How to Study the Stock Market
The stock market is constantly changing. It may seem difficult to keep track of the various movements in the market, but fortunately, there are a number of tools, websites, and other resources that can give you the trends and data. If you’re interested in larger market trends, stock indexes and financial sites will do the work for you. Keep an eye on individual stocks to know when to buy and sell. If the information seems overwhelming, don't worry. You can easily track your portfolio online or offline.
Finding Resources About Stocks
Read financial news daily to learn trends and predictions.Financial news sites will often identify the major trends, falls, and predictions for you. Many will also provide the major stock indexes as well as information on each individual stock. There are many different places you can stay up-to-date with the market. Some popular ones include:
- Wall Street Journal:
- Yahoo Finance:
Open an online brokerage account to manage your portfolio.If you like to do your own trading, an online brokerage account will help you map the trends in your portfolio. Online accounts can keep track of how well your stock is doing and provide updated information about a stock’s highs, lows, risk, and prices.
- Online brokerage firms include Ameritrade, E-trade, and Ally. These might charge a fee for every trade.
- These accounts will also give the history of individual stocks. You can look up the daily highs and lows for a stock as well as the highs and lows for the past 52-weeks. Some websites may even give a rating to each stock to let you know how risky it is.
Talk to a stock broker if you want personalized information.A stock broker will be able to teach you about the current market, stock history, and industry standards. If you’re new to stock trading, a stock broker will also be able to help you develop a portfolio that will help you reach your financial goals.
- A broker will do extensive research on stocks for you to provide the best advice. In many ways, having a stock broker can save you the trouble of intensively studying the markets yourself.
- You can find brokers at investment firms or banks. Stock brokers usually charge a commission. Some may require you to invest a certain level of money with them when you open your account.
- Tell the broker what your financial plans are, such as saving for retirement, buying a home, or creating an emergency fund. They will be able to help you develop a portfolio aimed towards your specific financial needs.
Identifying Market Trends
Pay attention to major stock exchanges.A stock exchange is a market where you can buy and sell stocks. There are multiple exchanges both in the US and around the world. When studying the stock market, you should make sure that you are aware of the trends in each exchange. While some companies trade among various exchanges, others may only trade on one.
- The New York Stock Exchange (NYSE) is the largest exchange in the world. Stocks on the NYSE are generally considered to be more stable and less risky. Large industrial firms tend to trade more on NYSE.
- NASDAQ is the second largest. It is traded electronically. Companies on NASDAQ tend to be more volatile but also have more growth potential. Technology companies tend to trade more on NASDAQ than NYSE.
- The London Stock Exchange (LSE) is the main hub for the UK market. It is also traded electronically.
- The Toronto Stock Exchange is the main Canadian exchange while the Australian Securities Exchange is the main Australian one. These are much smaller than the American and British exchanges.
- You may also want to pay attention to other international exchanges, such as the Tokyo Stock Exchange or EuroNext.
Read the major stock indexes regularly.Stock indexes are companies that compile all of the changes in individual stock exchanges. This data is put into graphs that show whether the market rose, fell, or stayed stable that day. Stock indexes are a great way to see how well general markets are doing at a specific time. These indexes are all available online.
- The 2 most important indexes in the United States are the Dow Jones Industrial Average (DJIA) and the Standard and Poor’s 500 (S&P 500). Most financial websites will contain these 2 indexes.
- Some stock indexes are focused on particular regions. The Nikkei 225, for example, represents the Tokyo Stock Exchange. Others, such as the S&P Global 100, compare multiple regions.
- Stock indexes represent how well the market is doing in real time. For example, the Financial Times Stock Exchange (FTSE), which represents the LSE, is updated every 15 seconds.
Look at the change and percentage change for markets each day.Stocks can rise and fall rapidly, so it is best to look at how much the price has changed since the exchange opened that day. Stock indexes and trading websites will list the change and percentage change for each stock. Positive changes are marked in green while negative changes are marked in red.
- The change is how much value the stock has gained or lost. The change may be +.50 if the stock rose 50 cents in value or -.50 if it fell 50 cents in value.
- The percentage change is what percentage of its opening value it lost or gained. For example if the stock’s percentage change is -1%, this means that it fell 1% in value. If it its percentage is +1%, it rose 1% in value.
- Changes are noted both for individual stocks as well as markets and indexes. For example, the S&P 500 might note a .4% increase. This means that, on average, stocks rose .4% that day.
