Companies sell stocks to raise capital for expansion or research purposes. The stocks can be bought by people. The stocks given away represent company ownership. The United States has two main stock exchanges the New York Stock Exchange and the NASDAQ.

When you buy stocks of a particular company, you become shareholder of the company. Usually every share that you hold you is given one vote that can be exercised during elections of the company board members in the annual meeting. If by chance the company meets with failure then you might lose your investment since the common stock holders are paid only at the end. Shareholders are entitled to the profits earned by company. This distribution of profit is made according to the number of shares held by a person and is brought about through dividends or the increase in price of the stocks.

Preferred stock holders are in a more advantageous position when compared to common stock holders. Though the preferred stock is more expensive it offers more security. The shareholders of preferred stocks are given dividends throughout the ownership duration. Even in the case of failure of company the preferred shareholders are paid prior to the common share holders. They even have stronger voting rights in comparison.

The stock market follows the general rule of all finance market and follows demand and supply idiom. As the demand for stocks rises the price of the stock increases. There are two types of traders in the market, those that conduct extensive research and track various company statistics before trading and those that gauge value of stocks by keeping track of the market sentiment. The vital ingredient determining the value of a stock is its price per share. The stock’s past value and predicted future value is of importance while considering trading the stock.

There are certain terms that are very frequently used while mentioning the stock market and most of the articles and news that are written about it have these terms which a common man might find difficult to understand.

• When the economy is going great the market is known as a Bull Market. The economy is flourishing with unemployment at a low and investments at a high.
• When the economy is under recession or periodic low the market is known as a Bear Market. There is high rate of unemployment and the investors have less confidence.
• There are traders who invest in stock whish are very risky. Though the end result might be a whopping jackpot if the trade is successful, the losses also are big in the event of failures. These high risk investors are known as Pigs in the stock market.

While entering the stock market for the first time it is better to take the help of stock brokers whoa re mandatory for all types of transactions. There are full service brokers and discount brokers. Full service brokers cater to all personal requirements and charge a premium fee while discount brokers perform the transactions for a nominal fee thought he personal attention tom details might be avoided.

People who want to begin trading in stocks should possess certain knowledge about the stock market and its working before embarking on direct trading. This is necessary to ensure that he can successfully conduct trades and gain from them. Money that is invested is hard earned and it should be invested wisely. Stock markets are not casinos where you gamble with your money though most people believe so. The stock market is an efficient business which caters to the norm of demand and supply. Traders have to be alert and proficient about the workings of the market in order to minim9ize losses and at the same time make profits. The stock market is very similar to other financial markets and a lot of money is at stake here. But wise planning and expert handling of trades would reap you benefits that would be overwhelming.

The market is where stocks are sold and bought by individuals at right prices. There are many stock exchanges and the trades take place here every day. A common place an exchange brings sellers and buyers to each other so that trading can happen between them. The first place to behold is the exchange floor. This is the place where market buyers and sellers use hand terminals and overhead monitors to complete stock transactions. The market makers or the specialists of the stock exchange ensure that a healthy stock market exists for stocks to be traded. There are electronic exchanges like NASDAQ where all the transactions are conducted on the computer which matches buyers and sellers. Both exchange floor trading and electronic trading requires stock brokers.

Individuals do not have access to the stock market. Stock brokers are the link. They charge the traders on the basis of service provided. These brokers are largely responsible for enforcing the exchange rules and making sure that liquidity exists fro the transaction to be successfully completed. There are electronic stock brokers too. The trades are conducted through online accounts established with the brokers. A complex network of computers is used to execute the buy and sell orders. These brokers usually charge according to commissions on trades.

Buying and selling shares

The first thing to do while entering the stock market is to select a good stock broker. The level of service required can be decided upon and an account opened with them in which money is deposited. Once this is done a detailed study of the stocks should be conducted in order to make a list of stocks that you are interested in buying. The short listed stocks are bought by placing order with the broker. The bought stocks are paid with the money in the account and the brokerage is also deducted from it. Similarly sell orders are also placed with the broker.

