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 think is that when trading on the stock market, companies can have a flourishing or bankrupt businesses depend on how they on the “stock market game”. In short, stocks are the representation of all the profits and assets of the company. If the company makes a profit from the stocks, this value will then be divided annually among the shareholders in the form of a dividend. To give you an example, if a company gains a profit of $300,000 this year, and it has 15 shareholders holding 1 stock each, then each shareholders would receive a dividend of $20,000.
Definition of Stock Market
The stock market or “stock exchange” is a financial institution in which licensed brokers trade company stocks and other securities that are approved to be traded by the exchange. The exchanges can take place virtually or physically. Brokers will buy and sell stocks depending on the needs and requirements of the people or companies they represent.
Basically, there are two types of stock market, the first is Primary Stock Market for trading of Initial Public Offerings IPOs and other brand-new issues by the sellers and buyers, the Secondary Stock Market for trading of existent stocks in the market by the buyers and sellers.
For you to understand the trends in the stock market, you must first need to know common terms and be able to make an assessment of the stock market charts. Taking an action to understand the basics of stock market will help you to become a smart investor.
1. 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. To simply put it, is the company is doing poorly in the stock market it will also reflect in its stock prices, which will decrease 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 include stock data over a period of 52 weeks. On the reporting day, you will be able to discover the stocks with the highest and lowest prices during this 52 weeks.
3. Price/Earnings Ratio or PE Ratio
This value is determined by dividing the newest stock price by the average earnings per share for the last four quarters.
4. The Trading Volume
This is the entire buying and selling transaction that happened during the day.
This is the last quoted stock price during the closing day of the stock market.
6. Net Change
This is the difference in price of the stock since the last change that happened. Net Change let you see the direction in which the stock price is headed. A plus symbol for a positive direction and a minus symbol for a negative direction.