1. How the Stock Market Works
Companies issue stocks to raise capital, and investors buy these shares to gain ownership. Stocks are traded on exchanges like the New York Stock Exchange (NYSE) and Nasdaq, where prices fluctuate based on supply and demand.
2. Key Market Participants
- Retail Investors – Individual traders and investors.
- Institutional Investors – Large firms like mutual funds and hedge funds.
- Market Makers – Entities that provide liquidity by continuously buying and selling stocks.
3. Stock Prices & Valuation
Stock prices are influenced by company performance, economic conditions, and investor sentiment. Investors evaluate stocks using metrics like:
- Earnings Per Share (EPS): A company’s profit divided by the number of shares.
- Price-to-Earnings (P/E) Ratio: Stock price relative to earnings, indicating valuation.
- Dividend Yield: The percentage return from dividends relative to stock price.
4. Market Trends & Indicators
- Bull Market: A rising market with investor optimism.
- Bear Market: A declining market driven by fear or economic downturns.
- Indices: Market performance is tracked using indices like the S&P 500, Dow Jones, and Nasdaq Composite.
5. Investment Strategies
- Long-term Investing: Buying and holding stocks for years to benefit from growth.
- Swing Trading: Holding stocks for days or weeks to profit from price swings.
- Day Trading: Buying and selling stocks within the same day to capitalize on short-term price movements.
By understanding these fundamentals, investors can make more informed decisions and navigate the stock market with confidence.