The Stock Market Explained

So, understanding the stock market...OK...what the heck is the stock market anyways?

The basic function of the stock market is to provide capital resources for corporations that seek capital to expand their operations and finance their growth.

If you make your money available to theses companies, you help them expand and prosper.

Companies that issue stock shares to the public are considered "publicly held" or "publicly traded" companies. Stock shares represents ownership of a corporation. As a shareholder, an investor owns a portion of the company's assets and profits.

With ownership comes risk and a shareholder assume the primary risk if a business does poorly. However, they also stand to make the greatest return if it succeeds. If he is smart, the shareholder would be wise to be understanding the stock market too.

When an entrepreneur starts a company, he often looks to family and friends for start-up capital. As the company grows, it will need more money, or in other words capital. Those who survive those tough early years, when most businesses fail, will look for a bank loan.

Loans carry high cash costs, in the form of interest payments. Eventually, if the company grows enough, its owners may choose to issue stock shares in the public markets. Understanding the stock market is very important to know for these entrepreneurs.

When you hear that a company is "going public", it means that the company is issuing shares of ownership for sale in the public marketplace. This process takes place during the initial public offering, or IPO.

The IPO is a first-time offering of stock for sale to the general public. The IPO process involves a number of people in addition to the company owners, and can be a rather complex undertaking. The company itself must be clear in understanding the stock market.

To go public and issue an IPO, the company must use and find an Investment Banking firm that is willing to underwrite the public offering. The Investment Banking firm, or underwriter, will do their best to sell the shares. They may reserve the right to sell the offering on an all or none basis, which means that if they cannot find buyers for all the shares to be issued, they may call off the entire offering.

The underwriter's profit in this case is made by a commission charged for selling the stock. If the underwriter agrees to a firm commitment to sell the entire offering, usually the first move is to buy all the shares that are going to be publicly offered at an agreed-upon price.

The underwriter then attempts to sell those shares to the public for a higher price, thus profiting from the transaction.

Stock Classifications

Stock Types There are two classifications of stock: Common and Preferred.

Common stock is usually what is issued to the general public. The term common Stock doesn't carry any negative connotations, but rather indicates that it is the "standard" stock the company has offered. Common shareholders have voting rights.

And as the word suggests, "preferred" stock has certain advantages over common stock. First, preferred shareholders are paid dividends before common shareholders. And if a company isn't doing well, the Common stock dividend is eliminated first.

Second, is if a company goes out of business, the owners of preferred shares have prior claim to any assets that remain when the company is dissolved and after bond holders and other creditors have been paid. Owners of common stock are the last in line to pick up the pieces of the fallen corporation.

There are disadvantages to owning preferred shares. Preferred shares have no voting rights. Also, the price of preferred shares tends to rise more slowly that the price of common shares.

As owners, common shareholders elect a corporation's Board Of Directors. The board of directors is a group of individuals, which are responsible for managing the affairs and growth of the corporation. The power of the board usually extends beyond that of the founder of the company.

The power resides in this board because the board is in the position of representing the shareholders as a group. This board must be educated in understanding the stock market.

Normally, owning one share of common stock gives you the power of one vote. If you have control a large number of shares, you will have more influence on the outcome of elections.

At worst, common shareholders can lose their entire investment if their company fails. In such a case, a company may be sold or liquidated and its remaining assets distributed among creditors, such as banks and bondholders. Shareholders would receive proceeds only after theses more senior claims are satisfied.

In order to stockstackup.com" title="make money">make money, the individual shareholder must sell his shares back to onto the market, through a Stock Exchange and their Stock Brokers.

StockMarket-Coach.com cares a great deal about you. Our aim is to provide the best stock advice with a friendly and positive attitude to keep you on the road to trading success.

StockMarket-Coach's mission is to provide a program of sound investing advice, education, and support that helps create successful lifetime stock investors. By doing the appropriate investment research and therefore becoming a confident, knowledgeable stock investor, you as a stock trader is empowered to build better financial futures for yourself and your family.

Peace and Abundance!

http://www.stockmarket-coach.com/index.html

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Penny Stock List - 3 Steps to Creating a Hot Stock Pick List

Having a Penny stock list at your finger tips is what you need to do frequent stockstackup.com" title="short term trading">short term trading. You can create your own list by using technical analysis or you can buy a service that will provide you hot picks. Let's do a quick review of creating your own penny stock list.

