Chapter 1 - Stock Market Basics

"A journey of a thousand miles begins with the first step" (Old Chinese Proverb)

Congratulations on taking the first step to learn about the stock market.

In this stock market basics page, you will discover the timeless secrets of the stock market that will revolutionize the way you think about the markets. Click on the links below to start learning about the basics of the stock market. Do read them in order so you will have a solid foundation of the stock market.

"A journey of a thousand miles begins with the first step" (Old Chinese Proverb)

I would advise you to start with the 4 stock market stages. The 4 stock market stages every stock will go through article will allow you to learn the 4 stages that stocks go through. You will learn that it is best to buy stocks when they are in a stage 2 uptrend and short stocks when they are in a stage 4 downtrend. You will also learn how to avoid stocks that are in a stage 3 market top. With this knowledge, you will be able to save yourself a lot of losses and turn your portfolio account into green.

You will also need to learn What are stock charts and why you need to use it . For those who are new to the stock market, the What is a stock market article will help you to see the stock market in a different light from the normal description and definition that you can find online. The stock market is a place of opportunity and it is also a place of great danger for those who don't do their homework.

There are 2 main emotions that rule the market. Fear and greed : The feelings that move the markets. Fear and greed is what motivates market participants to do the things they do. It also influence market participants to make irrational decisions. Most people will buy at the very top because of greed and sell at the very bottom because of fear. Which is why it is very important to know how to read stock charts. How to read stock charts for beginners.

As you enter into the world of trading, you will come across a term called "short selling". What is short selling and why you want to short sell stocks. Short selling is often used by seasoned traders to make money on the short side when the market collapses. Some market participants use short selling to hedge their portfolios.

There will come a time when you will wonder whether investing or trading is better. Investing vs trading : Which is better? I believe neither is the superior approach as there are people who are able to make money in these two arenas. It very much depends on your personality and your preference. The best is to choose the one that you feel most comfortable with.

If you choose to be a trader, this site will help you tremendously. Traders use technical analysis to time entry and exits and the proper use of stock charts will aid us to profits. There are many different types of trading. The different types of trading. You will learn that there is position trading, swing trading and day trading. Each one is different because of the time frames involved. 

Whether you invest or trade, there are 3 very important stock indices that you should look at. The 3 most important stock indexes everyone should look at. They are non other than the S&P 500 index, the Dow Jones Industrial Average and the Nasdaq Composite Index. Why is it important to look at these 3 indexes? Well, that's because:

  • 3 out of 4 stocks will follow the direction of these indexes. 
  • 75% of stocks will go up or down during the day depending on where these indexes are heading. 
  • 75% of world stock market indices also follow the S&P 500, Dow and Nasdaq. \

So, you see how important it is to study these indexes.

Sometimes it is good to learn from history. History is full of examples of how the stock market devastated people from all over the world. Lessons from the stock market crashes in recent history. Those who learn from history will be able to avoid the market crashes in the future. How to profit from stock declines and market crashes. We can also learn how to profit when stock or indexes fall. We profit from declines by shorting stocks or shorting indexes or buying put options.

Once you have gone through all the articles in Chapter 1, you might want to test your knowledge before moving on. Doing a test will help you to understand the lessons in this chapter more.

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