Candlestick Trading Blog

---

Basics of the Stockmarket

In today's article we discuss three important parts of the stock market. This will help those new to investing in stocks to understand the basic functions that stock exchanges provide to investors and corporations.

Stock Exchange
Stocks are publicly traded on stock exchanges throughout the world. The main stock exchanges in the United States include the NASDAQ, the NYSE, and the American Stock Exchange. All buying and selling is done in one place which allows the price of stock to be public knowledge at a moment's notice. As a result, investors are able to watch how a stock price is affected as a result of news, the economy, and other factors. They can then buy stock or sell stock based on these fluctuations.

Corporations
A corporation is a company that goes public and can then sell shares of stock in the company to investors. This is actually called incorporating and it serves many purposes for the newly incorporated company. For instance, the corporation is then able to raise money through the selling of its shares so it can invest back into the company. This money that is raised this way is known as investment capital. Additionally, the company can buy property and it can sue people. This is especially important because corporations help to limit the liability of the owners so there is less of a personal investment risk. If a corporation is sued, it can go out of business, but if a person who owns a company that is not incorporated is sued, then that person can potentially be personally liable and lose everything they have. In order to be traded on a major stock exchange the corporation must register with the government and it must be issued a federal tax ID number. The owners of the corporation also hold shares of stock in the corporation to represent their ownership. 

Shareholders
Shareholders are a group of owners in a corporation. Anyone can hold stock in a publicly traded company as long as they are able to buy it. Thousands of shareholders trade their shares on a public stock exchange everyday for one corporation. Additionally, there is a board of directors that is elected by the owners of the corporation. The board of directors make the major decisions and they decide how many total shares there will be. The hope of shareholders is that the money the corporation makes from selling its stock will be wisely invested back in to the corporation. As a result, the corporation then makes more profit and increases the value of the stock on the stockmarket. The investment opportunities are mutually beneficial between the corporation and the shareholders. Shareholders must be sure that they do sufficient research on the companies they are investing in. For short term traders, the key is to find a successful method for evaluating and predicting the short term price movements of stock, and then creating a successful trading plan that allows you to make a return on investment. 

Website Specials