchange is typically a strategic decision made by the company. The stock market is the sum total of all of these trading platforms.
Investing in the Stock Market: A Step-by-Step Guide
Unfortunately, you can’t just dial up your favourite stock exchange and start buying and selling shares over the phone. A stockbroker is an intermediary who facilitates trading between investors. That might be an actual person or an online service.
In a fortunate turn of events, the internet has made this a breeze. The days of placing orders and negotiating prices over the phone with a broker are long gone.
You can now open an account with any one of a plethora of online brokers, such as Libertex, deposit funds, and trade whenever and wherever you like, right from your mobile device, laptop, or desktop computer.
When you have the funds available, it only takes a couple of mouse clicks to start investing in companies all over the world.
CAUTION: The minimum age to invest in the stock market is 18. Anyone under the age of 18 should have an adult help them.
Varying Prices
The price you paid on Monday at a regular store remains the same by Friday. However, that is not how the stock market operates.
Each share is given a price, and that price changes throughout the trading day as buyers and sellers negotiate based on supply and demand and the latest available information.
You can either agree to the offered price or set a limit order to buy or sell the stock at some future date and price. As for the second, there’s no assurances that your needs will be met.
What Propels The Stock Market?
The price of a company’s stock can fluctuate up and down depending on various factors, the majority of which are associated with investors’ expectations for future profits.
For the market as a whole to shift, something must happen that can affect the profits of many businesses, like new regulations, a pandemic, or unexpected economic numbers and the government’s reaction to them.
Obviously, not every publicly traded company is created equal. A pandemic like COVID-19, for instance, might be good for the pharmaceutical industry but bad for retailers and restaurants.
Similarly, some businesses are much more vulnerable to economic downturns than others, typically those whose primary activity is the production or sale of non-essential goods and services, such as luxury goods.
The Economic and Stock Market
Companies, the lifeblood of the economy, use the stock market as a primary source of capital. Almost everyone in society has a job because of the goods and services provided by these companies.
It wouldn’t be good for the economy if they were to be denied access to the funds provided by the stock market.
There are a number of additional ways in which the stock market impacts the economy. The stock market is a popular example because many people put their savings or retirement funds there in the hopes that they will increase in value.
Without that, consumer spending would fall, governments would have to spend more money propping up the population, and life for everyone would get worse.
Tired of losing? Open a Libertex Account to start trading the stock market with the professionals today.
Words and Phrases Needed to Know
Just like the automotive and IT industries, the stock market has its own jargon that can be difficult to grasp for newcomers. A number of popular expressions are defined below.
- Ask price: A seller’s minimum acceptable offer price.
- Bid price: Shares can be purchased by bidders at the highest price they are willing to pay.
- Bearish: Predicting a decrease in stock prices.
- Broker: A person or company that buys and sells shares on your behalf.
- Bullish: A pessimistic outlook on the economy or the stock market.
- Capital gain: This is the increase in wealth that results from selling an asset for more than you paid for it.
- Dividend: A dividend is the distribution of a portion of a company’s profits to its shareholders.
- Earnings/Gains: Financial resources retained by an enterprise after deducting all necessary expenditures
- Liquidity: Company stock’s ability to be converted into cash quickly without affecting its market value.
- Margin: It entails borrowing funds from a broker in order to acquire a financial asset.
- Securities: These are any exchangeable financial asset.
- Ticker symbol: A shorthand way to identify a company’s shares.
- Trading volume: The volume of trading is the total number of shares bought and sold in a given time frame.
- Volatility: When a market or stock’s price fluctuates erratically, we say that it is volatile.
- Yield: In finance, yield refers to the rate of return on an investment over a specified time frame.
We shall be discussing more on this in our next article. Keep an eye on this space and don’t forget to subscribe to our newsletter for the latest news and article.
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