The Stock Market
Introduction
Speculator's Pledge: We don't share profits, but will share losses.
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Not unlike sports, such as tennis and golf, the stock market is all about trajectories, except that, now, the object in motion isn't a ball, but is, rather, the price of one or another equity as it varies in time. To make money you have to "track" the price movement and intercept it at a point where you wish to make a trade. It is interesting to note that the price at which the stock is "intercepted" for a trade is called the strike price. Shades of tennis and golf!
There's a lot of money to be made in the markets. Trillions (that's with a T) of dollars are floating around. But you have to be in the right stocks at the right time. And you have to be long if the stocks are going up, and short if they're going down. For that you need to know how prices move -- you need to know their dynamics. And that ain't easy.
That the game is wired against you and that there are plenty of crooks out there only makes the job harder. It also requires that you have a better grasp of the activities if you intend to stay. That's what it means to have a working model of the situation -- ideas you can use as a guide to information. Hope is a great companion but not a good guide. Technical analysis, including Elliot Wave Theory, may offer a better approach,
New players pretty much have to fend for themselves. And the cost of learning from "practical experience" can be very high -- assuming you can even get better at it. Oh, sure, you can get lucky and hit a gusher, but there are too many tough competitors and too many ways to make mistakes to think it's easy.
A bleak picture, I know. But a rational approach could provide a way to learn to play it profitably, though it's no easy go, as you can see here. The market might just be irrational!
Here you can learn more about overall market strategies, the trading mechanics of the markets, the market environment, dynamics of the markets, selecting stocks, trading online, and constructing market models, among other things.
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The market isn't a single, readily identifiable arena. There are many markets and there isn't a unified rulebook. Yet there are inter-market relationships and dependencies. You also have to recognize that the "stock market" is part of the overall economy.
The term 'stock market' itself is just informal shorthand, sometimes meaning just the Dow 30 Industrials, other times referring to markets, generally. In the sense of a totality, it identifies a conglomeration of markets that has many interactions and a long list of market exchanges where the transactions ultimately occur. There are many different markets in the complex, all with their own regulations and information sources, and they exist worldwide. Each market has its special way of doing business.
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The market is a minefield of errors and downright lies and scams -- the game simply isn't clean. This can be very disturbing as well as costly to you. And there are no referees!
When big money is at stake, it's hard to find an honest broker, even if the person wants to be. The pressure to find buyers for stocks is overwhelming. You're much better off if you can think for yourself. All of us are really our own managers, anyway, though sometimes we delegate the decision-making authority to others (let others do it for us)!
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Knowing the Securities
You have to know about available securities. You need to develop trading skills. Depending on how you choose to view the markets -- whether you apply fundamental analysis or technical analysis, for example -- this could involve knowing:
Some of these factors bear on fundamental analysis, concerned with matters of economics, like supply and demand, corporate operations, current assets, earnings per share, or future earnings. Others bear on technical analysis, which examines the supply and demand for a company's stock, movement of the price of stocks, statistics of price and volume, and ways to predict future values.
Technical analysts generally don't concern themselves with economic fundamentals; they feel that everything you need to know is bound up in the price action -- all that's known about a stock eventually shows up in its price charts. This work is exploratory, so I consider both technical and fundamental factors, but I tend to focus on technical analysis, and more specifically on information acquisition, which requires the use of rules, or models -- ways to look at the markets.
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Your aim as an analyst is to predict the course of the market and/or your own stocks in order to judge whether you can profit from your trades. It's your life; you have to manage it. You must learn to think on your own.
Should you decide to empower yourself this way, you could adopt one or both of two basic approaches -- applying either fundamental analysis or technical analysis. Fundamental analysis deals with financial aspects of securities, and technical analysis concerns itself with price movement.
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