Secret Tips Of The Mutant Marketer

At first glance, trading in the stock market (both online and offline) might look just like another common investment option. But to the astute trader, it brings with it many benefits that are substantial.

For both long-term and short-term investments, one very attractive benefit in the business of stock market trading is that you have a relatively liquid asset. This is because you can quickly (and easily) convert your stocks to cash by selling in times of need.

Your return of investment is also guaranteed whether you are in for a long haul or had chosen short-term options with your investments. Long-term investments are always safer because values generally increase over time. Short-term investment choices can be profitable by taking advantage of the quick changes in stock prices.

Stock trading

Compared with other businesses, taking to stock trading (and earning well) offers more flexibility in terms of work timings, educational qualifications and investment. This is especially true now that computers are now readily available to everyone.

No other business has all of these advantages. Moreover, you can work part time or full time. If you are into another business or profession, you can do trading in your spare time. A fulltime housewife can still earn while actively raising her children as well.

For physically-challenged persons, stock trading is a good earning option. With computers and today’s connectivity, mobility is not a problem anymore. For students who are also interested, the only requirement is that they have to be at least 18 years old.

Work at home

With the computer and the internet, stock trading can now be done fully online. From the comfort of your home, you can do all your transactions with out-of-town business associates or those from other parts of the world.

With the click of the mouse, even the delicate business of payments and transferring funds online are now standard procedures.

Low costs

In the old pre-internet days, stock brokers dictated the exorbitant amounts of their commissions. The advent of the internet and computers changed all that.

Today, there are so many stock brokerage companies offering much lower commissions, the latest trading technologies and other facilities to attract customers.

24-hour operations

Today, online stock trading had already erased the old restrictions on working hours. You have now the option to do your own trading at night after the old official business hours have closed.

If you did your research well and are updated on the latest business trends and economic crinkles, you can make thousands or more in a matter of minutes and with a few clicks of the mouse.

No limits

Today, if you cannot afford the full amount of a share in best value stocks, you can choose to buy its fractional shares. You can trade in stocks with as low as $3 per transaction.

You can invest in a whole range of sector (niche) stocks, either in small amounts or as high as your budget will go.

No waiting time

Unlike other businesses, you need not wait out for months to cash in on your profits. There is no need to advertise your goods, coax customers or write catching sales letters.

In the stock market, your stocks are sometimes regarded more dearly than cash.

For the layman, there are many terms used during transactions at the stock market that have filtered down to our everyday world. We heard them, we understand some of them, we use some of them ‘ yet, we know little what they mean in their real business context.

The following are some of the more widely-used terms used in the transaction of deals at the stock market, be it at the old stock exchange floors, or at some terminal of some electronic stock market network.

Stock exchange

This is the central market for buying and selling stocks. The price is determined through supply-demand mechanisms. Individuals and institutions buy and sell the stocks in an auction-like forum.

Initial public offering (IPO)
This is the first public stock offering undertaken by a company.

Primary market
This refers to the market in which shares in a company are sold to the public for the first time.

After market or secondary market
A term referring to stocks which have been bought and sold by investors after they have made their debut on the primary market. (A similar concept is new home sales versus resale. A home can only be sold “new” once. After that, it becomes a resale.)

Market value
This is the price investors are willing to pay for a stock. This is after being given information on the stock and its anticipated future earnings projections and dividend streams.

Depository
This refers to the centralized clearinghouse and repository for securities where securities are actually stored. This is also where the electronic day-to-day movements of those securities are facilitated. (The Depository Trust Company, located in New York, is the largest and most important depository in the U.S.)

Cash account
An account maintained at a brokerage in which an investor deposits cash that can be used to buy securities.

Long position (buying long)
This refers to the practice of buying and holding stock, expecting that the price of the stock will rise over time.

Preferred stock
This is a specific class of stocks which is senior to (and receives preferential treatment over) the company’s common stock. Also, preferred stockholders receive preference in the payment of dividends and on claims of company assets in the event of a bankruptcy.

