3 Top Stock Market Tips

tool of trader for stock market gameBefore presenting stock market tips, it is helpful to explain exactly what shares of stocks are. A share of stock represents a share of ownership in the company that sells the stock. Public companies are actually owned by all of their stockholders. That means that each share should represent the shareholder’s claim upon the company’s earnings of assets.

Of course, major stockholders have more power than people who only own a few shares of stock. Most individual investors have to rely upon decisions made by the company’s board of directors and major stockholders. But in some cases, minor shareholders may band together to retain some voting power.

1. Stock Market Value Is Not Always Based Upon Company Value

In a simpler world, the value of share of stock would be very easy to figure out. As stated above, a stock represents a share of a company. The value of that share should be based upon the value of a company and the profits that company makes. In the long run, this might still be true.

However, short term changes could be based upon enthusiasm over good news, fear because of bad news, or even overall political or market conditions. A successful company might suffer from a loss of share value because of an overseas war or a gain because of some good news about research done on one of their products.

Successful stockholders need to understand companies that they invest in. They also should try to keep up with news that might impact the value of their shares.

2. Trading Is Cheap To Do These Days

In the old days, trading stocks required a call to a broker. These brokers may have also advised clients, but they charged high commissions for their services. These days, more and more people are trading shares over the Internet. This may require more education on the trader’s part, but it is also a lot cheaper.

Besides, it is probably better to act on personal knowledge and judgement than totally relying upon the advice of a stockbroker. Even though he or she may be very good at the job, it is hard to know if the broker has another motivation for suggesting one trade or another.

3. Traders Need To Decide How Much Money They Can Afford To Lose

Of course, there are blue chip stocks that rarely falter. However, as people saw during the Great Recession of the last few years, even established companies can falter, especially in the short term. Particularly when betting upon a riskier stock, it is a good idea to figure out the maximum risks and only act if that is something that could be sacrificed– especially in the sort term.

Over time, the stock market generally trends upwards. That gives traders the potential to earn good returns. However, that doesn’t mean every company’s stock always rises in value. Furthermore, almost every corporation has short-term rises and dips in value. Use these stock market tips to help you to get the most money from your investments.