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A Beginner's Guide to the Stock Market
Read in 16 min.
Listen in 20 min.
Learn the key ideas of the book by Matthew R. Kratter

A Beginner's Guide to the Stock Market

Learn how to develop your own trading strategy

The stock market is considered to be the greatest opportunity-machine ever created. To take advantage of it, however, it is necessary to have a good understanding of the mechanisms that regulate it, the possible pitfalls, and the mistakes that others have already made, so as not to gamble away your savings. In the book, A Beginner's Guide to the Stock Market, Matthew R. Kratter provides a simple and concise explanation of the basics of stock trading, including practical examples, such as how to open a brokerage account, buy shares, and generate passive income. Furthermore, he provides a series of ideas and suggestions for developing your own trading strategy, based on how you see yourself as an investor, and what objectives you want to achieve. 

A Beginner's Guide to the Stock Market
Read in 16 min.
Listen in 20 min.

The stock market is a complex system: learning how it works is essential if you want to make the most of it

It requires time, patience, and dedication to understand how trading works, and which strategies you should use to invest in a profitable way, however, if you want to be successful on the stock market, these skills are absolutely essential. Getting started is simple. Shares are bought and sold on the stock exchange. It is here, in a regulated market, that the exchange of money for shares (and vice versa) takes place. Today, the matching of sellers and buyers is done by computer. 

The most important stock exchanges in the United States are the New York Stock Exchange (NYSE - New York Stock Exchange) and the NASDAQ (National Association of Securities Dealers Automated Quotation). At the NYSE you can find blue chips, or large market capitalisation companies, such as Coca Cola or McDonald's, for example. The NASDAQ, on the other hand, is the main technology stocks index, which includes companies such as Apple, Amazon, Google, and Netflix. At the NYSE, the shares belonging to a particular company are listed by their ticker - an abbreviation that uniquely identifies a stock - consisting of two letters: KO is the ticker for Coca Cola, HD is the ticker for Home Depot. In NASDAQ, on the other hand, stocks usually have a four-letter ticker: for example, AAPL (Apple), and NFLX (Netflix), however there are a few exceptions such as FB, which is the ticker that identifies Facebook.

If an investor is to be successful, they must be able to guess what direction the market will take. However, sudden changes in the technology sector and in our society are making it increasingly difficult to make these kinds of predictions. There are two ways to make money in the stock market: be an investor or be a trader. Investors buy stocks and then put them aside, almost forgetting they have them, and at times even leave them there for several years. Traders, on the other hand, buy and sell stocks at a much faster pace, owning stocks for as little as an hour, a day, a week, or a month.

In a perfect world, you should try to be part investor and part trader, in order to differentiate your buying and selling strategies. In addition, it would also be useful to diversify the products you deal in, including bonds, options, futures, venture capitals, and real estate in your action plan. There is no universal winning strategy that can be used by everyone: each person must gradually understand what their strategy is, taking into consideration various factors, including their own level of risk tolerance. If you are not able to see your investment fluctuate without getting palpitations, it is most likely not a good idea for you to go down the route of trading. In any case, for people who are just starting out, the advice is to start by relying on the guidance of a financial advisor.


The key ideas of "A Beginner's Guide to the Stock Market"

The stock market is a complex system: learning how it works is essential if you want to make the most of it
The stock market is a predictive mechanism, and the price of shares depends on several factors
Starting to trade is easy: first you need a broker or brokerage account
Investing in an index is a simple and fairly safe passive investment, but it takes time before it pays off
Investing in dividend stocks is one of the best ways to increase your wealth
Knowing the P / E of a stock helps you to understand what the value of that company is, and decide on an appropriate investment strategy
Growth stocks and IPOs are not investments for beginners but, if mastered, can be profitable
Avoiding some rookie mistakes will help you to continue trading more, and to be more successful
Take-home message
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