[Guide] Initiation to the stock market! Hey! Have you ever come across one of those threads about stock trading brokerage firms wondering how you could contribute and profit from these wonderful occasions? Here's the guide you need to understand what stocks are! Everything written here will be very simple and this guide will be relatively short at the beginning. To begin, let's read Wikipedia's definition about stocks, shares! Wikipedia wrote:The stock of a business is divided into shares, the total of which must be stated at the time of business formation. Given the total amount of money invested in the business, a share has a certain declared face value, commonly known as the par value of a share. The par value is the de minimis (minimum) amount of money that a business may issue and sell shares for in many jurisdictions and it is the value represented as capital in the accounting of the business. In other jurisdictions, however, shares may not have an associated par value at all. Such stock is often called non-par stock. Shares represent a fraction of ownership in a business. A business may declare different types (classes) of shares, each having distinctive ownership rules, privileges, or share values. Ownership of shares is documented by issuance of a stock certificate. A stock certificate is a legal document that specifies the amount of shares owned by the shareholder, and other specifics of the shares, such as the par value, if any, or the class of the shares. Fundamental concepts! So far, you need to understand a few concepts. The first concept you need to understand is that stock is the 'general' term to refer to shares being traded and such. An example of this would be to say 'I began trading on the stock market, I purchased 25 shares of company A'. Second concept: This one is the most basic concept of the market. A share represents an ownership of a company. For example, company A has 100 outstanding shares on the market(outstanding means it's issued, out in the market, etc..). You decide to purchase five of those shares, so you contact your stock broker and you purchase these five shares at 1$ each. You paid $5 for those and you now own five shares out of the hundred on the market. You now own 5%(percent) of this company. Depending on the type of stock you hold and from which company you hold, you may receive a dividend paycheck given quarterly. This will be explained later on! Third concept: Stocks are listed as symbols on the exchange. For instance, the apple stock is listed as AAPL: http://www.google.ca/finance?q=AAPL Fourth concept: As I've said earlier, there is several type of stocks you may purchase. These types of shares have different performance averages, advantages and disadvantages. The most common type of stock you hear about is a 'common stock. It's so simple, even the name says what it is, common! TYPES OF STOCKS Common stocks:These are the stocks you usually hear about. Some of these stocks offer voting rights that goes with the number of shares you own. If I remember correct fully, it goes as "X votes per share". As a shareholder, your best use of this voting right is to vote for a management team that'll make the stock's price go up. Past this, here's how this goes in LS-RP: how to profit from it. Most of these common stocks will not issue 'fixed' dividends. Dividends are checks paid to shareholders in a formula similar to "X$ per shares". If you purchase a common stock, you can expect to make(or lose) money with market appreciation. Here's an example: if you purchase 10 shares of company A at 1$ each, you've paid a total of 10$ for these. Now, two days after this, the share goes up 10 percent, up to 1,10$. You have the option to sell your ten shares for a ten percent return. You'll sell these for 11$ and you'll make a dollar in profit. Let's say you haven't sold your options and the share goes down to 90 cent. You haven't lost your money YET but your portfolio will be worth less than it originally was. If you do sell your shares to avoid losing anymore money, you'll lose a dollar and that's it. If however you decide to kick fate in the face and challenge it, you may end up being happily surprised or crying in your bed at nights. A week after going up and down barely a percent, the share goes up to 1,30$. You sell all of your ten shares and take 3$ in profit. Term: A portfolio is your collection of shares and securities you have. Please take in mind that common stocks aren't limited to these functions and that there's literally much more types of stocks than this one. --------------------------------------- Now, you're probably wondering how you can check on stocks value without taking a trip to NY. I'll use a piece of advice given to me by finance magnate Hoovie! You should use the following website: http://www.google.com/finance. It's very simple and it even gives you an option of saving your portfolio on to this to measure how well you are doing as an investor! It's search function is very developed as it takes in consideration market beginners. You may not know all the symbols of the stocks such as 'SHLD' for Sears Corporation limited, but you may write 'Sears corporation' in the search function. The stock symbol will be displayed at the top right along with its market exchange(NYSE etc..) Sears Holdings Corporation (Public, NASDAQ:SHLD) USEFUL LINKS http://www.google.com/finance (Use this website to keep yourself updated on your portfolios. You have the option to watch certain stocks and you even have comparative charts) http://simulator.investopedia.com/ (This is a very interesting simulator. Very simple yet it helps a lot of people understand the market.) http://www.plus500.com/Help/HelpDemoMoneyTrading.aspx (Stock trading demo, credits to Pappa) --------------------- As I said previously, this thread will be relatively short in the beginning. That is because the stock market is immense and I could fill up about forty page with just about a percent of the market's terminology and functions. Whenever somebody would like to add a piece of advice OR would like an explanation on another type of stock, I'll be happy to add it! Take in mind that this guide's original intent is to guide the players who are interested in roleplaying with the stock market factions such as Hoover's faction and Tradex. I've heard of people's incomprehensions regarding the stock market and I thought it was blasphemy considering the stock market is VERY simple. It only takes time.
