7 Facts To Help You Understand The Stock Market (For Beginners)

By | October 15, 2013

1) Origins Of The Stock Market

Understanding the stock market for beginners starts with understanding the idea of the stock market. Originally, it came to America with Alexander Hamilton. He quickly spread the idea, with the use of his public status. With that, the idea exploded.

The stock market was a way to build up the economy, since it was still in its beginning stages. Today, there is a statue of him in the heart of the financial district of New York.

2) What Is The Purpose Of The Stock Market

There are two purposes for the stock market. The first being for the anyone with a few bucks and a little knowledge to make some money. Of course, if you only have a little knowledge, you are taking much more of a risk.

The second is for businesses to make money. There is much less risk with this. However, there are down sides to this. The first being that the company must give up part of they’re ownership. The second being that they must become completely transparent.

3) Why Buy Stocks?

To understand the stock market for beginners, you must understand, “just why buy stocks?”.

I love to trade stocks. The stock market is real, it’s not a fly by night scheme. It is also hard to master, as with anything worth doing. I enjoy the passion and excitement of being able to invest in the real world as well as being able to learn at the same time.

To me, I see two main important factors for why to buy stocks. The first is to make money. The second is the incredible amount of information you can gain just from practice.

4) Where To Buy Stocks?brokers

One of the basics of understanding the stock market for beginners, is understanding exactly how to go about buying stocks. This is simple. You buy stocks from a stock broker. That’s where I trade. That’s actually the only place. There are two kinds of stock brokers. Both with advantages and disadvantages.

Some charge more, some charge less. Some even manage your money for you. They are all in competition for you. So, make sure you get the facts before choosing one.

5) Stock Exchange Symbols

Stock exchange symbols range from one letter to five letters. In the beginning, with the NYSE, stocks were only assigned one or two letter symbols. The companies that were most actively traded were rewarded with one-letter symbols. Originally, you could tell which exchange a stock was being traded on just by looking at they’re symbol. But, that all changed in 1997.

6) Extended Hours Trading Of Stock

As well as with trading on the regular markets, you can also trade stock in the evening. The stock is not traded on the same exchange as during the day, but something called an ECN. If you wish to trade at this time, you must find a broker that matches your needs. But first, you should learn a little bit about the risks and rewards.

7) Stock Investment Risks

Understanding the stock market for beginners also includes understanding just what you are getting yourself into.

There are risks associated with stock investing, as there are with any true investment or business. Each trading strategy has it’s own set of risk. Of course, with more risk comes the possibility of more reward. So, what exactly is the perfect blend of risk and reward for you? I hope this helps you make your decision.

If you’re not comfortable with the risks associated with the stock market, then perhaps a more conservative approach to making money and managing money will work better for you.