An Overview about Stock Market for Beginners
A lot of individuals know the word “stock market” but for those who are not expert in financial matters are still confused about its meaning. What most people are aware of is that trading on stock market can result to either bankruptcy or booming of businesses if these companies enter the stock market game. Simply put, stocks depicts the company’s profits and assets. The amount of all the profits gained by the company from the stocks will be divided per annum in the form of a dividend. So for example, if a company makes a profit of $200,000 this year, and it has 20 shareholders with 1 stock each, then the 20 shareholders would receive a dividend of $10,000.
Definition of Stock Market
The stock market or “stock exchange” is a financial institution where a licensed broker trade company stocks and other securities that are authorized for trading by the exchange. These exchanges can occur virtually or physically. Brokers buy and sell stocks based on the needs of the companies or individual they represent.
There are two types of stock market, these are the Primary Stock Market, this is for trading of IPOs or Initial Public Offerings and also other brand-new issues by the sellers and buyers; the Secondary Stock Market, this is for trading of existing stocks in the market by the buyers and sellers.
In order for you to know the trends in the stock market, you have to learn certain commonly used terms and be able to assess stock market charts. Taking an action to understand the basics of stock market will help you to become a smart investor.
1. The Stock Price
This represents the value for which stocks are bought and sold. Some factors that can affect the stock prices are the current performance and expansion and future growth. Simply put, if the company is doing badly in the stock market, their stock prices will also decline in value. In contrast, if the company is doing well in the stock market, the stock prices will also shoot up in value.
2. Highest and Lowest Prices in 52 Weeks
This is made up of stock data in a period of 52 weeks. On the day of reporting, you will be able to notice the stocks with the lowest and highest prices during this period of 52 weeks.
3. Price/Earnings Ratio or PE Ratio
You can get this value by dividing the stock price by the average earnings per share for the last four quarters.
4. Trading Volume
This is the overall selling and buying transactions that have taken place during the day.
5. Closing Day
This refers to the last quoted price of the stock at the closing day of the stock market.
6. The Net Change
This refers to the difference in prices of the stock since the previous change that took place. The Net Change allows you to see the direction in which the stock price is coming. A plus symbol means a positive direction while a minus symbol means a negative direction.