3 Steps to Create a Penny Stock List

Using a Stock Broker
Find yourself an online broker. Most stockstackup.com" title="online brokers">online brokers have stock screening tools to sort through the thousands of stocks available. The broker will have ideas on how to screen stocks that are typically pretty decent. I focus on companies that have shown a steady increase of cash flow in the past year. I also like picks that are under $2. This type of screening is easy with the right online broker.

Technical Analysis
If you are not familiar with technical analysis, you will need to take little time to get up to speed. The idea with this type of analysis is to review price history on charts to predict how the stock price will act in the future. Charting patterns, oscillators, and indicators used together are common tools to do technical analysis. When combined, they can help you find a share price that will most likely move up or down in the near future. Your online stock broker probably will have lots of information that you can read to get up to speed with technical trading.

Before I started using a stock alert service, there were a few things I'd look for when doing technical analysis. I would like to focus on spikes in trading volume and trendline breaks. When I saw significant support or resistance broken while volume was spiking, this was a very good technical analysis sign to enter a trade.

Penny Stock Research
Finally, you'll need to know how to research a company you are considering to add to your hot pick list. The main component of this research will be financial. Understanding how to read income statements and balance sheets can shed some important light on potential picks.

If you thought penny stocks may be a way to make a lot of money, you are absolutely right. Having an easy way to create your own stock watch list or to pay a reputable company to provide you a penny stock list is the most important part.

Hector Breton's passion is trading. He does so successfully by using a penny stock list service provider. Find out what he recommends as the only proven method to trade at http://www.pennystockslist.us.

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Stock Option Recommendation Service

Plenty of investors are having the hard time in selecting a stock option recommendation service. Although they want to look for good stock picks, investors do not have enough time to their own analysis on the selection of stocks. Some of the investors may not even have that kind of expertise when it comes to analysis.

Selecting a stock option recommendation service can be very tough for some investors. Because of this reason, a kind of software had been offered that helps picking and posting of stock options much easier. Good solutions are also included in the software for any difficulties that could be encountered during the selection process.

Aside from the software, there are also some online stock trading sites that offer tools on how to select or choose a stock option recommendation service. An investor can choose from any of the sites available over the Internet. However, it is recommended that the investor is adapted on the computer technology so it would be easier for him or her to access and explore the sites available or narrowing down the fields on the sites otherwise it would be very overwhelming or time consuming for the investor-user. Apparently, not at all online stock trading sites easily works for the investors since every investor has his or her own specializations or strong areas as well as weak areas on selecting stock options. Most of these sites give the investor-users the freedom of posting their opinions on how their tools can be enhanced as well how it will be of help in the increase of their profits on stock trading.

When it comes to trading, the stock option recommendation service is not that complex as what might other people think. Although it uses technical analysis, a trading plan is still needed in the outlining of the requirements used for exiting and entering trades. If you are a new investor, it is recommended that you should start with just minimal lots of shares. It is advisable to jump in with maximum orders that are above 1,000.

The stock option recommendation service is important for stockstackup.com" title="day trader">day traders for the rapid in and out of their stocks. If the day traders did not carefully watched their stocks it will bear them disastrous results at the end.

Knowing all the technical details of buying and selling stocks is not necessary to be able to understand basically the stock option recommendation service. The only knowledge that you need to know is how the market works. In this way, you would know how to use vast computer networks in the electronic markets that will help you match the sellers and the buyers. This idea is best rather than dealing with human brokers. However, you still need a human broker who will handle all your trades.

Candis Reade is an accomplished niche website developer and author. To learn more about Stock Option Recommendation Service [http://freeinvestingstrategies.info/stock-option-recommendation-service], please visit Free Investing Strategies [http://freeinvestingstrategies.info] for current articles and discussions.

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Currency Market Trading Tips

I'm going to share with you my stockstackup.com" title="currency">currency market trading tips, that should help you increase your bottom line. This is a great market to start into because you can make a profitable second income from the comfort of your own home.

