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You need to have clear concepts and understand what it takes to make that tick in the stock market. This will make you more informed and also smart as an investor. The stock market was once a tool that was used by the rich but today it is a choice of investment for the majority of the population, of different classes as well.
Thanks to the internet and the advancement in technology as well as the brokerage firms that let you have a trading account at a low cost. Today everyone can be a part of the market and buy and sell stocks of any company at their will.
It is important to know that there are two common ways to trading in the stock market. They are investing and speculation. When you invest you give your money to the company which can be used for the growth and the expansion of the company. The company will use the money for development and research in the expectation that the future of the company will be worth more than what it is today. When you invest you understand the research that the company needs to do and what its payoff will be. You feel that there is a reason why the company needs expansion and you believe in the future business plan of the company. So basically when you are an investor you make a decision based on what you expect the future of the company to be. When you invest money into the company you intend to put your money into the company so that it can be used to increase its value.
Speculation is however like gambling. Read more. Speculators buy a stock with the hope of selling it for a higher price as soon as they can. They do not need to understand the reason why the price should go up or even care about the reason for the value of the stock to rise. The speculators trade on the basis of gut feeling or on news or rumors. They are not bothered about the prospects of the company or its business plans. Speculation is not a bad thing because speculators keep the market liquid.
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