Wednesday, April 11, 2012

How to Approach the Stock Market For Beginners

Many different sources can probably try to tell you that they offer a stock market for beginners. But the stock market for beginners is pretty much the same for everybody, because everyone has to follow the same basic, elemental principles if they want to get off on the right foot and make sure that they will be able to make a fortune in the stock market rather than losing their shirt or having their money go nowhere fast.

When we are considering how to approach the stock market for beginners, we always start by telling people to buy low and sell high. This sounds all too simple enough to follow. But the fact of the matter is that this can be exceedingly difficult to follow. Buying low and selling high in the stock market is counterintuitive for many, many people, and they may resort to panic trading or overly emotional trading, all of which leads to eventual disaster. To take the emotion out of investing (key to understanding the stock market for beginners), a person must have a disciplined investment philosophy, and that begins with buying low and selling high.

What we mean by buy low and sell high is this: first study a given stock's historic performance by attaining its stock charts. After studying the patterns of its stock price ups and downs, determine (along with some other information) at what point you think a stock is at a "low"; a price that it is almost guaranteed to rise up from--it is "undervalued". When you see that stock actually at or approaching that price on the market, buy it. Don't pay much attention to the news about the company, news about the economy, etc. Just buy that stock. Now, you should also have in mind a price level at which you believe that stock gets to be "overvalued", or people are bidding up its price beyond rational expectations about that company. When your stock is getting close to that price, be prepared to sell. Again, forget about the news, forget about gambling on its going even higher. Just sell it at that point and take your profits (the difference between what you paid for it and what you just sold it for; your buying and selling events may have taken place months or a few years apart, keep in mind).

So understanding and getting into the stock market for beginners is all about creating a discipline. As an investor you will want to be coldly calculating, like a poker player (except in the market, if you're doing things right you really aren't gambling very much). You have to train yourself so that just because a stock you are holding seems to be skyrocketing, don't get too enthusiastic about it; and likewise, if it seems to be starting to tank, don't cry yourself a river. You are looking for certain signs that it's time to buy or sell a stock. Your feelings about it don't matter. You cannot have any attachment to your stocks. That's the essence of the stock market for beginners.

1 comment:

  1. Great, with these awesome tips it becomes easy to earn from stock market.

    maria cruiz

    ReplyDelete