The first tip I want to give you is to get you into the mindset of the cold and calculated person. When you're trading, this is the type of person you must become. This person makes trades on numbers. He does the analysis, he crunches the numbers and he determines if that is a good move. The cold and calculated person is not emotional. Emotional people make moves on gut feelings. They get stressed out and frustrated. You need to understand that the emotional person is a person acting like a gambler. They're making decisions not based on a formula to profit, but a feeling that it will "just happen". Don't be emotional, be cold and calculated.

The next tip I want to give maybe a little hard for some people, but you need to become confident. If you're into stockstackup.com" title="currency">currency trading, you're now your own boss. You make your own decisions. The quality of decisions rests on your shoulders. You need to be confident in your decisions. Any lack confidence will reflect in hesitation and early exits. Hesitations are pretty obvious. You'll miss out on great opportunities. Early exits are the people that get uneasy after a trade and exit before they've really given a chance for the trade to perform. You don't want to be like that. Act as a confident person.

Lastly, I want you to start simplifying your work. The more simple things are, the more likely you're to complete them, do it correctly and execute it again in the future. Simplicity is the key to success because it requires no thought, just action.

I'm currently giving a 7 day free forex training course. Newbies and experienced are all welcome. If you're interested in participating, check out the Casual Forex Trader.

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Automated Stock Trading Software Can Bridge The Divide Between Fundamental Analysis And Chartering

Perhaps the most important attribute of the canny investor is a sense of timing - knowing when to purchase the stocks and when to sell them. We all know the old saying "Buy Low and Sell High", but how do we know when the price is low so that we can buy; or when the price is high, so we can sell?

There have been many theories and techniques which have supposedly guided the investor over the years. Traditionally, these theories fall into two general categories: the Fundamental Analysis and Chartering. Fundamental Analysis is all about understanding the nature of the underlying asset so that the investor can make an informed investment decision. The analyst will pours over the company's financial statements, analyze the profitability of the market the company operates in, and make an assessment of the calibe of the management team.

Chartering - or technical analysis - takes a different approach. There is absolutely no focus on the company itself. Instead the investor analyses the movement of the stock price over a period of time. The theory is that "everything is factored into the price", and the stock price alone will predict the Buy and Sell signals.

Investors have traditionally adopted one of these two approaches. But now, with the advent of increased computer processing power and intelligent algorithms, the investor can get the best of both worlds by using Automated Stock trading software.

Some examples of Automated Stock trading software packages are StockPicker from Investing Systems Network or OmniTrader. Additional information can be found at http://www.autostocktrading.com.

Automated Stock trading software enables the investor to robotically monitor the market for Buy and Sell signals, as per the Chartering model. But it also accommodates the Fundamental Analysts by evaluating the company behind the stock using its proprietary algorithms and "fuzzy logic". Best of all, it then executes the trades when all the conditions are met!

Russell Clark owns and operates the website AutoStockTrading.com

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How to Play the Stock Market For Quick Profits

The stock market is one the most profitable investment venues, if and when you know how to play it to your advantage. There are many ways to do so, of which the following tips are just a few.

Buy Low, Sell High

This is the first edict of making a killing at the stock market, which cannot be overemphasized for both novice and expert traders alike. Basically, this means that you have to stockstackup.com" title="buy stock">buy stocks at the lowest price, usually when the industry sector or market as a whole is down, and then sell the same stocks, when the company recovers from its slump. Of course, choosing the stocks with the best chances for recovery is an art in itself. For most investors, however, stocks in the consumer staples, alcohol, pharmaceutical and electric industries are stable sources of investments, no matter the state of the national economy.

Entry and Exit Plan

The second edict of successful stock investors is to always formulate and follow your entry and exit plan. Basically, you set limits on how much you can profit from a trade and seize the opportunity when it comes up as well as how much you can afford to lose and cut your losses. For example, if your profit limit is a thousand dollars on a few shares of a company, then sell it. If your loss limit is half the amount of your profit ceiling, then sell the stocks before it slides down any lower.

Ask The Professionals

There is no shame in asking for professional advice especially when your hard-earned investment capital is at stake. Professional help can come in many forms and it is up to you to choose the best one to suit your needs. Or better yet, use all of them for optimal results. First, you can read books written by successful investors, which will give you insights on the intricacies of the stock market. Second, you have the services of professional stockbrokers on your side especially if you enroll in an online trading platform. Third, you can look for a mentor to teach you the ways of the stock market on a more personal basis.

