Before we start explaining stocks and the stock market, we have to warn you about something. The subject of this article doesn’t cover stocks you find on 24option and other binary options brokers. You should refer to other sources to find more about that market and how assets affect it.
Now, shares represent the ownership of the company. Whenever a company decides to expand, they seek money for the expansion and the easiest way to gather the money is to sell something. In this case, the company issues shares and sells them on the stock market. Every trader that buys them becomes the owner of that company and gains rights to vote and to receive payments (dividends).
Once the shares are sold the company losses rights over them, and they become a tool for trading.
How do stock prices work?
The success of the company does have some influence on the stocks, but that influence isn’t as strong as some might think. Tesla stocks have an excellent price, and the company is years from any real profit. The price of the shares depends mainly on the supply and demand. A success of the company will have a small impact on the price of the stocks, but that effect can’t be compared to an impact that a significant event in the industry can have.
Many other factors can influence the value of the stock and the impact they cause varies. We could even say that the value of various currencies has some slight impact on some stocks, but the impact currencies have is minuscule.
The impact some events have on the currencies is based on the reactions of traders on the stock market. Whenever some economic events reach news, it causes ripples in the stock exchange. If traders accept the story that speculates the success or a breakthrough from a particular company or certain industry, then they will invest in the stocks from that industry. Those investments will increase the value of those shares, even though the news might not be on the spot as everyone thought. Experienced traders will not jump on news that has little to no evidence, and they will wait for the evidence and act once the stock prices settle down.
Trading stocks –How it works?
The stock market is large, and it covers all stocks you can imagine. This isn’t just one big market, but several smaller markets that are interconnected. The majority of the traders on those markets are the speculators, people who use little to no data to invest in stocks. It’s said that those speculators determine the real value of the shares on the market. They do lose a lot of money, but their investments help more experienced traders to make money.
So, if you want to trade and find success don’t speculate, but wait for the speculators to determine the real value of the stocks in question. This might be hard, and it will take a lot of patience as well as research that will have to follow the initial investments made by speculators.