Stock Market For Beginners » how does the stock market work

Historical stocks prices and historical stock quotes – How to get them?

admin — Mon, 10 Aug 2009 03:45:31 +0000

Almost all websites and brokers provide a stock ticker which gives you information about the current trading prices of all securities but not all websites would be able to provide you with the historical stock prices. Till some time back, it used to be pretty difficult for an individual investor to know the historical stock quotes for a specific security while doing online trading but thing has changed a lot due to new technology which is available now in the form of internet.

The investors may need to know about the historical stock prices of a particular stock to understand how it behaves in particular situations. People may want to know how many times IBM stock has split? Or they want to know how Microsoft (MFST) behaved during the year two thousand bubble burst? Or what was Coca Cola (KO) stock price ten years ago? Or what was the price of Google (GOOG) when its IPO came in? They may also want to follow a particular index like Dow Jones Industrial Average or S&P index to see trends.

There are various websites available today which will provide you with this stock market data. They will let you see the historical stock prices for a particular stock as well as details about any particular index. You can see charts for any given range of time if you want to visualize the data. You can also compare two or more stocks in a single chart by overlaying them which is a great tool to do research. You can see when and how many times have a stock split in last so many years. What more, you can even download the data in a local excel spreadsheet for future reference for yourself.

Though there are many websites available, a few of them are most users friendly. These include Yahoo Finance website and bigcharts.com website. BigCharts is one of the most famous online tools to get the historical information about any chart. You just have to enter the stock symbol and you can get historical stock prices for that stock.

Yahoo Finance is also a great tool which is famous across the world. You can specify the date range while getting the historical stock quotes. You can choose the button for the type of values you want: Daily, Weekly, Monthly, or Dividends Only information. The output will give you data about stock prices (Open, High, Low, Closing Price), and Volume (number of shares sold). There is also an Adjusted Closing Price, to account for share splits, dividends, and any other unusual adjustments.

There are a lot of other very useful sites which provide this information free of cost. These include Investopedia’s research, MoneyCentral etc.

You should use the historical stock prices to make yourself a well informed stock investor. By studying the historical stock quotes, you can become more aware of the stocks and can invest in them in more confident manner.

Explaining the Dow Jones Index for beginners – what is DJIA

admin — Wed, 05 Aug 2009 08:48:44 +0000

As stock market for beginners guide I have explained NASDAQ at length in one of my earlier posts and also I have made sure that you have adequate understanding of Dow Jones index.

However It seems that post was not enough for people to understand the Dow Jones index as beginners. That is why this post will help you understand Dow Jones in pure simple terms.

Let us begin at the very simple definition of a stock market index.

A stock market index is what is needed to help you track the market. In general it is a way to tell the broader market direction. The broader market will I turn tell the health of the economy.

Then somebody thought of this and took a group of securities and decide that their simple average of the prices will be like and index.

Then you compare yesterday’s index with today’s and say that the broader market was up or below the previous day index. Now if it was simple average then a company with huge price will be able to manipulate the index and hence they have weighted average so as to discount the theory that one company can potentially influence the stock market movement.

The Dow Jones industrial 30 companies are carefully selected and the index is calculated very carefully and here is the current list of the Dow Jones stock list and I have the Dow Jones industrial 30 companies symbols.

3m Co (MMM)

Alcoa Inc (AA)

American Express Company (AXP)

AT&T Inc (T)

Bank of America Corporation (BAC)

Boeing Co (BA)

Caterpillar Inc (CAT)

Chevron Corp (CVX)

Cisco Systems Inc (CSCO)

E.I. du Pont de Nemours and Company (DD)

Exxon Mobil Corp (XOM)

General Electric Company (GE)

Hewlett-Packard Co. (HPQ)

Intel Corporation (INTC)

International Business Machines (IBM)

Johnson & Johnson (JNJ)

JP Morgan & Chase & Co (AMJ)

Kraft Foods Inc (KFT)

McDonald’s Corporation (MCD)

Merck & Co., Inc. (MRK)

Microsoft Corporation (MSFT)

Pfizer Inc (PFE)

The Coca-Cola Company (KO)

The Home Depot, Inc.(HD)

The Procter & Gamble Company (PG)

Travelers Companies Inc (TRV)

United Technologies Corporation (UTX)

Verizon Communications (VZ)

Wal-Mart Stores, Inc. (WMT)

Walt Disney Company (The) (Holding Company) (DIS)

So how does the Dow Jones work and how the Dow Jones is computed and measured.

The average price of the 30 stocks is taken and then divided by a divisor. It is this divisor which is calculated and adjusted based on the splits, mergers and the overall weight of each stock. If this divisor was 1 then assuming Dow Jones is a stock then the stock price is simply the average stock price of each stock. This weight for each is calculated by the price weightage method.

