Buy! Sell! It easy to get excited when you watch movies or television shows about people working and making money in the stock market. Hollywood glamorizes Wall Street to make it more dramatic. However, this doesn't mean you can't make money in the stock market. With a little bit of knowledge and a lot of hard work you can make your investments pay off for you; and you can do it from the comfort of your own home.
1. DO YOUR RESEARCH
You wouldn't jump in the deep end before learning how to swim, would you? Investing in the stock market isn't much different; just a little drier. Knowing the basics of how the stock market operates is a key to making money. If you are unsure how to invest your hard-earned money, it is advisable to contact a stock broker. They will explain how the stock market operates and help you find the companies that will best suit your needs. Whether you use a stock broker or go it alone, you will need to keep yourself informed about news that relates to the stock market.
Investigate the companies you're interested in. Find out as much information as you can about the companies initially and keep yourself up to date about any news that could affect the price of the stock. Know who is running the company and where they worked before.
Read the financial reports and watch the stock market reports daily. You will want to keep your information as fresh as possible if you want to make money in the stock market. If a company's earnings have risen or dropped substantially, it will have an effect on the price of the stock.
Watch the news. The stock market is a very fickle mainly because investors are fickle. Bad news such as war or a natural disaster can affect the price of stocks. Keep an eye on the latest news stories and watch for your stock's prices to rise or fall.
Visit the websites of the stock markets. You can go directly to the websites of the different markets, like the New York Stock Exchange and NASDAQ to get the information directly from the source.
Get stock tips from the pros. There are plenty of websites where you can get stock tips to help you when you're first starting out, or later in the game. Do your research to make sure the websites you get your tips from are worth your time.
Hot Stock Market offers free membership to their website to get market analysis, trading tips, forums and more.
Jim Cramer is a nationally known face in the Stock market. You can subscribe to his website, The Street, to get great tips for stock investing. The Street offers a free trial, but there will be future membership costs.
Keep an eye on the market condition and get sound advice by visiting the MarketWatch website.
2. KNOW WHEN TO BUY AND SELL
The key to making money in the stock market is to know when to buy and sell your stock. Many people purchase stocks and ride them through the tough times. This can work out well sometimes, but often people end up losing money or making very little gain.
Watch the IPOs (Initial Public Offering). When a company offers their stocks publicly they are usually offered at a low price initially. Depending on the company and their profit history the stock's can rise drastically very quickly. Do your research on companies that are about to offer their stocks publicly to decide if they will make a good investment.
Buy stocks from companies whose values are underrated. If you know a company is being underrated by the people who rate the companies it may be wise to invest. You will make money down the line.
Use the employee stock option at your work. Some companies offer stock to their employees at a huge discount. If your company is strong, it would be wise to invest in the stock option they offer.
Sell when the price starts to drop dramatically. You will want to sell your stock if the price drops but is still above the price you paid for it.
Sell your stock if it does nothing for a long period of time. If the price of the stock you own has remained fairly stagnant for a few months it may be wise to sell your stock and invest your money elsewhere.
Sell your stock if a competing company is stronger. If a competing company shows stronger earnings it may be wise to sell your current stock and reinvest in the stronger company.
Practice before you play. If you want to play in the pros you may want to practice before you invest your hard earned money in the stock market by playing the Stock Market Game online. For $25 you can play the stock market with an imaginary one-hundred thousand dollars against other teams in your area.
3. DECIDE IF A BROKER IS RIGHT FOR YOU
Having a good relationship with a broker is essential to making money in the stock market. You want to employ someone you can trust with your assets. Knowing the types of brokers that are available will help you decide if they are right for you.
Full-service broker Full-service brokers handle all aspects of your trading. They decide when it is a good time to buy or sell and what stocks will help to make you money. The upside of a full-service broker is that your trading will require less work on your part. The downside is that full-service brokers get paid by their activity and not on the quality of the trades, so you can't guarantee they have your best interest at heart.
Discount broker If you have some knowledge of how the stock market works, a discount broker is probably your best bet. Using a discount broker requires more work on your part, but you will have more control over your investments and the discount broker makes money on the trade quality. The more you make, the more the discount broker makes.
Online brokers If you want to do your investing from the comfort of your living room you could use the services of an online broker. While you won't get the personal attention you might get from a local broker, you may also avoid many of the headaches. Online brokers offer all the services you would get from a regular broker if you need the help or you can go it alone for a small fee per trade.
ETrade offers all the services of a broker if needed and low per trade rates that are easy to understand.
Ameritrade offers flat rate trading if you don't require broker help.
Some websites offer free trading as an incentive to join. Zecco has ten free trades a month and a rate of only $3.50 after that.
4. KNOW WHAT YOU'RE TALKING ABOUT
Just like any other business, the stock market has its own vocabulary that you will have to become familiar with if you are going to understand what is going on.
All or none give this order to your broker when you buy or sell stocks to make sure that the order is completely filled or not at all.
Ask the current price that a stock is offered for sale.
At the close the price of a stock at the close of the market.
At the open the price of a stock at the market's open.
Bear Market a long period of time when stock prices are generally in decline.
Bull Market a long period of time when stock prices are generally increasing.
Bull Trap when it seems like stock prices are on an upward slope but it proves to be false.
Consumer Price Index (CPI) economic indicator put out by the U.S. Department of Labor that measures the prices of consumer goods and services.
Day high highest price a security traded at on a particular day.
Day low lowest price a security traded at on a particular day.
Insiders people with inside information about a company that is traded on the stock market.
Insider trading trading of a company's shares by its directors and advisors. Insider trading must be public knowledge.
Momentum the strength behind a stock's upward or downward movement.
Overbought when a stock's price rises too quickly.
Oversold when a stock's price falls too quickly
Volume number of shares that are traded of a stock on a daily basis.
These are just a few of the terms you will need to know if you want to make money in the stock market. You probably won't need to know every stock market term, but having a general idea of what is being discussed will help you keep the shirt on your back.
