Make money with stock investing


Understanding stock prices

How are Stock Prices Set Each Day?tight and not be frightened off a good
How much does a share of stock cost?price.
That’s like asking how long is a pieceAs you develop you investing skills, you
of string. The answer is ‘itwill learn strategies and techniques to
depends.’help you establish a fair price for
Once a stock moves out of the IPO stagestocks and either get that price or find
and into the open market, there are aanother stock to buy that meets you
number of factors that go into settinginvesting criteria.
the price.Buy low and sell high is the ultimate
Opening Priceguide to successful stock investing. It
For example, Amalgamated Kumquats closesis also the reverse of what many
on Tuesday at 251; what will it open atinvestors do.
on Wednesday morning? The answer is: whoIt’s not that investors start out to
knows. Most likely, it will opendo that, but too often, they use price,
somewhere around 251, but any number ofand in particular price movement, as
things might cause it to open higher ortheir only signal to buy or sell.
lower. Before the market opens onStocks that have gone up recently,
Wednesday:especially those with a lot of press,
Civil war in Elbonia, the prime produceroften attract even more buyers. This
of Kumquatsobviously drives the price up even
President of Amalgamated Kumquatshigher.
arrested for looting the companyPeople get excited about what they read
FDA says Kumquats cure baldnessand see and want a part of the action.
Huge oil reserves discovered onThey jump into a stock that is already
Amalgamated propertytrading at a premium – they buy high.
All of these circumstances and manyTraders
others could influence the price up orExperienced traders can make money
down.jumping in and out of a stock that’s
In the end, it remains a question ofcaught the public’s attention, but
what a buyer is willing to pay and ait’s not a game for the inexperienced
seller is willing to take.and it’s not investing.
The swirl of market, political, andThere’s risk involved and tax
industry news influences whether thereconsequences along with other issues
are more buyers or sellers for athat mean most investors should leave
particular stock in the market at anythis activity to short-term traders.
one time.For most investors, trying to grab a
Clean Slatepiece of the latest flashy stock,
Every day the market opens, it’s ausually means paying too much (buying
clean slate. Investors must meet no sethigh).
prices. Stocks that the day before wereBad Decision
flying high may not get off the groundThe other side of the market is when a
today. The ugly duckling turns into astock has fallen; most investors may
cash cow (how’s that for mixingwant to sell along with the rest of the
metaphors).market. If you go by price alone, this
The point is a share of stock is worthcan be a bad decision (sell low).
what someone else is willing to pay forThere are many reasons a stock’s price
it. That is the heart of investing. Adrops and some of them have nothing to
stock may be a good buy at $35 per sharedo with the soundness of the investment.
and a terrible buy at $50 per share toThat’s why if you only follow price
one investor, however another investoryou may miss an opportunity.
may not think twice about paying $50 perAfter a stock’s price has fallen can
share. Which is the right price? Oftenbe a great time to buy (buy low) if you
only time will tell. Many years ago,have done your research on the company.
some investors thought $10 per share wasConclusion
too much for Microsoft and refused toIf all you know about a stock is the
buy it. Too bad for them.price, you may (and likely will) make
Fair Priceinvesting mistakes. Remember, if a stock
Successful investors decide what a fairhas had a good run up it may be time to
price for a particular stock is andsell, not buy (sell high). Similarly, if
that’s where they buy. They don’ta stock has dropped like a rock, it may
let market hysteria goad them intobe a good time to buy rather than sell
overpaying. Likewise, if nothing has(buy low). You won’t know what to do
fundamentally changed with the company,unless you understand a lot more about
but the stock is dropping along with thethe company than its stock price.
market, successful investors will sit



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