Journal article Open Access
Are you interested in the world of financial markets? Do you want to learn how to invest in the stock market from scratch? Professional brokers from dotbig.com can tell you how you should do that to raise your income!
More and more people are interested in this fascinating world; in fact, many began investing in the stock market in 2020 during the various phases that we experience with the coronavirus.
However, it is not always easy to find information that really helps you understand the stock market and how to trade it, especially if you are a beginner. That is why in this article we teach you everything you need to know.
In Google and other search engines, the phrase "how to make money in the stock market" is highly searched. This shows that many people want to invest their savings in this way. But you should know 3 things:
⚠️ Beware of any guaranteed stock market advice or wonderful promises - be careful not to fall for a potential scam.
What is the Stock Market?
The first step to learning to invest in the stock market is to know what this market is.
The Stock Market is a market in which financial instruments are traded: stocks, currencies, bonds, etc. It allows people to invest in the hope of making money from the increase or decrease in value of the assets they buy or sell.
This market, like any other, is based on the law of supply and demand: if a stock is in high demand, its price increases because there are many buyers in the market. If the stock falls, there are more sellers in the market than buyers.
The stock market allows companies to finance themselves by selling shares of their capital. On the other hand, it also allows investors to own part of the capital of a company. The shares grant the right to:
✅ Receive the dividend if the company pays one.
✅ Participate and vote in the General Meetings.
There are many more stock markets than we imagine: the traditional stock market, but also the commodity markets, such as oil and gold, the index markets, such as the CAC 40 and DAX 30, the forex market with the eurodollar or the Swiss franc, without forgetting the derivatives market (Contract for Difference (CFDs), Futures, Options ...) that arouse a more pronounced interest among individuals.
Now that we know the stock market, let's go to the second step; who are the market participants?
Institutional investors are the main players in financial markets. They are responsible for the majority of the volumes of the different classes of financial assets. Among them, you will find insurance companies, asset management companies, hedge funds, investment banks, or even retirement pension funds.
People invest in the stock market to generate financial wealth and earn part of their savings, most often over a long-term investment horizon (several years).
Depending on the direction of the investment, the participants can be classified into:
The objective of trading on the stock market is to buy stock in the hope of selling it at a higher price, that is, more expensive. For example: if the price of an Iberdrola share is 6 euros, I want to buy it only if I think the price could rise more.
At the same time, a seller is a person or entity that sells security because it believes its price will decrease. This is done through CFDs. For example: if the price of an Iberdrola share on the stock market is 6 euros, I will sell it only if I think the share price will fall.