What is a Stock Market?
A stock market is where the shares of publicly-traded companies are bought and sold in the idea of achieving some profits. That is, buying some stock means, enjoying a ‘part’ of the ownership of the company, which when fares well, yields you the necessary profits! But, on the other hand, if the company, whose share you own witness a slump then, unfortunately, you also ought to suffer some definite losses as a shareholder. Thus, both profits and losses are a part of the stock market, in where, to achieve only the former requires some basic understanding and preparations, such as knowing the 3 important concepts and terms mentioned in here! Is Bitcoin Trader a scam.
Even those, who are not very fond of the stock trading would easily tell you that the expectation of a stock trader lies in the appreciation of the specific stocks of the company that he/she owns. That is, the trader buys the stocks in the hope of earning money with its raising value and that is the common practice. But, do you know, one can also earn profits in the declining value of the stocks by going or selling short?
Yes, short-selling allows you to earn money during the falling prices of the stock and the opposite, aka lose money if the market goes up. For this to happen, you borrow some shares of the security from a broker and immediately sell those shares at the current market price. Later, when the market value of the shares go down as expected, you repurchase them and return back to the borrower and enjoy the price difference as your profit!
Bull market & Bear Market
When you decode the exact meaning of the phrase, one can easily understand that a bull market is a rising market that is moving as fast as a Bull and a bear market is a downward market or a market moving so sluggishly as a bear! But, comes the technical meaning of these two terms!
A Bull market is a rising market, where the commonly followed stock market indices would witness a 20% rise from a recent low! Whereas the Bear market is a falling market, whose stock market indices would suffer a 20% decline from a recent high-water mark! Thus, the former denotes the growing economy and the latter, the upcoming recession!
Inflation & Deflation
It is impossible for you to have missed the word inflation, as it is a constantly debated news topic, where the experts comment about the current inflation rate. Even though the term is a familiar one, not many of you know the meaning, which is very much important for an aspiring stock trader! Inflation refers to the situation of rising prices of the goods, commodities and the services, while the deflation means the opposite aka falling prices.
Although falling prices make it easier for us to buy the respective goods and services, it also weakens the economy and eventually, the businesses would suffer losses leading to recession. Therefore, both, inflation and deflation should be kept well within the control, for the betterment of the society and the economy!