Mutual funds are ideal for beginners in this market since the initial investment required is small and the risks involved are also minimal when compared to full fledged stock trades. Mutual funds also do not concentrate on one stock and diversification is enabled which a novice in the field of stocks might find difficult to comprehend.

The current market condition is such that traders are wary and are thinking a lot before going forward with trades or there are others who are trying to make a buck while the stumbling market is trying to recover. Both actions do not add to the long term health of the stock market or the stock traders. The economy is in recession and the common people are experiencing financial difficulties due to lay offs, job cuts, salary reductions and forced sabbaticals. The job market has been terribly hit due to the ongoing economic recession. The ripple effect of the bursting of the housing bubble in the US is being felt through out the world. The stock markets though on a free fall till a couple of months ago are slowly trying to recover though it has a long way to go before reaching stability. Those traders who want to make a profit even during these difficult times should keep certain dos and don’ts in mind that would help in the long run.

Recession is a highly emotional time in the market. The best way to evade these and still trade smartly is to keep observe and learn the behavior of the group at the same time keep our emotions away from the trading. Thus playing group psychology can benefit the traders at this juncture in economy. Thus trades can be improved and better trading performed if certain guidelines are followed.

Don’ts

• Do not trade more money than you can lose. The market is highly volatile during recession and you cannot afford to lose more money than you can spare. Thus play safe.
• If a stock drops the recovery may not be immediate or as before and hence be prepared with an exit strategy also when you enter a trade. Exit the moment the stock falls since there might not be a come back for some time to come.
• Stick to your pre determined plan of action and do not stray from it. Emotional trading would not benefit under the circumstances.
• Be very alert to the happenings of the stock market and the general trend here. Be patient and gather information about companies experiencing difficulties and general corporate health of the nation. This would help you in your decisions.
• Be aware of the risks of any investment made in the market. The fluctuating market can throw in a number of shocks and surprises, thus be prepared for this.

Dos

• Make a money management plan so that losses can be minimized.
• Do not expect to hit the jackpot or earn very high profits during the recession period. Profits would be there but expectations should be reasonable.
• Acquire knowledge about the various parameters governing the stock market trends. This would help in intelligent trades.
• Use your own discretion while trading. Do not trust anybody else, but yourself.
• Trading is like a business, there can be ups and downs which have to be taken in your stride. Thus be prepared to meet hurdles during difficult times.

The current economic scenario has increased the popular interest in the stock market. If you have never been involved in the stock market, it would not be possible for you to tell what is a bull stock market and what is a bear stock market. Here is an overview of the bear and bull stock markets to help you understand the things in a better manner.

The prices of stocks that are being traded are known as the financial market trends. In order to understand them with ease, the trends are represented in the the form of a price chart. The chart helps the investor pick up the best opportunities to invest and trade off. Obviously these trends fluctuate and this happens because of the buyers. The rise and fall of these trends is what is known as bulls and bears.

The main concept is that the market being bullish or bearish is all about the driving force that adjusts these price trends. When the stock is being bought in large numbers, the buyers become bulls and when the stock is being sold in large numbers, the stock becomes becomes bearish and the sellers become the bears. In a number of cases, these terms have been used along with particular securities and stocks.

The defining factor of a bullish market is the investor confidence that is reflected in it. With increasing investor confidence, more and more people tend to buy stock with the goal to make money out if. As of now, the 1990s has been the longest and strongest bull run. It saw economies grow at a rapid pace across the globe.

As has been just mentioned, a bullish market is where the investor confidence is high and people want more capital gains so they buy in large numbers. The bearish market is the exact opposite. In the case of a bearish market, investor confidence is low and they want to keep money in had and thus go on a selling spree. The main goal of the investors here is to ensure that their losses are the lowest.

Small drops in the price of one or two stocks would not make the market bearish. Instead, a sustained fall in stock price of a multitude of companies is what changes the trend in such a radical manner. As of now, the Great Depression between the two world wars was the worst such period. We are currently going through the second worst such a period. Other such instances of bearish markets was witnessed from 1967 - 1970s because of the energy crisis and the one if 1983 which started because of increased unemployment in 1980s.

