What exactly is a stock?
A stock is a piece of ownership of a corporation. For example, if you buy one share of Apple, you actually own a small portion of the company. How much? Well in Apple’s case, you’d own 0.0000001095%! Sure it’s peanuts but the point is, you actually own a portion of the company. What percentage one share gets you varies by company—by how many shares they have total.
What does owning a stock get me?
Owning a stock has three benefits. The first is arguably useless (to the average investor):
- Voting rights: Day to day operations are handled by the CEO but very big decisions (like who the CEO is) are voted on by the shareholders. Each share gets you one vote.
- Dividends: Some companies decide (often by a shareholder vote) to share their profits with their shareholders. Usually done every 3 months, this is called a dividend. The company will send you a check based on how many shares you own. Ex: Say the dividend is $0.25 per share, and you own 10,000 shares. You’d get $2500. Not all companies issue dividends and the dividend amount varies quarter by quarter, depending on how well the company does.
- Increased value: This is by far the biggest benefit of owning stock. As a company makes more profit, their cash increases along with their ability to make even more in the future. This drives new investors to the stock, pushing up the stock price. Your shares are now worth more and you can sell them at anytime. Life is good.
Why do stock prices move up and down?
This is probably the least understood question in investing. Sure when a company makes more money the shares are more valuable, in theory. In practice, the reason stocks rise or fall in value is simple supply and demand. Think of a share of stock not as a fixed price good, but instead as a fluctuating value. Every Monday-Friday from 930am to 4pm EST there is an ongoing…..auction for lack of a better word. Buyers are bidding for shares and sellers are asking for certain prices before they sell. Where they meet is where the value of the share is. As more buyers come in (or as sellers sit out) the price will rise. If sellers outweigh the buyers, the price will fall. This is a key concept to understand when Day Trading and Swing Trading.
How can we predict the direction of a stock price?
Sad to say but you cannot accurately predict the direction of the market or an individual stock. You can, however, make educated guesses. How?
Remember, stocks move up and down in price based on PEOPLE. More buyers? Price goes up. More sellers? Price goes down. Period. So we can look at the stock’s previous price (in a chart) and see where buyers like to buy, where they stop buying and the same for sellers. This is a sort of psychological profile on the crowd buying and selling the stock. Based on their past actions, we can ‘predict’ their future actions. This is called Technical Analysis.
Is there any system that is guaranteed to make you money in the market?
You know the answer before you ask the question. No.
See the thing about unchanging systems is that if they work for even a day, everyone will start to use it and it will self correct. Remember, people drive price moves. So if a big group of people are guaranteed to make money if they buy XYZ stock, they will buy it and the price will go up as they buy it, forcing their entry price higher. Everyone else not using that system would see the price spike and take advantage by selling, pushing the price lower and our poor friends with the guaranteed lock would lose money. Loopholes are rare, but even when they do exist briefly, they self-correct. No system can be built around a loophole. If you see a system out there that guarantees profits, you know you’re looking at a scam. After all, why is this fellow sharing this secret with you? Why does he want your money when he can make unlimited money with his system?At TickerTank we’re all about education and proven long term strategies. Our Day Trading, Swing Trading and Options Trading systems are by no means 100% and we lose ALMOST as much as we win. That almost is key! If we can make money on 55% of our trades, losing on 45%, we’ll do just fine and so will you.
I want to learn more about stock and options trading---how should I get started?
This is where TickerTank comes in. Your membership with us will give you access to a trading expert who will not only share great trades as they come along, but be happy to answer your questions as they arise. All this will happen in real-time in our state of the art trading room. Discover new trades, get help on entry and exit orders and have your questions answered, all by a pro. That is TickerTank