Read the news for outside factors that can influence the market.Interest rates, political unrest, natural disasters, and company buyouts can all have an effect on the stock market. Read newspapers, financial websites, and political blogs every day to stay aware of any event that might influence the market.
- If there is an earthquake or hurricane in a major city such as Beijing or San Francisco, the markets might drop in response, as investors might think that it will slow or stop economic growth.
- Watch out for economic changes, such as interest rates or changes in the value of currencies. For example, high interest rates often cause the market to fall while low interest rates often cause the market to rise.
- If two companies merge, then the stock of the acquiring company usually drops while the stock of the bought or acquired company usually rises.
- Stay aware of international markets. The European and Asian markets tend to close by the time the American market opens. Trends in these markets may have a similar impact on the American market.
Evaluating Individual Stocks
Read the annual report to learn if the company is stable and profitable.The annual report often contains an income statement, a balance sheet, and a cash flow statement. You can find the annual report by contacting the investor relations department at the company or by visiting the investment page on their website.
- The income statement tells you how much the company made. Generally, profitable companies tend to do better on the stock market, although profitability is not the only factor in a strong stock.
- The balance sheet compares the assets and liabilities of the company. Look for a company that has more assets (which are investments that will make money over time) than liabilities (which are investments that may lose money).
- The cash flow shows where they made and lost money. Each company and industry will have different types of expenditures. You should research the industry to make sure that their expenditures are considered normal.
Research 52-week high/lows to identify average prices in the market.It is generally recommended to sell high and buy low, but it can be hard to understand what the high and low points are for a certain stock. Daily highs and lows can fluctuate significantly. You will get a better idea of the stock’s value from the 52-week high/low.
- For example, if you were to look up Ulta (ULTA) on the NASDAQ exchange, you might find that the highest it has been in 52 weeks is 4.86 USD and that the lowest is 7.96 USD.
- If the price goes above the 52 week high, it is a good time to sell. Similarly, if a stock goes below its 52-week low, you might want to buy. So you might want to buy ULTA stock when it is below 7.96 USD and sell it when it is near or above 4.86 USD.
- Any online stock broker will tell you the 52-week high/low on the page for the stock. Furthermore, if the stock is traded on NASDAQ or LSE, you can find the high/low on their websites.
Compare the stock with stocks from similar companies.Look for another stock from the same industry with a similar size to the company you are studying. You can even compare the stock to its direct competitors. This can help you determine if the stock is a good choice compared to its competitors.
- For example, do not compare Amazon (AMZN), which is in the electronic commerce sector, with Antero Resources Corporation (AR), which is in the energy section. Instead, compare Amazon with eBay (EBAY) or Apple (AAPL), which are both competitors of Amazon.
- Plug the companies into a stock comparison tool to quickly compare them. These tools will automatically pull up the prices, changes, and high/lows for each stock. Some popular stock comparison tools include NASDAQ, Google Finance, and MarketBeat.
Keeping Track of Your Stocks
Use an online investment portfolio.There are many programs available that can help your portfolio. If you use an online broker, it may keep track of your portfolio for you. If you use a personal broker or if you have different types of investments, however, you may want to use a separate portfolio tool, such as:
- Personal Capital
- Google Finance
Set up daily stock alerts to be delivered to your email.Many websites, online brokerage accounts, and electronic market exchanges will send you alerts when the stock reaches a certain price. In most cases, you will need to set up an account, provide your email, and state when you want an alert.
- Both NASDAQ and the LSE offer email alerts through their web pages.You can also use a company like Stock Monitor or Zignals.
- When you sign up, you will be asked to state when you want to be alerted. Perhaps you want to know when a stock reaches a certain price or if there is a significant percentage change in a stock.
Create a spreadsheet with all of your stocks.If you prefer to track your own stocks, you can always make a spreadsheet on your computer or even by hand. Create columns for date, the opening price, the daily high, the daily low, the closing price, the change, and the percentage change. Put the day’s date under the date column. For each day, fill in the columns according to the stock’s data.
- The opening price is the price at the beginning of the day and the closing price is the price at the end of the day.
- The daily high is the highest price that day and the daily low is the lowest.
- Each individual stock should have its own spreadsheet. You can also create a spreadsheet to record the overall value of your portfolio.
Video: Stock market for beginners [Hindi]
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