Blue chip stocks
This refers to the stocks of large and stable public companies with a solid history of profitable growth and a steady stream of dividend payments.

Par value
This is an arbitrary value assigned to common stock shares at the time a stock is issued in a public offering. Par value typically has no relationship to actual market value.

Capital gain
This refers to the profit or gain made when a stock is sold for a higher price than was paid for the stock. If a stock is bought for $10 and was sold a year later for $11, the capital gain on that sale is valued at $1.

Dividends
These are the cash payments paid to shareholders. Dividends represent a certain percentage of a company’s total profits after taxes. Not all companies pay dividends.

Dividend yield
This refers to the annual percentage return represented by the annual dividend stream compared to the price of the stock.

Just like any other profession or trade, the stock market has its own set of names and terms unique to its kind of business. The above-listed ones are the most commonly-used.

Put simply, a stock market is the place where people buy and sell shares of stock in publicly traded companies. Brokers connect potential buyers and sellers who agree to transactions at an agreed-upon price.

When the stock market operates the way it should, the most efficiently-run companies will receive more investments than the others who are not. The best businesses will then thrive and those that are not will become extinct or adapt.

Today, stock markets are thriving and are getting more sophisticated. There is now a slow transition of the traditional stock markets (and stock exchanges) into the virtual world and online stocks transactions will all be done online.

For an aspiring investor or a broker wannabe, there are still certain things one should be familiar with in a real-world stock market trading. One of them is the so-called stock index.

Stock indexes

A stock index is the statistical average of a particular stock exchange or sector. Stocks of parts of the same exchange, or the same industry or the same companies are classified and grouped into indexes.

The most common (and well-known) stock indexes in the U.S. are the Dow Jones Industrial Average, the New York Stock Exchange composite index, and the Standard & Poor 500 Composite Stock Price Index.

Stock indexes are usually studied by experts for a definitive look into the overall perspective of the economic health of a certain industry group or the whole of a stock exchange, for instance.

Kinds of indexes

Stock indexes are calculated in different ways, each type serving a purpose. Price Weighted Indexes are those that are based solely on the price of stocks. This index group does not consider the importance of any particular stock or the company size.

The Market Value Weighted Index is the one that does consider the company size of the stocks group with them. This group considers the price shifts of small companies even if they have less influence than the big ones. Another type, the one that is based on the number of shares rather than the total value is called the Market-share Weighted Index.

Other index uses

Aside from giving overall outlook on particular economies, indexes are also used as investment instruments. Passively Managed Mutual Funds are mutual funds based on indexes.

Regular managed funds have been found to be outperformed by this index-based passively managed mutual fund.

The big indexes

The Dow Jones Industrial Average is one of the best-known indexes in the U.S. Presently, it follows the stock movements of 30 of the most influential companies in America.

Dow Jones is considered to be a price-weighted average index because it gives more influence to more expensive stocks. Many analysts say that price-weighting does not really give an accurate picture of the different stock market movements. They also added that 30 companies is still short to form an accurate assessment.

S & P 500 Index

S & P 500 Index is based on 500 US corporations that are carefully chosen to represent a much extensive swathe of the country’s economic activity. Although regarded as second only to Dow Jones, economic experts feel that it is an accurate predictor of the state and condition of the economy.

All in all, stock indexes have a perfect role to perform in a stock market ‘ an indicator of the market’s health or that of its group or even the strength of one particular stock itself in the market.

The stock market is also known as the equity market where companies have access to capital and investors. Once investors had bought shares of the company, they look forward to potential gains of their investments in the future performance of the company.

Stock exchanges

With the exchanges as the main players, the stock market is like a big superstore, a buying and selling place where people buy stocks. These exchanges are where the buyers and sellers are matched.

The primary exchanges in the U.S. are the NASDAQ, the New York Stock Exchange (NYSE), all of the ECNs (electronic communication networks) and some regional exchanges like the American Stock Exchange and the Pacific Stock Exchange.

