Understanding The Stock Market For Beginner Investors and Traders

Understanding the stock market could make you a multimillionaire like it has many people in the United States. Some of the wealthiest people in the world generated their wealth from the stock market. The only thing that separates yourself from them is the knowledge they have that you don’t.

If you would have bought a 100 shares of Microsoft 25 years ago at the IPO price of $21 it would now be worth three quarters of a million dollars. A $10,000 investment in Apple stock during the IPO would be worth $2,540,159.85 today. With a small investment in the right company over time you could be a millionaire.

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The truth is a lot of the top investors and traders on Wall Street are sometimes wrong. Timing is the single greatest attribute of successful traders and investors. In fact if you master the art of timing you can be a millionaire within a year from the stock market.

If you have a solid track record and strategy in the market you can and will find investors willing to invest in your ideas. This is how Warren Buffett amassed his billions. He didn’t start off with millions of dollars. Overtime his investing strategy worked and people wanted to invest in his ideas. Now he manages over 600 billion in assets and is worth 67 billion.

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The stock market is unlike anything in this world. The market doesn’t discriminate against anyone ever. It doesn’t care about your race, age, religion, or anything about you. Anyone can buy and sell shares in the market from anywhere in the world with an internet connection.

There’s three different types of people on Wall Street. There’s traders, investors, and a mix of both.

Traders look to profit from price fluctuations in stocks. There are many different types of traders. Some of the common types are technical traders, day traders, momentum traders, penny stock traders, and swing traders. They can trade stocks, options, futures, and forex.

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Investors buy stock in a company and actually want to be an owner of it. Whereas traders don’t actually care about being shareholders. Investors are looking to buy shares and hold for a long period of time. This is what Warren Buffett does. One of his famous quotes is, “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” A lot of investors grow wealth over a long period through collecting dividends.

The third type consist of a mix of both trading and investing. In this type people are looking at investing in a company but also want to get a good price to buy. There’s always opportunities to pick up discounted shares in quality companies through basic trading principles. Often this is done through technical trading.

Before getting started on Wall Street make a plan of what type you’re going to be. It should be one that reflects your goals, personality, and time availability. Time availability is included because day trading, scalp trading, penny stock trading, and momentum trading all require you to sit in front of a screen all day watching your position. A 10 minute distraction could cost you a lot of money in the above strategies.

For more relaxed trading and if you’re not looking to sit in front a screen all day I recommend swing trading. Swing trading involves holding positions for a weeks to a few months. In addition, swing traders are more likely to be profitable than any other type of trading.

One thing to understand about the stock market is that you can profit regardless if prices go up, down, or sideways. You have to get the concept out of your head that you can only profit if price goes up.

The ways you can make money if stocks go down is the concept of shorting or buying inverse ETFs.

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There’s also numerous other ways to short stocks and not have unlimited downside. If you buy inverse ETFs you can only lose the amount you invested in that ETF. In addition, you can buy put options in a stock you think is going to go down and if you’re wrong you only lose your initial investment. This is a better approach for beginner traders as a direct short position has unlimited downside as explained in the video above.

Traders can profit from sideways price action in stocks through the options market. This is an advanced strategy that will require a course.

Before trading the market you want to develop a strategy and test that strategy through paper trading. Paper trading is using fake money but simulates your results as if it were real. The best paper trading website is Wall Street Survivor. It’s free and easy to use.

Before investing in the market you should educate yourself through books, online courses, and observe some of the best investors to ever live. A small list would include Warren Buffett, Carl Icahn, Peter Lynch, George Soros, Benjamin Graham, and many more.

In order to start investing and trading in the stock market you will need a broker account. A new startup company that’s saving traders and investors millions of dollars in fees is Robin Hood. There’s zero fees forever. Their motto is, “Stop paying up to $10 for every trade”.

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There’s always a bull market somewhere in the stock market. Opportunities are everywhere.

I hope you now have a better understanding of the stock market. Our website is dedicated to helping you make money in the market. Please share and comment with any questions.

 

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Kourt Kardashian

Stock trader and investor. Keeping it simple and helping the community of traders and investors make more money is my #1 goal.

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