The Dow Jones closing history and the Dow Jones closing stock charts will tell us that the market has invariably gone through a lot of ups and downs and each time it has rebound and has given the amazing returns tom investors and in turn also giving out some good market gurus like Warren Buffet.

Then there are other set of industrial averages related to each industry which are tracked by a lot of people and these are collectively known as Dow Jones Industrials. This is important for understanding the stock market

Fundamental Analysis of Stocks

admin — Tue, 28 Jul 2009 03:51:49 +0000

Simply stating, fundamental analysis of stock is the process of analyzing a business on a fundamental and financial level. It involves analyzing the security or business by going through its financial statements a health, market competition and management’s effectiveness. It analyzes everything which could affect the security price which includes macro economic factors like overall industry and economic conditions as well as specific condition of the business.

The main aim of doing fundamental analysis is to be able to decide whether it is a good idea to buy a security, hold it or sell it based on its current price. Using fundamental analysis, this type of decision can be made. This type of valuation can be done for stocks as well as any other type of security like forex, options etc.

Fundamental analysis of stock is done on current as well as historical data with the hope of predicting the financial forecasts of a company. Fundamental analysis of stock can be done to answer questions about a company like:

Is the company’s revenue growing or not?
Is the company making any profit?
Will it be able to survive competition and beat it?
Will it be able to repay its debts?
Is the management effectively running the business or is it cooking books?
What is the credit risk of the company?
And many more…

As mentioned in stock analysis for beginners, fundamental analysis is done based on a few factors like value, growth, GARP, income and quality. Let’s take a look at these factors.

The main purpose of choosing one stock over others is the intrinsic value of that stock. All investors would like to know the value of stock so that they know what profits they will get in case they sell it tomorrow. But, determining value is not a straight forward task. Beginners should understand that although most value investors believe in certain things, not all who use the word “value” mean the same thing.

Growth investing is done by those who think that the company will grow in future at a reasonable pace. Growth is very frequently linked with relatively new companies which have the potential to grow faster than already established ones.

Many people invest not just for value, nor do they look for future growth of the company. They simply invest in a stock because it has a good history of giving out dividends. These types of investors are called income investors.

GARP (Growth at reasonable price) is another concept used by practitioners believing in fundamental analysis of stock. This is basically a combination of value and growth theories and then it puts an additional numerical slant to the equation. One of the common GARP approaches is to buy stocks when the P/E ratio is lower than the rate at which earnings per share can grow in the future. Since GARP uses numbers in its equation, some people believe that it is a part of quantitative analysis instead of fundamental analysis.

Quality – People who want a real quality stock look at all the above factors – growth, value, GARP and income to decide upon a high quality stock. In this theory, fundamentals like management competitiveness along with numerical figures like return on equity (ROE) are looked at in totality. The qualitative and quantitative factors are looked in conjunction to find the real quality stock.

Fundamental Analysis Tools

There are various tools or financial ratios which are used to do fundamental analysis. Some of them are:

Earnings per Share – EPS
Price to Earnings Ratio – P/E
Projected Earning Growth – PEG
Price to Sales – P/S
Price to Book – P/B
Dividend Payout Ratio
Dividend Yield
Book Value
Return on Equity

Criticism of fundamental analysis technique

There are mainly two arguments against fundamental analysis of stocks. One argument is that this analysis is done based on public information which is known by all. Since it is public information, there is no advantage which can be taken by one analyst over another.

Other argument is that a lot of things in this analysis are not properly defined. They are fuzzy so to speak. Therefore these terms like value and growth can be interpreted by different people in different ways.

Understanding the stock market investing for beginners

admin — Fri, 12 Jun 2009 03:43:21 +0000

Understanding the stock market is always a challenge and if your are a stock market for beginners person then it is all the more tough as you are not familiar with the terms and terminology like nasdaq definition or understanding the djia.

That said there is no short cut here to understand the stock market.

The best way to understand the stock market is to start investing in the stock market in a very small manner. Get your hands dirty in the market and you will learn quickly.

Best things happen in the practical world and the real stock market

You can start learning the ropes by joining a small refresher course or a stock market lesson plan but no amount of simulation can help you prepare for the vagaries of the stock market. That adrenaline rush when you see the market going on a new high and that depression of the recession are things that you will learn in the stock market.

As a beginner I would suggest these steps

1) Open up an account with a discount online broker

2) Put up some small amount say $500 or $1000 in your account and then start investing

3) Invest in defensive stock – Yes you will have to learn about defensive stocks as well as volatile stocks.

4) Put in your first trade and you will ask question like what is GTC or the limit trade.

5) Then when you sell you will have to decide whether to sell when there is little profit or when the market is down you may have to cut your losses.

6) This will in turn gradually give you an idea as to how to cut your losses or if you are in the market for long term you may start accumulating the market is down. See another strategy. No amount of theory will teach you what you can decide seeing the actual market behaviors

7) At this moment your total potential loss is no more than $1000.00.

