To understand the principles of how the stock market works, we must first understand the basic principle of economics, which is supply and demand. This principle states that once the demand is low the price of the product is low, and once the demand increases the price of the product rises accordingly.
In the case of the stock market, the products are the shares of the company. Once a company goes public, it is divided into shares which are parts. Any one holding a certain percentage of the shares has, accordingly, a certain percentage of ownership over the company, and is allowed to participate in decision makings of the company. In the case of someone holding at least 51% of the shares he becomes the share holder of the company.
As said above, shares are another form of products. Once the demand for it increases its price rises as well. There for, to fully utilize the economic potential of the stock market, one must buy as many shares while the demand for the shares is low and there for the price is low as well. And then, he must sell them when the demand is sky high and the shares prices are at their high peak.
To successfully carry out this economic ideal, one must fully study and analyze the market. Since the point of the shares is for the simple civilian to be able to participate in the success of the company, there for the public actually buys shares when it feels the company is successful, and earning well during the recent period of time. This feeling about a certain company's success rate comes from actual fiscal reports, and from the current hype and buzz regarding this specific company. Analyzing the market and the specific company which you intend on investing in (by buying shares), gives you a detailed picture (according to the accuracy of the analysis) of predicting a future hype and buzz surrounding this company. Thus, creating the ideal economic situation mentioned above, of buying shares for cheap because... [continues]
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