The Basics on How You Can Read the Stock Market
Many people may heard about the term “stock market”, however, many are still confused of what it means especially for those who do not have financial expertise. What most of the people know is that the companies’ businesses can get bankrupt or prosper when trading on the stock market correctly. To simply put it, stocks represents the assets and profits of a company. If the company makes a profit from the stocks, this value will then be divided annually among the shareholders in the form of a dividend. So for example, if a company makes a profit of $200,000 this year, and it has 20 shareholders with 1 stock each, then the 20 shareholders would receive a dividend of $10,000.
The Stock Market Defined
The stock market also called as “stock exchange” is a type of financial institution wherein a licensed broker trade company stocks and other securities that are agreed to be traded by the exchange. These exchanges can occur virtually or physically. The stocks the brokers buy and sell depends on the requirements of the individual and/or companies they represent.
Basically, there are two types of stock market, the first is Primary Stock Market for trading of Initial Public Offerings IPOs and other brand-new issues by the sellers and buyers, the Secondary Stock Market for trading of existent stocks in the market by the buyers and sellers.
You can be able to understand the trends in the stock market by starting to learn the meaning of common stock market terms and be able to give an assessment to stock market charts. Learning the basics of the stock market can make you into a smart investor and be able to make correct stock decisions.
1. Stock Price
This represents the value for which stocks are bought and sold. There are certain factors which can affect the stock prices, including the current performance and expansion and future growth. So if a company is making badly in the stock market, it is expected that its stock prices will reduce in value. While the company performing well in the stock market, the stock prices will increase in value.
2. 52-Week Period and Its High and Low Prices
This is made up of stock data in a period of 52 weeks. On the date of reporting, you will see which of the stocks have the highest and lowest prices throughout this 52 weeks.
3. The PE Ratio
This value is determined by dividing the newest stock price by the average earnings per share for the last four quarters.
4. The Trading Volume
This is the entire buying and selling transaction that happened during the day.
This refers to the last quoted price of the stock at the closing day of the stock market.
6. Net Change in the Stock Price
This refers to the difference in prices of the stock since the previous change that took place. Net Change let you see the direction in which the stock price is headed. Plus symbol indicates a positive direction and a minus symbol indicates a negative direction.