As has been told, a bearish stock market is not something which is set in just by decline in two or three stocks. Generally the market is said to be bearish if the overall stock market index takes a sustained fall of a minimum of 20% in a period of no less than 2 months.

As is obvious, it is way easier to trade in a bullish market than in a bearish market. There are a number of traders who would make big money in bullish markets but since they are not aware of what are the best practices for stock trading in bear markets, they would either stop trading in such a condition or would take major losses.

The key to making money in a bearish market is that above all things, you have to accept that the market has collapsed and that the profits might not be easy and large to come by. A number of people use their escapist tendencies and live under the delusion that such conditions would not last long. The fact is that if you do not adapt the techniques that are meant to make money in a bearish market, you would only end up losing money.Remember that shifting the blame would not be of much help.

You have to follow the simplest approach. If the market is bullish, start looking for stocks which are in a downturn but would not always remain the same. Buy stocks of such companies and put them in the closet. At the time when market decides to go northward again, you would be able sell out the stock for a handsome profit.

Another important thing that you must know about bearish market is to learn to trade with the trends. In the case of bearish market, the trends are shorter. Generally the market tends to move sideways more than moving upside or down. Generally the price oscillate between given ranges and you have to focus more on range trading if you want to make money because the standard approach of trend trading becomes all but useless. It is extremely important that you move from trend trading to range trading in the shortest span of time, failing which you would end up in a lot of short term trend changes. The result would be that you will end up losing a lot of money in an extremely short span of time.

One more thing that you must keep in mind is that when the stock market is in bearish mood, lackadiasical trading would only land you in a total and complete mess. In such market conditions, the margin of error is extremely low and taking any chances may have completely negative results. The key to success is that you must be able to adapt yourself to trading in the shorter swings. If you can move on to range trading, so much the better. The profit in a bearish market would obviously be lower so it becomes important that you increase the trading volume as much as you can and at the same time try to haggle a lower commission from the brokerage. You may also consider moving to online trading systems which charge way less than traditional brokerage.

Making money in bearish market is possible provided that you take proper precautions and follow the established practices.

Short Stocking is the term used to denote the process of selling a stock at short. Short Stocking is known as a pretty risky business. What you are doing here is that you are selling a stock which for all practical purposes you do not own yet. All you have is a promise that you will be able to buy the stock at a decided price. You sell it at a price higher than this decided price in order to make the profit.

For a person who is new in the stock market, all this may sound crazy because generally you do not sell something which you do not yet own yourself. Short Selling might seem like an extremely complicated process but if explained in simple terms it becomes easy to understand.

In most cases this happens because your stock broker has some stock of a company which might be coming from his personal stash or from any other of his customers.  He is lending the stock to you. What will happen is that the stock will be sold in your name. You will be the owner of whatever are the proceeds of the sale. On your part, you are required to buy that much stock and transfer it to the original owner of the stock who might be the broker himself or any of his other customers.

In the simplest form, this is a loan of stock and you have to repay it, along with the interest, regardless that you have made a profit or taken a loss.

As you may have guessed by now, the pros and cons of Short Stocking are pretty simple and basic. This one here is an extremely high risk high gain investment.

In case you are able to repurchase the  stock at a price lower than what you sold it for, you make a handsome profit. If the price of the stock takes a nose dive, you would have made a King’s ransom. On the flip side if the prices of the stock go up, you would end up in a financial fiasco. You can imagine the condition if the prices of the stock decide to skyrocket in one go.

A major disadvantage of short stocking is that it is playing against the common trend. Generally the market tends to go up and this is what you are betting against. If you have a strong reason to believe that a particular stock will go up, only then would this be a good idea otherwise you are going to risk your entire standing in the market.

The second thing is that you are basically borrowing a lot of money and all this is an unsecured debt. If you fail to repay this loan you wold be in a load of trouble. More than that this kind of investment is not for people who tend to abuse their credit channels like credit cards.

All in all Short Stocking is meant for people who can exercise extreme self control and restraint.

Getting favorable results continuously from online stock trading is possible provided that you gain a thorough understanding of what matters. You have to adapt to the system and unless you do that, you would not be making much of a leeway in the market. In order to make you understand what are the things that matter in online stock trading, some of the tips have been compiled in the following paragraphs.

