Stock Market Trading: Here Are Some Little Lessons to Learn

Stock market trading is like buying a company. The shares are equal parts of the company and each shareholder owns a portion. Most people watch infomercials or hear people talking and they believe that the only way to make money in the stock market is to buy and sell frantically.
Think about it, would you buy a store one day, and sell it right away the next? Maybe if the price was right. However, you have to ask, why did you buy the store in the first place? To make money for years and years, not just for one day.

You earn money from the profits of the business when you trade in the stock market for long-term results. After the company you purchase pays their taxes and other bills, the money left over is their earnings.

These earnings go back to the shareholders as dividends. The best news is that sometimes, you can reinvest those dividends and get more shares that grow and pay even more dividends. There's a lot of money to make when you do stock market trading that's not just from the rise and fall of the stock price.

One of the top mutual fund managers said that he purchased stock after he sampled their customer service. If the stock was that of a restaurant chain, he ate at the restaurant. If it was an airline, he flew the airline. Often the consumer sees situations that create hazards or growth in the company.

All of these things affect the life and profitability of that company. You need to look at the company from a business angle. Are their computers junk, or do you love the new changes and models? Does the company have a good reputation for quality? These are simple questions that you need answering before you purchase a stock.

People that do stock market trading sometimes look for price fluctuations and have no concept what that company does. Trading on price movement alone puts your money at risk to the whims of the market. If you know that a company's financial situation is solid, then you don't panic and sell each time the price of the stock dips.

Remember, the stock price is not real. It's what people perceive to be real. When you buy stock without knowing any of the companies financials or even the type of industry they're in, you might as well put your money on the pass line at a Vegas craps table, because your odds of winning are just about the same.

Understand the company and the industry when you do stock market trading. During times of depression and recession, some companies do quite well. During bull markets when the economy has a sunnier picture painted, other companies do quite well.

You can grab up bargains in the period of time when your company stock, through no fault of it's own, drops in price. The company is still the same, but the idiots that buy willy-nilly drive the price down because they don't understand the real money made on long term investing. If you know the financial situation and the company and it's good, during that industry down time you get bargains on that stock so it's time the to buy more.

Knowledge is your best comrade when you do stock market trading. Just remember the staff at Microsoft. If they sold their shares at first, they would have made pennies. A few years later, a sale would have brought them thousands. Those staffers that knew the quality of their company and held the shares ended up making millions because they had knowledge.