You hear all about stocks and the stock market on the news and in the newspapers. You hear about people who make millions in the stock market and you hear about people who lose a lot, too. How exactly does it work? It's not that hard to understand the stock market because it's not that complicated. What is a market? A market is where goods or services are bought and sold, just like a supermarket where food is bought and sold. The stock market is where stocks are bought and sold. Stock is simply equity in a company. Equity is ownership interest. Put it together and when you own stock, you have ownership of that company. Stocks are bought and sold on a stock exchange. The most common exchange would be the New York Stock Exchange. There are stock exchanges all over the world where stocks of different public companies are bought and sold. If you want to make money from stocks, you need to follow a simple process. First, you buy the stock of a corporation at a specific price. Then, when the price has gone up, you sell it. The difference is the profit you gain. It's just like buying and selling anything else. Take ebay for example. You might find at a yard sale a dvd that is very cheap, maybe $4. You go to ebay and you sell it for $7 after fees. That is a gain of $3, your profit. How do you buy and sell the stock? This is where the exchange comes into play. You don't have to go around and find someone to buy from or sell to. You set up a brokerage account and a broker buys or sells the stock for you with your money when ask them. This is just the bare basics of how the stock market works. Basically, your objective should be to buy low and sell high. If you are able to do this, you will make a profit. You may not be able to do this all the time, but as long as you are making an overall profit, you will do well.
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