Once you have learnt the ropes you start expanding your portfolio. Then I would suggest that you start getting lesson on understanding the stock market as well as managing your stock portfolio.

9) Never give up and start by small investment and eventually you will have a nice fine tuned strategy suitable for your risk profile (another term)

10) Monitor the markets daily and start reading the financial newspapers like Wall Street Journal.

Steps to Invest in Stocks For Beginners

admin — Fri, 26 Dec 2008 03:05:46 +0000

As a stock market investing for beginners learning guide the most important thing that you need to know is that what initial steps you need to take invest in stocks as a beginner.

I will list the things here and will follow that up in my posts later on each topic and in fact some of the topics I may have covered in my earlier posts also and I will link to those if needed.

The list of steps as outlined here are

1) The first and foremost you need to understand how the stock market works

2) That translates into NASDAQ Definition

3) Also Dow Jones for beginners

4) Stock Symbols

5) Then you need to think about what kind of risk are willing to take and that usually means

6) Your Investing strategy – Long term versus day trading versus forex market

7) You need to understand the stock market terms and glossary

You should start reading the Wall Street Journal and other investing related magazines

9) Learn about full service brokers and discount brokers and you can learn about brokers for beginners here.

10) Learn about what are penny stocks

After you have learnt about all the above do not fret too much what you have not learnt and rather take it easy as that way you will be able to enjoy the stock market rather than it be a painful thing for you.

The next few steps as well advice is

1) Select a discount broker and put some money in the account.

2) Select a good stock to trade in and put a buy order and that means you should know about good stocks or rather large cap stocks as well as mid cap stocks as well as what are blue chip stocks

3) Also then you should know what is a limit order versus what is market order

4) Then click the buy button and sit and relax. The buy order will be executed.

The next few steps after the stock has been bought are

1) You will need to monitor the stock and that will usually mean either you go to www.cnbc.com or to any other financial market site.

2) You can also use a stock market ticker to make sure that you have the best of the information at your desktop and that way you need not log on to the website every time.

3) The stock if it goes down is an opportunity to buy more if you are a long term investor and is a call to stop your loss if you are not waiting for long term up trends to start. Herein lies the difference in strategy that you have employed.

4) Next comes the decision to sell if the stock is rising and is way ahead of the purchase price. You can either sell it to make good profits or you can buy more thinking it will appreciate all the more. At this point you need to decide what kind of profits do you want an exit the stock.

5) Assuming that you sold the stock the entire set of transactions buy as well as sell will reflect in the portfolio and that portfolio will also tell you how percentage gain you made or percentage loss as well as if you have more than one stock then it will tell about what is the overall gain or loss percentage.

Once you are familiar with the entire process then you will have to think about investing more money and also diversify your stock picking so that you have good defensive stocks which and also some stocks which will give you some good amazing profits over the short period. These stocks may be more risky than the others but that is why they say that stock market is not for the faint hearted.

Learn To Invest Stocks As a Stock MArket Beginner

admin — Mon, 04 Aug 2008 13:13:02 +0000

Well as a stock market for beginners help you should know all bout stocks and also learn to invest stocks successfully to make money online with stocks.

Making money online is always a tough game and with all the success of internet there are chances that you will always be able to invest in stocks at a cheaper rate using those online brokerage firms

My most important tip is that to invest in stocks you would need to have the best of advice from a online broker and also about how does the stock market function.

Here are the steps that you need top take to make sure that you are the best in making money via stocks.

Get a stock trading course

Then but a stock simulation game

Then keep aside your money for investing in stocks

Select an online broker

Choose a plan which can keep your brokerage outflow at the minimum

Choose a stock and start investing with that stock.

Never try to emulate what the experts do at the market

Take your time and you will gain confidence about the stocks

Be aware of the market all the time and then think what works well for you and you will succeed.

Invest for long term as opposed to short term for maximum benefit. Patience pays always in life as well as in stocks.

How does the Stock Market Work

admin — Sun, 27 Jul 2008 04:18:43 +0000

This is basic question that every one who is a stock market for beginners student asks.

The answer to this question is not that simple but not too complex. Basically the stock market is like any other market and you will have demand and supply situation for each market.

In this stock market then there are rule attached to each type of stock as well to each type of stock exchange.

For getting to know how the stock market works you need to do two things. First is to open an account with an online stock brokerage firm. Also make sure that you enroll in a stock market training course which will help you understand the stock market basics.

There are a variety of stock market lesson and training courses available. Do your research properly should you want to enroll in these courses. There are many fly by nigh operators out there.

But your best bet is to have an account and start by investing a few hundred dollars. Try to get online with the customer executive of that firm and tell them that you need help. That person will guide you through the first few trades and that is what you need to get through.

Next thing you need to do is read the wall street journal for in-depth stock market reviews of stocks and that is a big learning.

Bets luck on understanding how the stock market works. Make money for sure