Stock Market Basics PDF and Free Guide (2024)

When trading and investing in the stock market, your goal is to buy the shares of a company at a low price and make a profit by selling them at a higher price. You have to be registered to trade stocks on an exchange, but you can easily buy and sell shares through a licensed broker who will charge you a fee. However, the vast majority of share trading in today’s world is carried out through online trading platforms.

In this in-depth guide, we explore the basics of the stock market, and how you can get started trading in stocks.

NOTE: You can get your free stock market basics PDF guide below.

Free PDF Guide: Get Your Intro to Stock Trading PDF Guide

Table of Contents

The Stock Market for Beginners

A company looking to raise capital can offer its shares to the public and list on a stock exchange. This is known as an IPO (initial public offering).

At the start, the price point of a share is set by the company itself. Once the shares have been floated on the stock exchange, the price is open to the public and can move higher or lower depending on supply and demand.

While a company can issue more shares, there is always a limited supply and a public record of the number of shares in circulation.

When a trader buys shares in a company, they become a part-owner of that company and gain any rights that come with those shares. This includes voting and dividend rights.

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Stock Market Basics

When you own stock in a company, you own a slice of that company equal to the number of shares you own. For example, if you own 10 shares of stock XYZ and there are 100 shares in total, you own 10% of that company.

As discussed below, physically buying stocks is different from trading and speculating in stocks with products such as CFDs. With CFD’s, you don’t actually own any part of the company. You are only speculating on if the price will move higher or lower.

It is important to note that when buying and selling shares, you are not buying or selling them directly from the company. Usually, you’ll make your trades through a registered broker, and buy or sell shares to another stock investor.

What Determines Share Prices

The price of a companies stock can move higher for several different reasons, but in the end, it all comes down to supply and demand. If more people want to buy the shares, then the price will rise. If more people are trying to sell, then the price will fall.

Supply and Demand

There are many factors which affect supply and demand…

  • Company Earnings: The financial welfare of a company plays a huge role in its share price. This calculation includes how much money the company is currently making, as well as how much they could make in the future.
  • State of the Economy: When we are in strong bull markets, it can be easy to find strong stocks. When the economy takes a dive, finding stocks that remain positive becomes much more difficult.
  • Interest rates: When interest rates increase, investors can easily monetize other investments. This takes money out of the stock market and will often cause them to stagnate or lose ground.
  • Technical Analysis: Many investors are using technical analysis and chart patterns for both finding and managing their stock trades.

Buyers Fighting Sellers

After everything is taken into account, the price of a companies stock comes down to the laws of supply and demand.

There are millions of transactions from both buyers and sellers taking place in the market every day. The price of a company’s stock will move higher if more buyers are willing to pay higher and higher prices.

However, on the flip side, when the sellers move in and overwhelm the buyers, we can see price sell-off quickly and aggressively lower.

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Understanding the Stock Market

It has been proven repeatedly that over long periods of time, the stock market can generate substantial returns that are hard to beat.

As we discuss in more depth below, not only can you make money from buying low and selling for a profit, but as a shareholder, you can also make money from dividends.

When many investors think of the stock market, they either think of day trading or what it would be like to find the next Facebook or Google before it takes off. However, to make solid profits over long periods of time, you do not need to take such large risks looking for the next big player.

Investing in companies that have proven long-term track records of profits can give you long-term capital gains while giving you an income every year from the company dividend.

Stock Market Indexes

There are many thousands of stocks on many different stock exchanges worldwide. However, there are also stock market indexes.

Stock market indexes show you the price of a basket of stocks for certain indices. For example, when people talk about the Dow Jone, they are talking about the stock market index formed with the 30 largest US publicly traded companies.

There are many different stock market indexes all around the world. Whilst you may not be interested in trading them directly, they are often a good idea to keep an eye on if you are a stock trade because they can give you a quick idea of how an overall market or sector is doing.

Some of the biggest and most well know stock market indexes around the world include;

  • S&P 500
  • Nasdaq Composite
  • Russell 2000
  • FTSE Index
  • Nikkei 225
  • Dax Index
  • CAC 40 Index
  • CSI 300 Index
  • Sensex

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What is a Dividend?

Making profits through capital gain is a popular way to make money in the stock market. However, profiting from dividends can also be very lucrative.

A dividend is a payment to shareholders out of the company’s profit. These payments are normally made once or twice a year. Some larger companies will pay out quarterly dividends.

Typically, only the biggest and most profitable companies will pay out dividends, and they will publicly declare the amount of each dividend.

To be eligible for a dividend payment, you must be a fully paid stock owner by the ex-dividend date.

Profitable companies will regularly pay out their normal dividend when making profits, but they can also pay out special dividends. This is often the case if the company has made a larger than expected.

How to Invest in Stocks for Beginners With Little Money

There are two common ways traders and investors take part in the stock market. Whilst at first glance they seem very similar, they have very different pros and cons.

Buying and Owning Shares

The most common form of share investing is buying the shares outright. This means you own a slice of that company and all the rights that come with those shares, including potential dividends.

This type of trading normally involves no margin. That means if you buy $10,000 worth of stock, then you will need to front up the whole $10,000 at the time of settlement.

With this type of investing, you are looking to buy as cheap as possible and profit as the price rises.

Speculating on Shares With CFD’s

The other popular way to trade the share market is with products such as CFD’s.

With CFD’s, you do not actually own a part of the companies stock; you are only speculating and profiting from the price movements.

