How the Stock Market Works

It’s important to understand the basics of how the stock market works if you are interested in investing. There are a lot of money making opportunities for those investors who are interested in dedicating themselves to studying and learning about the stock market . In today’s article we discuss the basics of the stock market for the new investor.

Once a stock has gone public its shares are then bought and sold on organized stock exchanges. Companies who go public offer a certain number of shares in their company to the public and then investors can use the stock exchange to buy and sell stocks on companies that they are interested in. The largest of these public exchanges is the New York Stock Exchange (NYSE). It is also known as “The Big Board” and it is home to many of the largest and most well known American companies.

When learning how the stock market works you must understand how stock prices are determined. The stock prices are the price that a specific stock sells for and the price is set by several factors. These factors include things such as the health of the economy, trading trends, supply and demand, financial reports, and spending trends. Many investors who practice short term trading study the trends in the stock market. They learn how to read stock charts and they utilize technical indicators associated with stochastics , Japanese Candlesticks , and Fibonacci numbers . These short term traders are interested only in predicting future price direction unlike long term traders who are only interested in the fundamentals of a company.

When learning about how the stock market works you will also come across the term market capitalization. Market capitalization is the value of the company or stock that is being offered and it is calculated by taking the number of outstanding shares and multiplying it by the price of the stock. It is basically the measure of a company’s total value.

There are other stock exchanges such as the American Stock Exchange (AMEX), the NASDAQ and other smaller regional stock exchanges. The NASDAQ stock exchange is different from the AMEX and the NYSE in that it is completely electronic. All trades done on this exchange are done via a computerized network between brokerage firms and investment banks.

Please read about Japanese Candlesticks which is a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts when trading stock . Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or Exchange Traded Funds .