Study: My Understanding of Stocks

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How to Read the Stock Market

A lot of individuals know the word “stock market” but for those who are not expert in financial matters are still confused about its meaning. What most people are aware of is that trading on stock market can result to either bankruptcy or booming of businesses if these companies enter the stock market game. To simply put it, stocks represents the assets and profits of a company. The amount of all the profits gained by the company from the stocks will be divided per annum in the form of a dividend. For instance, if a company makes a profit of $200,000 this year, and it has 10 shareholders holding 1 stock each, then the shareholders would receive a dividend of $20,000.

Meaning of Stock Market

The stock market or “stock exchange” is a financial institution in which licensed brokers trade company stocks and other securities that are approved to be traded by the exchange. The exchanges can take place virtually or physically. Brokers will buy and sell stocks depending on the needs and requirements of the people or companies they represent.

There are two types of stock market, these are the Primary Stock Market, this is for trading of IPOs or Initial Public Offerings and also other brand-new issues by the sellers and buyers; the Secondary Stock Market, this is for trading of existing stocks in the market by the buyers and sellers.

In order for you to know the trends in the stock market, you have to learn certain commonly used terms and be able to assess stock market charts. By taking time learning the basics of stock market, it will help you to be a more knowledgeable investor.

1. Stock Price
This represents the value for which stocks are bought and sold. Future growth, current performance and expansion are examples of the factors that can affect the stock prices. So if a company is making badly in the stock market, it is expected that its stock prices will reduce in value. While the company performing well in the stock market, the stock prices will increase in value.
2. Highest and Lowest Prices in 52 Weeks
This is made up of the stock data over a period of 52 weeks. On the date of reporting, you will see which of the stocks have the highest and lowest prices throughout this 52 weeks.
3. Price/Earnings Ratio or PE Ratio
This value is determined by dividing the newest stock price by the average earnings per share for the last four quarters.
4. The Trading Volume
This is the overall selling and buying transactions that have taken place during the day.
5. The Closing of the Stock Market
This refers to the quoted stock price at the closing day of stock market.
6. Net Change
This is the difference in price of the stock since the last change that happened. Net Change let you see the direction in which the stock price is headed. A plus symbol means a positive direction while a minus symbol means a negative direction.

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