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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 of the people know is that the companies’ businesses can get bankrupt or prosper when trading on the stock market correctly. In short, stocks are the representation of all the profits and assets of the company. The amount of all the profits gained by the company from the stocks will be divided per annum in the form of a dividend. To give you an example, if a company gains a profit of $300,000 this year, and it has 15 shareholders holding 1 stock each, then each shareholders would receive a dividend of $20,000.

Meaning of Stock Market

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. The exchanges can happen physically or virtually. The stocks the brokers buy and sell depends on the requirements of the individual and/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.

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. Some factors that can affect the stock prices are the current performance and expansion and future growth. Simply put, if the company is doing badly in the stock market, their stock prices will also decline 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 include stock data over a period of 52 weeks. On the day of reporting, you will be able to notice the stocks with the lowest and highest prices during this period of 52 weeks.
3. Price/Earnings Ratio or PE Ratio
This value is determined by dividing the newest stock price by the average earnings per share for the last four quarters.
4. Total Trading Volume
This is the overall selling and buying transactions that have taken place during the day.
5. The Closing of the Stock Market
This refers to the quoted stock price at the closing day of stock market.
6. The Net Change
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. A plus symbol means a positive direction while a minus symbol means a negative direction.

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