How to Read the Stock Market
A lot of individuals know the word “stock market” but for those who are not expert in financial matters are still confused about its meaning. What most people are aware of is that trading on stock market can result to either bankruptcy or booming of businesses if these companies enter the stock market game. Simply put, stocks depicts the company’s profits and assets. 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.
Meaning of Stock Market
The stock market or “stock exchange” is a financial institution in which licensed brokers trade company stocks and other securities that are approved to be traded by the exchange. These exchanges can occur virtually or physically. Brokers will buy and sell stocks depending on the needs and requirements of the people or companies they represent.
There are two types of stock market, these are the Primary Stock Market, this is for trading of IPOs or Initial Public Offerings and also other brand-new issues by the sellers and buyers; the Secondary Stock Market, this is for trading of existing stocks in the market by the buyers and sellers.
For you to understand the trends in the stock market, you must first need to know common terms and be able to make an assessment of the 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. The Stock Price
Stock price is the value for which stocks are purchased and sold. Some factors that can affect the stock prices are 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. In contrast, if the company is doing well in the stock market, the stock prices will also shoot up 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 calculated by dividing the latest stock price by the average earnings per share for the last four quarters.
4. Total Trading Volume
This is the entire buying and selling transaction that happened during the day.
5. The Closing of the Stock Market
This is the last quoted stock price during the closing day of the stock market.
6. Net Change
This is the difference in price of the stock since the last change that happened. 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.