Understanding the stock market will be critical to your success as an investor or as an active trader. Let’s begin with a broad and general terms of what the stock market is. Basically it’s a system that allows the trading of stocks, bonds and derivatives. While the definition is utterly simplistic in reality that is all it really is. The stock market allows companies and governments to sell shares of ownership to the public and keep track of all of these activities.
But to really understand the stock market and actually profit from it you need to go a little deeper. The stock market is not just about buying and selling it’s about human emotions. Yes, you read correctly, to really understand the stock market you need to understand the human emotions that drive it. There are basically two human emotions that drive the stock market; GREED and FEAR.
Greed is simply the insatiable need to make goobs and goobs of money and fear is simple just the thought of losing the money. Both drive the market and both can be used to your advantage. Now the scope of this article is too small to delve into the psychology of how all of this works, but suffice it to say that if you can identify both you will be able to move in take profits and get out before losing. Again the scope of this article is understanding the stock market so they is just not enough info to really go into a deep explanation.
If you decide that active trading is in your plans that you will need to study up on what makes the stock market tick. An understanding of candlestick charts to MACD and everything are things you will want to learn in order to fully understand the stock market.