A simplistic approach that you may consider is to buy equal dollar amounts of ten or fifteen important stocks. Make sure that you buy stocks with dividend yields and then hold these stocks for an year or so. After you have held them for an year, sell out and buy the stock of some of the companies who have seen a downturn in the last four to six months. The thing is that there is an expectation of these slightly out of favor stocks gaining back their reputation in the market. As soon as these stocks start appreciating again, you would start making money as well. Please note that this strategy has a rather high risk because the stock that you have purchased might not appreciate again and you might end up loosing all the investment you made.

One more thing in online stock trading that you must consider is the fixed investment system. In this case, you have a fixed amount that you invest every month of every year in online stock trading. Assuming that the prices go up, you would be getting lesser shares for the money you spend. At the same time if the market goes down, you would receive higher number of shares for the money that you invest.

The money that you may commit is completely your decision and it would require your willpower to make sure that you do not spend more than the decided amount. If the conditions are favorable, you may decide to lower the amount you put in because the factor that matters is that you have to meet a set target and for this you may have to adjust that amount that you direct to online trading. You would have to rely on dollar cost averaging which is based on the 1/x curve non linearity. At the time the when value  is down, you have to do more value averaging and at the time when value is high, you would have to do less value averaging. In case of a bearish market this strategy might poise a big rsik so you have to be very careful.

Another thing that you must be aware of in online stock trading is the concept of Hedging. Here you keep on buying the stock of one company and then sell out the stock to a competing company. If you want to take Hedging seriously, you should consider Futures. This would provide you the ability to protect yourself from declines in the market.

While these are tested and tried thing about online stock trading, you should never refrain from experimenting and innovating if you want to make the most out of the market.

The fast moving world of the stock market confuses objectives and targets of investors. It is necessary to devise a plan which is robust and profitable in the testing environments of the stock market. It is imperative that investors set trading goals and strategize their actions accordingly. The following discussion incorporates the

Understand Your Stock Portfolio

“Eat what you can digest”. While building your portfolio choose the stocks preferentially, giving importance to those stocks which you will be to handle comfortably. In order to make some fast bucks picking stocks which are as incomprehensible as Greek is a bad decision. Further, it is of utmost importance that you have wide information about the nature and future prospects of the stocks picked. Randomly picking up stocks just for the sake of it will only cause trouble in the long term.

Advice from Professionals

Though it is a bonus if the investor has some experience in dealing with stocks, investors should look up to professionals who analyze and operate on stocks for a living. A professional would be able to provide a better analysis than a part-timer who meddles in stock market. Now, there is an array of services which are used for information gathering by a stock market investor. The recommendations of professionals should be sought for, even more in a volatile economic market. The stock market is the right place for wealth creation, but going alone in this financial minefield is not prudent.

Be Flexible

In this volatile market investors should be flexible in their outlook. Within a trading session, many times an investor has to take a non-traditional decision. The decision making should still be conforming to the basic concepts of stock trading. But, the investor should be flexible in taking new decisions.

Long term Planning

The stock market is full of manipulations and volatile tactics. The stock investor should review the past performances of the portfolio and take long term decisions in its reflection. The trading of the stock investor should cast a futuristic approach. The planning should account for factors, seen or unforeseen in the future. Taking decisions based on a quick profit in the short term is not advisable.

Decide the time to get out

Sometimes it is advisable to stay put even in a volatile market adhering to a long term plan. But, when the danger is imminent the stock trader should have the guts to cash out.. This remains true for intra day and swing traders in all cases but in some, the long term investor should also decide to find the exit door. Stock market movements are at the most

Irregular. Therefore, planning an exit strategy before the hand burnt is prudent. Moreover as a rule, whatever the trend the stock trading is showing now may reverse unexpectedly.

Prioritize Goals

The stock market pretty much same as life and here to prioritizing goals is fundamental to success. Investors need to do the same and not juggle with too many objectives at once.

