In simple terms, how does the stock market work? Also, are there any good stock trading websites?

I never could quite understand how the stock market works. Can anyone give me an easy-to-understand description. Pretend like you’re talking to a complete idiot because any technical terms will confuse me. I was also looking for a website where I can spend about or just to get a feeling of it. Also, is stock trading more of a long term investment, or can you make a regular income off trading stocks.

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5 thoughts on “In simple terms, how does the stock market work? Also, are there any good stock trading websites?”

  1. In simple terms

    Company A needs money

    Company A makes an Initial Public Offering (stock shares).

    Investors buy stock shares and Company A makes a quick buck.

    Investors then trade (buy and sell) their shares on the market to those who would like to own a piece of the company.

    The increase and decrease of the price depends on those buying and selling shares. What are they willing to pay for a piece of the company and what are they willing to let it go for.

    A good solid company who increases their profits year after year and future looks promising usually have stocks which increase in value.

    A bad company who loses money every year and future looks depressing will decrease in value and eventually be gone.

    To sum up….. the stock market is about predicting what investors will do in the future. Past performance does not guarantee future results. Remember this.

    Is stock trading a long term investment? Hmm, we’re peeling and onion here, there are many layers on investing.

    Regular income from stocks? Sure, find stocks that pay a dividend. Buy enough shares to live off the dividends.

  2. Each stock is like owning a piece of a company. When you buy a stock, you are a buying a piece of a company of what the market (or general public) thinks that that company is worth. As new information is released about that company or the surrounding business world, the stock will go down depending on the positive or negative affect on the company’s sales or earnings.

  3. If the ticker symbol for any stock that you OWN is green: that means that stock has increased in value, meaning that it’s time to sell shares.
    Never buy or purchase stock if it’s green, because the price is up, and you will wind up probably losing money on your investment.
    If the ticker symbol for any stock that you OWN is red: that means that stock is down for the quarter, and if you sell it while it’s down, you will lose money on the deal. Only buy or purchase stock when it’s red because you are buying it cheap- then as soon as it turns green- sell it off FAST!!! That way, you’re in control of how you invest, and you can make good money playing the stock market that way. I own 924 shares of ExxonMobile, XOM, valued at $104.56/share. It will do me no good to sell it off because the stock price is still rising, though it is in the green right now. So I guess I’m being greedy- waiting for the stock to split again, and double my money.

  4. In the simplest terms, the stock market is like an auction. You have buyers and sellers. More buyers than sellers, and the price goes up. More sellers than buyers, and the price goes down. In this case, you are buying and selling shares (or ownership) of publically traded companies. In reality, a little more complicated than that. But that is the jist.

    As far as long term investment… YES. Just ask Warren Buffett, the most successful investor in history. His theory is he won’t buy a stock that he’s not comfortable holding for 10+ years. Can you make money in the short term? Yes, but history proves you’ll lose more than you win if you try. There are many stocks that pay dividends on a regular (usually quarterly basis) if you’re looking for regular income.

    re: the stock split answer… The price cuts in half when a stock splits, so you don’t double your money. Although many times, splits do tend to enhance price appreciation (appears cheaper to the average investor).

  5. you ca try some stock trade simulators like the simulator in investopedia.com
    there you can get the feeling of it for free

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