As you probably realize, we live in financial times, like one advertisement says. We realize this now more than ever, mainly because of recent news in the stock market and financial industry. Even big banks with long history like Lehman Brothers have serious financial problems and the whole financial sector has bad times.
Stock Market has record drops since 9/11 and majority of people are scared from this events and are afraid about their investments, retirement and future. I saw the biggest rush in the stock market in my trading career. For majority of people are events like these disquieting. However the best traders and investors know how to make money in every market, regardless if market goes up or down or how fast it goes. In this market, few days ago I had my the most profitable trade ever. I was profiting from stock, that price was going down. I used put option, that enables me to profit even if the price of underlying stock goes down.
So what's my solution for traders or investors that want to survive or benefit in every market? If you want to prosper and benefit from situations like this you must have right knowledge that will give you advantage. The right knowledge is the key that makes risk much smaller.
Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts
How Does the Stock Market Work?
In order to properly answer the question how does the the stock market work, first I have to explain what is the stock market. The stock market is a place where stocks are traded. And as for every market, there must be buyers and sellers. Buyers represent demand and sellers represent supply.
The price of any stock is determined by relationship between supply and demand, by market participants willing to buy or sell at a certain price. If demand exceeds supply, price should rise. If supply exceeds demand, price should fall. This economic principle applies to every market.
From this results that for a deeper understanding of what makes the price of a stock change, it is necessary to know what influences supply and demand. There is a lot of factors that determine price movement and their effect is relative because only buyers and sellers know why they bought or sold any given stock. Between these factors belongs news about company, industry or the whole economy. If good news comes out on a company, the price and demand for the stock mostly go up. When bad news occurs, the price and demand mostly go down. Next factor is information about company's performance like sales growth, earnings, production and so on, next element is the market psychology, what is topic itself, and generally there is countless amount of other factors that influence opinions of market participants.
Nowadays these stock trades are very organized and performed electronically by computers in stock exchanges like New York Stock Exchange (NYSE). Stock trading is very popular and everybody with little capital and phone or computer with internet connection can be part of the stock market.
The price of any stock is determined by relationship between supply and demand, by market participants willing to buy or sell at a certain price. If demand exceeds supply, price should rise. If supply exceeds demand, price should fall. This economic principle applies to every market.
From this results that for a deeper understanding of what makes the price of a stock change, it is necessary to know what influences supply and demand. There is a lot of factors that determine price movement and their effect is relative because only buyers and sellers know why they bought or sold any given stock. Between these factors belongs news about company, industry or the whole economy. If good news comes out on a company, the price and demand for the stock mostly go up. When bad news occurs, the price and demand mostly go down. Next factor is information about company's performance like sales growth, earnings, production and so on, next element is the market psychology, what is topic itself, and generally there is countless amount of other factors that influence opinions of market participants.
Nowadays these stock trades are very organized and performed electronically by computers in stock exchanges like New York Stock Exchange (NYSE). Stock trading is very popular and everybody with little capital and phone or computer with internet connection can be part of the stock market.
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