How to Study the Stock Market
How to Study the Stock Market
When it comes to investing in stocks or learning how this big machine works, it can be very intimidating, and we can often feel like we are shooting in the dark. Many would call investing in the stock market a craft that takes years to master, and many would say that investing in the stock market is only pure luck and can’t be mastered at all. However, there are tools and guides out there that can teach you how to read the market and not feel so alone in the dark.
The stock market is its own language and its own culture. There is nothing like it, but like any language or culture, it can be learned and adapted by anyone willing to put in the time. While you may never be able to master the stock market, you can sure learn the language and become fluent in trading. This will help you be confident when you jump into the raging sea of numbers and dollars. Learning how to study the market is not easy, and definitely takes years of experience, but there is a starting place that anyone can enter into on equal playing fields of other investors, traders, and learners.
Here are some beginner tips on how to study the stock market:
Start with Knowing Your Basics
Everyone needs a refreshment of the basics. This is never hurtful. It is even good for us to refresh ourselves with the basics of grammar, because over-time, we often let important pieces of information leave our brains, and we find ourselves forgetting where commas go. The same goes for staying on top with the basics of stock trading.
The stock market can’t be compared to going shopping at your favorite retailer. You can’t look at a shelf of stocks and pick your most desired one. It is way more complicated than this. The stock market is all about exchanges. When a stock is listed at a specific exchange, this brings buyers and sellers alike to make a deal and operates as a market for the share of that specific stock. The buyer and seller can then agree or disagree on the exchange of this stock. Supply and demand are heavily correlated with this exchange and often leads to the price fluctuation of that stock.
Now, of course this exchange is done online, with a broker in-between the buyer and the seller, so there is never any actual handshaking or lines for checkout. Once we can learn to rethink stock trading as online exchanges and agreements verses checking out at a store, we will be in a better position of understanding how the complex world of stock trading works.
Watch and Understand the Market
An average morning routine for a working millennial these days is: wake up, check Instagram, check Twitter, check Facebook, check IMDb, check email, check text messages, get in the shower, and get ready for work. This may be exaggerated, but we live in a time of the smartphone. We work, we socialize, we get our news, we communicate to our loved ones, and we shop on our smartphones. As much as people frown on the bad habits of phone addiction, this culture is never going away and we will only become more accustomed to doing all things on our mobile smart phones going into the future.
The point here is that we must add watching and checking the stock markets with our list of things we find valuable and informative in the mornings, during lunch, before we go to bed, and whenever we have a free second. This is not to feed an addiction but is to keep you on the front of all major movements in the market. Being one of the first responders to a market movement can lead to some major profit or save you from major profit loss. Watching the stock market like we watch our likes on Instagram, can lead us to actual profit and value, or protecting our current profit and value.
Market indexes are usually what people refer to when they discuss the market being up or down. Market indexes often track the performance of a market as a whole, that is made up by groups of stocks and companies that reflect a specific industry. Serious stock traders use market indexes to watch the market thoroughly and create milestones in their portfolio. Traders also use market indexes to help make decisions on buying or selling stock. This is one of the main practical ways to help you watch and understand the market.
Seek Trading Information
The difference between a stock investor and stock trader is that the investor builds a diverse portfolio and holds out over a long period of time, during good seasons and bad seasons, hoping to make a great profit over the course of many years. The trader buys and sells daily in order to time the market just right, in hopes to make a quick large profit. Many would call the trader more of a gambler, and the investor more of an…investor.
However, many agree that stock trading is where the real craft appears and the more time spent researching and getting experience, the more one becomes a professional stock trader. A devoted stock trader seeks trading information daily and is always at the front of the line. They often spend hours a day in research, invests money into algorithm tools and systems, and uses complex technical analysis for their decision making.
Understand the Difference Between Bull Markets & Bear Markets
An important factor to always remember when studying the market is knowing the difference between bull markets and bear markets. A bear market is a symbol of fear that is used to define when stock prices are falling 20% or more. Bull markets are the opposite of bear markets and usually indicates a strong incline in stock prices across the board. Bull markets often follow bear markets and bear markets often follow bull markets, but no one knows how long the life of a bull or bear market have. There are hints and clues, but it is a mystery to all investors and stock experts.
Know the Value of Diversification
A note on diversification. A way to keep yourself safe from a bear market is to have a diverse portfolio verses having all of your eggs in one basket. If you have all of your money in one basket, a bear market could cause you to lose it all. This is the importance of diversifying. You can’t control what the market does, but you can control your choices.
There are many different types of stocks and many different ways to invest. It is takes time, money, and patience to build a solid portfolio, but we encourage you to seek guidance and a professional to help guide you on this path. It is important to jump into the water and learn about this world stock trading, but it is appropriate to wear the proper floaties to swim well if the current shakes up.
Understand Stock Market Crashes and Corrections
Stock market crashes happen when stocks plunge to 20% or more in a single day. This often creates a jerk reaction of sell, sell, sell which causes prices to go down, and therefore creates a bear market. However, it is important to understand a stock correction. A stock correction is when a stock drops below 10% or more in a single day, but does not necessarily mean a crash or bear market is coming, but it may just mean a bad day.
These are important tools and guides in learning how to read the stock market. Here at LVGI, we hope we have helped you understand the complexity of the stock market and encourage you to learn more and dive into the water with us. If you are interested in starting somewhere, you can find our publicly traded company on the OTC Markets.