Use Your Head

The stock market will move up or down. Wall Street executives and company management will make their moves. The forces affecting stocks in general will move in many directions. All throughout these movements, you must not fall into the trap of thinking that it has something to do with you on a personal basis. As such, it pays to always make your decisions based on informed judgment that are, in turn, shaped by the savvy use of technical investment tools. No matter what happens, never use your emotions to make your decisions for you, least of all greed.

You must always do your research about the financial statements, organizational structures and future plans of the company you are planning to invest your money in. After all, before you can make a profit in trading stocks, you must know how to choose the right stocks in the first place. Visit http://www.pennystocktradez.com/ to learn more.

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Three Things You Must Know About The Stock Market Before Investing

An Introduction to the Stock Market

What is the Stock Market?

The stock market is a commercial platform for people and organizations to trade company stocks and derivatives of stocks. Similar trading platforms are the bond market and the commodities market. The bond market is an over-the-counter environment that deals with trading in bonds, while commodities are sold in the commodities market. stocks are listed on stock exchanges. These are corporations or mutual fund organizations where buyers and sellers of stocks meet and conduct transactions. Stock exchanges in the US include the New York Stock Exchange (NYSE), the NASDAQ, the Amex and other regional exchanges such as the Pink Sheets and the OTCBB. Exchanges in Europe include the Paris Bourse, which is now officially a part of Euronext, the Deutsch Bourse and the London Stock Exchange.

What is the Size of the Global Stock Market?

The size of the global stock market is valued at $22.5 trillion and is half the size of the global bond market, valued at $45 trillion. The worldwide market for derivatives stands at an imposing $300 trillion and major US banks comprise a third of this figure, at $100 trillion. The difference between the market for derivatives and the stock market is that the latter refers to actual value, while the former refers to notional outstanding amounts.

Buying in the Stock Market

Most people tend to think that a well-priced stock is a good buy. There are others who rely on instinct while buying stock. However, these are not always the best parameters to base an investment on and remember that buying stock is an investment. You need to know that the stock you are investing money in is reliable and is actually as good as the name or the price it carries.

While price may not be a strong clinching factor if you are looking at buying stock as a long-term investment option, it is still a good idea to be sure about what you are investing in. That's why you must do research on the company you're investing in, as well as the company you're investing through, whether that's a mutual fund or through a broker.

One key to remember is NEVER to go with a load-bearing mutual fund. Paying a 'load' means you pay an up-front sales fee, plus a commission on any of your earnings to the mutual fund. There is no reason to pay that fee because there are plenty of great mutual funds out there that are 'no load' funds.

Three Things to Know Before You Start Buying

There are three things you should know when you are thinking of purchasing at the stock market:

a. What the company you are planning to invest your money in does. You are, after all, going to part with your money when you buy stock in a company. Therefore, it is in your best interest to know about the company you are planning to invest in.

b. The growth curve of the company. This is very important, as this will give you an idea about what shape your money would be in over a period of, say, five years. You should know what the previous and existing revenue and income of the company is. This gives you a fair idea about the financial health of the company, which in turn will be a direct pointer to whether your money will be safe here or not.

c. How much you are willing to pay. This is another critical question. Even after you find that the company you are planning to invest in has a name in the market and is doing well financially, you still need to know why you're investing. If you're looking for a long-term investment, you'll probably diversify your money by investing some here and some there. In case one sector does poorly, the other sectors you've invested in can keep you from losing everything. If you can handle risk and you're looking for fast cash - it's possible but not recommended to look into day trading. The better idea is to be safe and be knowledgeable.

The stock market doesn't have to be something that scares you or seems like a foreign language. Put in a little bit of research because what else in your life deserves research if not your money? Ideally, in time, you'll be able to invest your own money where YOU see fit, and not take so much 'wise advice' from everyone else who sells their opinion. Be wise yourself by educating yourself. Then you can make the stock market work for you.

Alan King is a writer that concentrates on helping people better themselves, for cutting edge information you NEED to know about stock trading before you try to cash in on this multi TRILLION dollar industry I strongly suggest that you check out my friend Mark Crisp's awesome free 9 page e-book at http://www.stressfreetrading.com

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Insurance in Financial Planning - Importance of Managing Investment Risks

Insurance certainly plays an important role in the financial planning process in the context of the managing of one's investment risks. In financial planning, a logical step to improve and increase one's net worth is to indulge in a careful and a well implemented investment plan. You would required time to be on your side and also the patience not to plunder into your stockstackup.com" title="investments">investments long enough to allow them to grow through compounding.

