Stock Market Basics

If you don’t know the rules of the game, there’s no way you can win.

(An irreverent, simplistic look at stock market basics)

Stock Investing as a Home Business

As all successful sports coaches always remind their athletes, "You can't win without knowing the basics or fundamentals of the game." Your stock investing business is the same: you can't be successful without knowing the stock market basics.

What You Need to Know

People have been investing in some form of organized stock market in the United States since the late 1700's. Other countries have their own stock markets, and, depending on rules in various countries, you may or may not participate in different stock markets. Millions of investors, traders, swindlers and brokers, and other “players," have participated in market activities. Many have made money and many have lost money. Over time, the little guy has lost more than the others, due to two factors: a lack of knowledge and a lack of proper mental preparation.

Knowledge can help you win.

Let’s look at some stock market basics. If this information is too basic for you, skim quickly and move on. Warning: If you’re losing money, this information is not too basic.

What is proper mental preparation?

The stock market is a fast moving, non-forgiving enterprise. Survival requires serious self-discipline. Your emotions can defeat you. To be successful, you must strengthen your self-image. Then you must develop your own strategies and follow them. Just as important is the need to learn as much as you can.

What is the Stock Market?

The stock market is a large crowd of people, including you and me. Each of these people tries to take money from the others by outsmarting them in a game or process that enables people and institutions to buy and sell (or trade) shares of stock among themselves.

What is a share of stock?

A share of stock is a fractional piece of a business corporation. These are the "chips" in the game that you buy with your hard earned money.

Where do I come in?

You are one of the players in this big game. You bring your hard-earned money to the table, trying to make it grow, while all other players are trying to outsmart you and take your money away from you. You need to learn how to be smarter than the other guy.

How do I get into this game?

As a beginner, you usually find a “stock broker” (registered representative), kind of like a “dealer” in Las Vegas or a “bookie” out on the street. The stock broker will show you how to buy and sell stocks and other “investment vehicles.” However, the stock broker usually has his own agenda – to "move" stocks in his company's inventory.(Confession: I spent 6 years as a stock broker, so I saw the game from the inside.)

How else can I get into the game?

You could start an account with an online (internet) broker. You may also get into the game through some sort of government tax related method, where an investment company takes your money and pools it with money from thousands of others. They now play the game with your money and show you the score from time to time.

Is the broker there to help me?

In this game, each person is there for their own self. Brokers are not social workers. In theory they help you, but they are employees of brokerage firms. They make money by taking your money and selling you their inventory. If you ever have any doubt about this, ask your broker to return your money. Brokers work on what they call the "mushroom" theory. The clients are the mushrooms: they keep them in the dark and feed them manure.

Does the government protect me?

The government insists that Brokers and their firms play by the official rules (SEC, NASD and other government and industry watchdogs), and punishes them when they don’t. They paid about $1.5 Billion in fines after a round of investigations in the early 2000's, only a small percentage of their profits. No one returned lost money to you and the other millions of investors. Therefore proving your best protection is your own knowledge – know your stock market basics.

Can a small player like me win in the Stock Market?

Yes! Absolutely! You can win, and you can win big. I know several people who started small a few years ago and won many millions of dollars. Some managed to keep most of their profits – they knew their stock market basics. Others managed to lose more than they won – they didn't know their stock market basics or they trusted their brokers.

How can I make big money in the Stock Market and keep it?

Prepare yourself to become a stock market winner.

  • Successful people need successful role models. To be a winner, you must read about successful stock traders and investors. The three most important people to read about are three of the most successful stock market winners of all time:

                1. Jesse Livermore
                2. Bernard Baruch

                3. Warren Buffett

  • Create and strengthen your own winning self-image. Dr. Maxwell Maltz developed the world’s best self-image program when he created Psycho-cybernetics. See this article.
  • Set winning goals for yourself.
  • Learn about different strategies and techniques from experts. These are two of the best that I've recently seen. They will raise the bar on your stock market basics and understanding. They are for different types of investors. Take a free look at what these guys have to say; either or both could help your stock investing business reach the level of success you want.

Become active – start now

  • Set market goals to keep you focused.
  • Keep learning those stock market basics.
  • Focus on one strategy (or maybe two) that fits your personality, assets and available time.
  • Focus on one or two industries or stock groups so they become familiar to you.
  • Practice your strategy without money, at first. Make mental bets so you can only lose your mind.

Remember, professionals and business people in every field learn and prepare. The profession of investing or stock trading is no different. It is a serious business. It can be fun. But, do you really want to throw money at the market with your eyes closed? You really should start your education now. After you learn the stock market basics, you need to continue to learn more. Remember, you need to know more than other players in the stock investing game.

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One of the funny things about the stock market is that every time one man buys, another sells, and they both think they are astute.
William Feather

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