This type of trading does have its advantages and disadvantages.

With CFD’s, you will gain access to leverage. This means that you can take a trade and only have to front up part of the capital. For example, you could gain access to 30:1 leverage or, in some cases, more.

CFD trading will also be cheaper and allow you to start trading with a lot less capital because you do not have to front up the full investment.

With CFD trading, you can also profit from price moving both higher and lower. If you think the price of a certain stock or stock index is going to fall, then you can make a short trade and make a profit from the price moving lower.

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Choosing an Online Stock Broker

The type of stockbroker you choose to use will largely be dependent on the style of trading or investing you want to do.

If you want to own the shares physically, you will need a stockbroker like IG markets or CMC markets. These types of brokers allow you to buy the shares physically.

If you want to trade with leverage using products such as CFD’s and profit from price moving both higher and lower, you will need a CFD broker such as Pepperstone.

NOTE: You can get your free stock market basics PDF guide below.

Free PDF Guide: Get Your Intro to Stock Trading PDF Guide

Your Guide to Price Action Entries FREE PDF Download

How to find, enter and place stop losses on the best price action entries

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Stock Market Basics PDF and Free Guide (2024)

FAQs

How can I learn basic stock market for free? ›

Finschool is an open source free to learn platform. The access to the platform is lifetime and all out free courses can be accessed by all the users for free. Finschool is dedicated toward building a knowledge-based community of stock market traders.

How long does it take to learn the basics of stock market? ›

On average, it takes between one and five years to grasp investing and understand the stock market, with key learning areas including research, fast-paced decision making, and growing market knowledge.

Which is the best overall stock market from scratch for complete beginners? ›

Compare the Best Investing Courses
CoursePricePlatform
Stock Market From Scratch for Complete Beginners Best Overall$49.99Udemy
Investing Classroom from morningstar.com Best for a Free and In-Depth Experience$0Morningstar
Warrior Trading's Warrior Starter and Warrior Pro Most Comprehensive Courseup to $5,997Warrior Trading
5 more rows

How to understand the stock market for beginners? ›

How to start investing in stocks: 9 tips for beginners
  1. Buy the right investment.
  2. Avoid individual stocks if you're a beginner.
  3. Create a diversified portfolio.
  4. Be prepared for a downturn.
  5. Try a simulator before investing real money.
  6. Stay committed to your long-term portfolio.
  7. Start now.
  8. Avoid short-term trading.
Apr 16, 2024

How to learn stock market from scratch? ›

Top ways to learn stock market as a beginner
  1. Read Books: Investors should read various books based on the Investment in the Stock Market. ...
  2. Analyze the Market: Investors should analyze the market in the best manner before investing their money. ...
  3. Online Courses: There are a lot of stock market online courses available.

Which trading is best for beginners? ›

Overview: Swing trading is an excellent starting point for beginners. It strikes a balance between the fast-paced day trading and long-term investing.

How many stocks should a beginner start with? ›

“How many stocks should I own as I begin my investing career?” As part of your initial portfolio management approach, you should aim to invest in a minimum of four or five stocks—one from most, if not all, of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities).

Which type of trading is most profitable? ›

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

Which is the best course for the stock market? ›

In summary, here are 10 of our most popular stock market courses
  • Financial Markets: Yale University.
  • Practical Guide to Trading: Interactive Brokers.
  • Trading Basics: Indian School of Business.
  • Investment Risk Management: Coursera Project Network.
  • Stocks and Bonds: University of Michigan.

What stock should I invest $1000 in right now? ›

Just like it does a wonderful job taking care of its customers, Amazon (NASDAQ: AMZN) continues to cater to its shareholders as well. The tech titan reported first-quarter 2024 revenue and earnings per share that exceeded Wall Street estimates.

Is Walmart a good stock to buy? ›

Walmart has 9.17% upside potential, based on the analysts' average price target. Is WMT a Buy, Sell or Hold? Walmart has a conensus rating of Strong Buy which is based on 25 buy ratings, 3 hold ratings and 0 sell ratings.

Where should I start investing in stocks for beginners? ›

One of the easiest ways is to open an online brokerage account and buy stocks or stock funds. If you're not comfortable with that, you can work with a professional to manage your portfolio, often for a reasonable fee. Either way, you can invest in stock online at little cost.

How much do I need to invest to make $1000 a month? ›

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

Can you self learn stocks? ›

Yes. While mentors can help, you don't need to find a teacher to learn how to trade stocks. Whether or not you have a mentor, you still should read books, invest a small amount of your own money, and take advantage of free educational materials offered by the best beginner trading platforms.

What is the minimum money to start stock trading? ›

Yes, you can technically start trading with $100 but it depends on what you are trying to trade and the strategy you are employing. Depending on that, brokerages may ask for a minimum deposit in your account that could be higher than $100. But for all intents and purposes, yes, you can start trading with $100.

What are the best stocks to make quick money? ›

Money Making Stocks To Invest In
  • Airbnb, Inc. (NASDAQ:ABNB)
  • Novo Nordisk A/S (NYSE:NVO)
  • ASML Holding N.V. (NASDAQ:ASML)
  • Lockheed Martin Corporation (NYSE:LMT)
  • Cisco Systems, Inc. (NASDAQ:CSCO)
  • PDD Holdings Inc. (NASDAQ:PDD)
  • The Home Depot, Inc. (NYSE:HD)
  • Booking Holdings Inc. (NASDAQ:BKNG)
Dec 30, 2023

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