However, we do know that unforeseen events do happen. It is therefore sensible and pertinent to take the necessary precaution in managing your investment risks by including the relevant insurance policies into your financial portfolio. Purchasing the right type of insurance is of paramount importance and certainly a necessity in ensuring and achieving success in your financial goals and objectives.

Two very important insurance policies recommended in your financial investment plan portfolio and the reasons for their recommendation are stated below:

1. Term Life Insurance with TPD (Total Permanent Disability) rider.

"Buy term and invest the difference in a diversified portfolio of long term investment instruments" is the call of most well meaning financial planners. The reason for it is that term life insurance is the cheapest form of life insurance in the market and the purest form of life insurance with a protection element only without any savings features built into it. Therefore, a term life insurance policy provides more protection coverage for a smaller annual premium. This will allow you to stretch your insurance dollars the furthest and to invest the difference in savings and investment vehicles that have higher long term historical returns. A term life insurance policy with a TPD rider will provide pure protection in the event of death and also in the event for total disability.

With the right amount of term life insurance in place, you will be able to allow sufficient time for your investment portfolio to mature to achieve your financial goals within the period before the term insurance policy expire.

2. Medical Insurance

A financial plan with the intention of managing your investment risks will not be complete without a medical insurance policy with critical illness coverage and hospitalization and surgical (H&S) coverage. A financial investment plan can be derail if one should suffer the tragedy of succumbing to any life threatening illness such as cancer, diabetes, etc causing the person to lose his job and income before the financial goal of his investment plan materialize. The cost of treatment which may be exorbitant from the hospital expenses and surgery needed would cause you to use up the emergency funds and in the worst scenario may require you to withdraw from investment program before it mature if a medical policy was not purchased earlier.

The quantum of amount of term and medical insurances required will depend on the individual needs and financial dreams of the individual.

There are other types of insurances for a more comprehensive financial program but the above two types of policies above are certainly vital in the managing of your investment risks. It certainly is a folly to ignore the importance of insurance in the financial planning process.

For related articles, check out Jeremy's blog on Financial Planning Guide at http://financialplanguide.blogspot.com

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Covered Calls For Retirement Income - Part 1

Many fail to get involved in selling stockstackup.com" title="covered calls">covered calls because it deals with options, yet the technique is really fairly simple. The term "Covered" just means that you own the stock you are "writing" a call option on.

In short, this strategy involves buying a stock and then selling someone else the right to buy it from you in the future (an option). The fact that it is a "call" option means that they (the option investor) are hoping the price of the stock will go up (to remember this, you call UP someone, then you put DOWN the phone - so "calls" are UP or Long, and "puts" are DOWN or short).

How does it all work. Do you have to go out and find the buyers for your call options? NO. This is all done for you by the broker. Once you "write" (or sell) the covered call, one of three things can happen:

1) The price of the stock goes up in value, and the buyer exercises his right to buy. In this case, you've pocketed the premium, and you'll most likely be selling the shares at a profit too! You'll then have to find another stock to buy in order to continue the strategy.

2) The stock price remains about the same (it could go up slightly, and the call option would still not be worth executing). In this case, you keep the option premium. Since the buyer won't be willing to pay you less than the option value for the stock, you'll keep the stock, too. You've made about 4% over three months, and you can even sell the right to buy your stock again! Not bad right?

3) The stock falls in value. In this case, the option premium you received helps to offset the loss on the stock. The buyer walks away when the right expires, and you're also free to sell another option.

So if the investment goes up, then we sell it for a gain. If the investment stays the same, then we profit from the option. If the investment drops in value, then the option premium helps offset the loss.

I know that sounds like a can't lose strategy, but there are a couple downfalls you need to avoid that we will cover in Part 2 of this article series.

Doug West has worked in Financial Planning and Investment training for over 20 years. Get his No-Cost Audio Report on how you can Secure Your Retirement with Free-Online Tools:

Get your Free Report Here and discover Rock Solid income strategies, including how you may be able to increase your social security check by 50%.

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