Use Stock Market To Make Money Online

The Basic Question is What is Stock market ?

As a simple stock market for beginners tip answer the stock market is a place where you buy and sell shares. It is like any other market for example the malls we usually frequent where you go and buy the goods but imagine in that market you were also able to sell your stuff then you would go to the perosn who would off you the highest price and also will buy from the person who offered you the lowest price.

Can You Directly Buy and Sell Shares ?

Yes you can directly buy and sell shares between let us sya you and your friend. But if your friend is not willing to buy shares from you then where would you go to sell shares. Of course you would look for a place where all the buyers and sellers can congregate. That place in today's world is known as the stock exchange.

Technically, you should be able to wlak into the exchange and be able to contact somebod who is willing to sell or buy. But it is would be tough then to get the best price and that is why there brokers who can connect two persons sitting across the world and get them the best prices and help execute a trade between them.

Why Do Prices Fluctuate?

As in the real world the price of the comodity fluctuates because there is demand and the supply is less. In case of shares the price will increase because there are less number of sellers of that stock at that price and the semand is haigh because of certain factors. Those factors can be some external news or good results or good positive outlook by the company for the next quarter or year.

What are Bulls and Bears ?

Bulls have a positive outlook and think that the stock will go up and will buy the stocks whereas bears have a pessimistic outlook and will try to sell their shares. The markets can fluctutate between bull runs and bearish phases.

How to Pick the Best Stock ?

The big question is how to pick the best stock. The best stock that you get is based on what type of investor you are. Are you looking for short term profits or long term profits? Are you a passive kind of investor or a active day trader?

The based on all that question you should be able to pick the stocks that suit your appetite.Also it depends on the kind of money that you have with you tio invest in the stock market.

I will go in detail with all these questions one by one.

Risk Vs Reward and the Risk Appetite ?

The kind of trading thatyou do on the stock market is directly dependent on the kind of risk taking ability you have. They say that stock market is not for the fainthearted and that is true. Imagine that today you are worth $1million and in a four days your networth could be wiped out in half or more. It can be happen in the stock market for sure. That means that if you are really absolutely not ready to take any risk then you should keep you money in the bank in a CD. But more mature investors actually do a effective financial planning and propoprtion some amount of money for the riskier assets. Easily said than done and hence you have financial planners.

Short Term vs Long term Profits ?

They say that the stack market in the long run is the best money making instrument that you have. Very correct . Long term or the long run can mean two years to ten years. Yes in the long run you can make good money with low risk but then the question is that whether you have the patience and the appetite to sit in on the stocks for the long run or not. That also leads us to the next quetsion about how much is money you are after. And at what time you will quit.

What you need to decide is when to book profits and when to cut your losses. Most people do not sell a stock hoping that they will make money in the long term but are not able to as the stock will someday slide and they do not have a strategy to cut the losses.

Fundamental Analysis Vs. technical Analysis

This is a big question as to which is a good stock picking strategy fundamental analysis or the technical analysis. Well are both are good but are suited towards different kinds of investors. If it was Warren Buffett he would probably never look at the technical analysis.

Fundamental analysis is fundamental research in terms of what you do to find a good stock. In fundamental reserach you look for broad econimic factors, industry factors and the company's managment and it practices to find out whether the stock is worth buying or not. Based on that you will also you also see if the stock will make money in the long run even if the stock is not a hot stock today.

Technical Analysis is more technical as the name suggests since it requires you to know the stock market charts and how to read them. The charts then tell you whether the stock is forming a predicted pattern. That patterns will tell you what the stock price will be and if it is going to turn in a profit for you. Technical analysis requires good software to identify stocks.

Online Brokerage vs Full Brokerage

Borkers are what you will need to buy the shares on any exchange. That said there are two types of brokerages namely the discount brokers and the full service brokers.

Discount brokers charge less as suggested in the name but yes they do not provide all sorts of service. Especially on the advice front. They will only provide with the details for the trade and nothing else.

Full service brokers will make sure that you have good portfolio of stocks and will give you advice on the stocks that you have and what to buy and sell and when to do that.

That said they obviously charge a lot more than the discount brokers in terms of brokerage and also in a lot of cases they charge a commission on the profit that you make.

Have a Portfolio?

What is portfolio?. Portfolio is a must if you are serous investor. This follows the maxim that never put your eggs in one basket. Make sure that you have sufficient number of stocks in your bag. So even if one stock goes bad there are others that will help you make money.

A large number of stocks is also not helpful so the optimum number is about 15 stocks that will help you make money with the stocks.

Getting started in the stock market?

Make sure that you understand a few terms in the stock market terminology like a limit order or GTC order. Also make sure that you understand what a p / e ratio is and what is the eps. Then have some amount of money usually thousand dollars is enough to open an account with a brokerage firm and then start trading. Do not go big on buying of stocks. Start small and then make sure that you invest and test the waters. Once you have made some money or at least done some trades then start reading some books and financial news papers for more details on everything related to stocks so that you can manage your portfolio of stocks.

If you have the cash the answer is a simple and a resounding yes. In the falling market buy the blue chips at a lower price and then if it falls sme more buy more.

This stratgey is risky but not that risky if you only buy the best of the bets blue chip stocks. Of course ehn you are talking about buying the liquid cash is important and that can only be there if you sold the shares for profit when the market was at a very good high.

People generally do not sell when the market is high in the hope of making more money and hence they do not have the money when stocks are available cheap.

Discipline is what they should aim and the stock market would be there for you to make a killing.