A few years back, all the trading was done in the traditional exchanges like the NYSE and the like. Now, almost all the trading is done through the NASDAQ which uses ECNs and thousands of other firms with access to the NASDAQ for trading.

Electronic buy-and-sell

Here is a sample on how a stock market transaction is done today. First, you open an account with say, E*Trade by sending E*Trade a $1,000 check. E*Trade then deposits the check into a trading account listed under your name.

You log on to E*Trade and place an order to buy 100 shares of stock in Company X. (The stock is currently trading at $5.) E*Trade uses its networks to tell NASDAQ and all its related networks that there is a demand for 100 shares of Company X.

NASDAQ finds someone who is willing to sell 100 shares of Company X and instantly facilitate the trading of stocks between you and the person selling the shares.

The data is sent to a clearinghouse where it is processed and the shares will now be registered to you. The actual stock certificates are held ‘in street names’ and do not need to change hands, although you can request that the certificates be transferred to your name.

How stocks get valued

Stocks are valued two ways. One is created using some type of cash flow, sales or fundamental earnings analysis.

The most common is the P/E ratio (Price to Earnings Ratio). This valuation method is based on historic ratios and statistics. The aim is to assign value to a stock based on measurable attributes. The form is what usually drives long-term stock prices.

Supply and demand

The other valuation follows how much the investors is willing to sell them. Both of these values changes as investors change the way they analyze stocks. In short, the stocks are valued based on supply and demand.

If more people want to buy them, the price goes higher. Conversely, the more people that want to sell the stocks, the lower the price.

Market forces

In the short run, the market is driven by simple human emotions of greed and fear. In periods of prosperity, the market usually rises above its real earnings.

In tough times, political uncertainties and other negative factors, the stock market often performs worse than its underlying fundamentals. In the long run, however, the stock market is driven by several underlying economic, financial and global growth.

Times may be hard, but this should not stop you from looking for ways to earn more than what you are already getting. This may be the ideal scenario, but you have to make sure that you fully understand all means, ways and terms of whatever venture that you may want to pursue. This is very true in dealing with the stock market. Here are some vital things that you have to know about this as you begin searching for clues about the topic.

The basic idea here is that you as the trader will buy and sell stocks. There are two ways in which this can be accomplished. This can be done on the exchange floor or you can also opt to trade through the electronic medium. There are some groups that are pushing for the latter to become the more utilized form for this kind of activity, but it cannot be helped that many people who opposed such notion. These days, most markets, including the most popular NASDAQ, are already trading using the electronic medium. There are some trading methods that must be done in person and this must happen on the floor through several exchanges, such as the futures’ markets.

The First Method ‘ Through the Exchange Floor

You may already have an idea of how this works or how it looks like because this has been used in many television shows and films. In Hollywood, it is already very common to show the NYSE or the New York Stock Exchange to reflect this kind of activity. The picture usually looks like hundreds of people rushing about when the market is open. These people shout and gesture to one another, while others are talking on the phones. These are happening while everybody keeps on looking at the monitor as they enter some information on the terminals. The overall appeal is chaotic and this is actually very true. The markets will work out all the trades when the day ends and everybody dwindle down as they all prepare for the next day.

The Second Method ‘ Through the Electronic Medium

Even NYSE uses this medium for the small percentage of its orders, but most transactions are done by humans. NYSE is the complete opposite because everything is done electronically. This can be accomplished through vast computer networks that handle the pairing of the right buyers and sellers, so that there is no longer any need for human brokers. The overall appeal is more simple and peaceful than the first type, but this is also faster and very proficient. Some samples of traders that prefer this method include mutual funds, pension funds and other institutional traders. This is also ideal for those who are only learning the tricks of the trade because instant confirmations on your trades are ensured. You will still be guided by an able broker with your transactions, so you really have to pay attention in looking for the right person.

As you go about the process of trading in the stock market, you will learn more things that can hone you to become better and more knowledgeable on this venture.