Candlestick Trading Blog

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For some people, it is difficult to grasp the basic concept of the stock market. Stock quotes, indexes, trends and forecasts just sort of run together. With the help of the “Dean of the Stock Market”, Benjamin Graham, we’re going to make it clear for you today.

Benjamin Graham is considered by many to be the most influential figure in the history of the stock market game. Books that he wrote fifty and sixty years ago hold market principles that are still true today. Yet with all of this wisdom, Graham still felt the need to create something to help people understand such stock market basics as stock price quotes. That something, or someone, was “Mr. Market”.

Think of stock price history and stock quotes like this; you have a business and you are partners in this business with Mr. Market. Everyday he offers you a choice; you can sell your part of the company to him or you can buy his part from him. The decision is up to you. There is one problem; it seems that your business partner is suffering from bi-polar disorder. His moods are either sky-high or filled with deep, dark lows. When he is up, his asking price soars with him and he is only willing to sell at a premium price. When he is low, his price tumbles to reflect his mood, even to the point of selling to you at a loss. In either case, his price is his price and he doesn’t care about the business’ value. Nothing about the business changes, it’s just the difference in Mr. Market’s mood and your own greed and fear.

The good news in this business relationship? You can just ignore Mr. Market and his stock prices if you want; he will simply show up tomorrow with another offer! It’s a beautiful thing; if you know the value of the business, you can catch him on one of his down days and make a great purchase.

This in a nutshell is the way to view stock quotes and the stock market in general. These are simply parts of doing business and should be viewed unemotionally. The twist in this “basics stock market investing” story is that one day Mr. Market will be on one of his highs and offer to buy back his portion of the company at a much larger price.

Stock prices are really the same thing; simply stock quotes from a partner who is very unstable. The stock market will be made easy for you and before long, you will have a smile on your face no matter which direction the market moves. Today’s hot stock quotes will be your next sell; tomorrow’s struggling stock quotes, your next buy.

The stock market is complex and confusing, yet elementary and easily understood for beginner investing. It is your crazy business partner who symbolizes stock quotes. It is the ability to act on or ignore those stock quotes that makes the analogy, and investing in the stock market, the place to be free from your crazy partner!