Technical analysis in stock trading allows accurate monitoring of stocks and identifying their trends in order to predict market swings so that investment is done wisely and appropriately for profits. The most common question that haunts any stock investor is what shares to buy? Technical analysis precisely tries to answer this question and save our confused traders from the dilemma. Some of the traders want buy and hold investments, some have no time to monitor the trends by themselves and still other have little knowledge and would never know a lower high from a higher high. These people require an advancing stock market with some diversity and a long term outlook. All these needs can be satisfied by using technical analysis for stock investments.

It is always safer to select shares on the basis of technical analysis. We shall consider some of the reasons.

• Short term trades are based on demand and supply. Technical analysis of the stock market and individual shares is based on price action and need not necessarily be based on fundamentals like trends over a course of a business cycle. If you have to wait for the next year it is not lucrative enough for short term traders. Chart patterns aid in making support, resistance and momentum of the market very clear to the trader. Emotions of the traders and trading trends can be easily distinguished by technical analysis.
• Chart patterns make money management in trading a lot more comfortable. Thus entering positions that allow a little loss and positions where more loss is predicted would automatically maneuver trades to those with less losses and nearby stop loss. Thus a trader can be more confident about his trading with the help of chart patterns.
• Sometimes research on companies and their strategies need not reveal the expected price rise or fall of a particular share. Just browsing through their balance sheets or going through their annual meeting minutes might not help the trader a great deal. Technical analysis is based more on the current situation faced by the share in the current market and the trends in the future market.
• Money is compounded faster in short trades where technical analysis is used in maximum. Since the trader is in and out of market so many times that money increases geometrically. Following fundamentals can take months and years for fructification while quick trades would yield results faster.
• It is a common trend that people buy stocks when it is moving up. That is how it should be, there is no need to ascertain if the company is good or not. All good company shares do not always go up. There are companies which have huge potential in the future but short term traders would not benefit from them at all. They are good options for long term traders and for those who meticulously follow fundamental methods of stock trading and tracking.

Technical analysis helps traders who deal short term mostly. They allow for more confidence while trading and more assured profits by reducing losses.

Reasons for not buying down trending stocks are many. But first of all one need to know what is down trending stocks. Stocks whose prices have started going down are called as down trending stocks. Their price trend shows a downward movement. The current market situation is such that the entire stock market is down trending.  The bursting of the housing bubble and the recession faced by the economy has plunged the stock market into chaos.

All people investing in shares want profits with good deals. Thus in stock markets one should sell high and buy low. Well it is fine if one is able to time the whole entry exit thing correctly. Buying low is the initial step. Buying low does not mean buying cheap stocks but rather buying good stocks when they are being traded for a lower price. This is what is called down trending of stocks. Stocks can be sold at lower prices due to many reasons like for example it might have split many times. A down trending stock is one which makes lower highs and lower lows. Money comes out of such stocks and people would have lost interest in it. They would be looking elsewhere.

Beginners are usually attracted to stocks that are going down since they are not fully aware of the pitfalls of trading with such shares. The low price attracts them and they invest not knowing that the share might not recover at all. It is always best not to buy down trending stocks. Let us consider some of the reasons.

1. Down trending stocks cannot promise profits.
2. They are on the way down and should not be relied upon.
3. Sometimes they might break into a free fall in price and take investors along. This is most common if the company faces bankruptcy or liquidates without prior notice.
4. Down trends in stocks should not be mistaken as right time to buy hoping for a reversal of trend. The reason for the downtrend has to be investigated for such a supposition.
5. Losses can be of very high magnitude and something which the common trader in not prepared for.
6. Chart patterns of down trending stocks are best avoided since they might seem to impart optimism over a longer time period.
7. Buying stocks that are going down has a very high element of risk. Though stock market investments are risky, this kind can be avoided if caution is exercised.
8. Most of the stocks that fall very steeply are not able to reach their original selling price for a very long time. It might take years for the share to recover.
9. A definite no no in stock markets is emotional trading that can lead to foolish trades and trading in down trending is very similar.
10. A perfect recipe for disaster is buying stocks that are on the way down. Cheap stocks are not worth the money and time thus losses would be maximum.

Stock market is not the place to look for bargains. Buy good stocks for making profits.