Let’s get right to it. Here is a quick guide on stock market for beginners.

1. As stock trading opens, a stock price goes up or down tremendously

I always thought the when the stock exchange opens, stock traders always use the previous closing price as the buying price. And that is why they the financial news often reports about historical share prices or previous closing stock prices of shares. Well wrong wrong wrong. While this can happen also, you also need to consider this scenario: A stock trader buys a stock at a higher price than the previous day close. If your thinking why would anyone do that, I was thinking the same thing hehe. But analyzing this, some traders bid higher because they expect the price of a stock to skyrocket. Since they want to get in early, they bid higher than the previous close so they can be sure that there will be a match between a buyer (that’s the stock trader) and a seller (anyone currently owning a stock) when the stock market opens. Going the other way around, this also happens when the stock price is expected to go down.

2. You don’t buy a stock because the stock price goes up for the last few days and it still goes up today.

Beginners usually make this mistake (like me back then hehe) because this is really counter-intuitive. If a stock price is already way up from the previous days, it will go down eventually. Well, that’s not always the case. At times, it continues going up on the next day. Why you say?! Because the company might be performing very well and people want to get a hold of this share. It may be the most active stock or currently the “star stock” (hehe just made that up). There are a lot of reasons actually. Remember that there’s always the right time to buy stocks. And also the right time to sell them (plug for the next topic hehe).

3. When you are holding a share and the stock price goes down and down, you can’t pull the trigger to sell it.

This is the other way around. You already have too much “paper losses” because the price of your stock goes down. A few days go by and it still goes down. Heck, your thinking is - well it will eventually go up at some point. Question you have to ask yourself is when will it go up. From my experience the longer a stock goes down, the harder it is for you to sell. Emotional attachment on stocks is a big problem for new investors. It’s like telling your stock broker that you already want to throw away those hard-earned money. You may experience a situation like these. When you see this situation, don’t let your emotions get in the way. If its the right time to sell, don’t hesitate one bit.

I believe that learning through experience is better than by just reading them. I really learn a lot by entering the stock market right away but it has its disadvantages (pocket-wise hehe).

What other experiences do you have? Share them by commenting below ^_^

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