The stock market is one of the most exciting – and important – components of the economy. It can be complicated, but fortunately, stock market information for beginners is easy to come by – and the basics are easy to understand.
Here, I’ll provide you with an overview of stock market info for those who are getting into the trading world and want to know more about how the market works and how one can learn more. I’ll also provide you with resources that cover stock market information for kids so children can get a head start on the fascinating world of trading.
First Things First: The Market
The stock market is a collective term we use to talk about the buying and selling of company stock, or, pieces of ownership of a company. When we say “the stock market” or “the market”, we’re actually talking about several markets working more or less at once, all over the world (in different time zones, of course).
There are stock exchanges in Tokyo, Hong Kong, Johannesburg, Mumbai, Madrid, Paris, Berlin, London, São Paulo, New York, Toronto, and elsewhere. Starting with the exchanges closest to the international dateline and moving west, each market opens, trades, and closes in sequence – and what happens in one exchange usually affects all the others.
Within each stock exchange are three groups: those who own stock and want to sell it; those who want to buy stock; and those who work to connect buyers and sellers together. In places like the New York Stock Exchange, trading is mostly accomplished with humans interacting together on the trading floor. With NASDAQ, all trading is done electronically.
The goal of each market, roughly, is to match each “buy” order with each “sell” order.
How to Trade
Most people who trade today do so through an online brokerage like Optionsxpress or TD Ameritrade. After you sign up and deposit your money, making a trade literally is as simple as finding the stock you want, selecting the number of shares you’d like to buy (or sell), selecting the type of order you want (more on that below), and clicking a button.
Trades are executed quickly, if a stock is liquid (that is, there are enough buyers and sellers to make trades happen). You can also get real-time quotes from your platform, although some platforms charge extra for that.
Know that you’ll have to pay for each trade. Most online brokerages charge you a flat rate per trade; for example, if each trade costs $9.95, then buying and selling shares of one stock will cost you $19.90.
The types of orders you can use include:
- Market orders: These buy or sell at whatever the current price is.
- Limit orders: These only execute once the price of a stock has reached a certain level.
- Stop Loss orders: These orders are executed when a stock falls to a certain price. They are used to cut your losses.
- Fill-or-Kill orders: These ensure you get all of the shares you want, or none of them.
- Good-until-cancelled orders: These keep your orders active until they’re executed or you cancel them yourself.
Common Stock market Terms
While learning more about the stock market, you might come across some common terms. Here is a list to get you started with learning the lingo.
After-hours: Trading after the trading day has officially closed
Ask: What it will cost you to buy a share of stock
Bear: Term that describes a down market
Bid: What others will pay you for your stock
Blue chip: Stocks that represent companies that have strong earnings, solid dividends, strong financials, and good reputations
Bull: Term that describes an up market
Close: The last price of the trading day
Dividend: Money paid per share to shareholders of a particular stock
High: The highest price during the day
Low: The lowest price during the day
Market capitalization: The share price multiplied by the number of outstanding shares; indicates the rough size or value of a company
Open: The first price of the day
P/E ratio: Price-to-earnings ratio; i.e. how much you pay per dollar earned by the company. Lower P/E ratios mean stocks are less “expensive”
Spread: Difference between the bid and ask
Volume: Number of shares traded
Stock Market Information for Kids
The stock market can be as complicated and complex as you want it to be, but it can also be a great learning tool for children.
Some resources to help teach the stock market to children include:
- Stock Learning Center powered by ThinkQuest; has basic information plus kid-friendly investment ideas
- PIGGYBANK Fantasy Stock Exchange powered by OINK! and the London Stock Exchange; stock market trading game for children
- Online Trading for Kids from familyeducation.com; offers a tutorial for online trading for kids using actual online brokerages
- Stock Market Basics from the LearningSeed.com; good resource on stocks, trading, and the market for kids and beginners alike
One of the best ways to teach kids about stocks is to trade with them online using practice accounts with online brokerages. Practice accounts are free, plus there is no better way to learn than by doing.