THE STOCK EXCHANGE

Stock is a piece of ownership of a company. Ownership of such a portion gives the holder the right to receive part of the company’s profits and to participate in its management as if you own enough stock you also have some decision-making power within the company.

When a company needs to acquire extra money to help grow the business, they can sell some or all of the ownership of the company in the form of stocks. So if you were to buy 100% of a company's stock, you would own the whole company.

Buying stock is a very popular form of investing.

Share = Stocks

Bond

It is a document issued by a government or a company

borrowing money from the public, stating the existence of a debt and the amount owing to the holder who must show this document in order to obtain

repayment of the loan.

So it is a kind of formal contract to repay borrowed money with

interest at fixed intervals.

The main DIFFERENCE between bonds and stocks is that STOCKHOLDERS are owners of the

company they are invested in, whereas BONDHOLDERS are only lenders. Another

difference is that bonds usually have a maturity date, after which the bond is cancelled, whereas

stocks may be outstanding indefinitely.

Terminiology related to BONDS:

The issuer is the entity (company or govt.) who borrows an amount of money and pays the interest. The principal of a bond is the amount that the issuer borrows which must be repaid to the lender.The coupon is the interest that the issuer must pay. The maturity is the date that the issuer must return the principal + interests. The indenture is the contract that states all of the terms of the bond.

STOCK EXCHANGE: special markets where buyers and sellers are brought together to buy and sell stocks.

Professionals in a hectic activity buying and selling stocks.

The New York Stock Exchange (=The Big Board) is a stock exchange located at 11 Wall Street, New York City. It is the world's largest stock . It provides a means for buyers and sellers to trade shares in companies registered for public trading.

BROKERAGE FIRM: dealer of stocks that acts as your agent when you want to buy or sell stocks. They charge the investors with a commission fee for their services.

Nowadays using only their website is often enough.

Stockers execute STOCK TRANSACTIONS on behalf of

investors.

Investor place the order to his broker.

It is sent to the firm’s order department.

They send it to their trader on the exchange floor, who looks for someone willing to sell the kind of share you are looking for. (It’s not

always easy to buy and sell the stocks you want).

The traders agree on a price and execute the order.

HOW DOES THE STOCK EXCHANGE WORKS?

WATCH THIS TUTORIAL CARTOON TO BETTER UNDERSTAND HOW THE STOCK MARKET WORKS:

http://www.youtube.com/watch?v=rtQ4MwuC3E8 Part 1

http://www.youtube.com/watch?v=GnJCOof2HJk Part 2 (the last past of the first video = as the beginning of the second video)

THE GREAT QUESTION: HOW DO I KNOW WHICH STOCK TO BUY?

Stocks recommended on TV, experts, newspapers, experts?

Stocks from big, stable and successful companies?

Checking the technical indicators?

Choosing randomly?

Based on rumors?

SEVERAL FACTORS TO CONSIDER:

How long can you wait?How much risk can you afford?

How many stocks can you afford?

Do you want to be conservative? Keep your risk low buy buying some blue-chip stocks like GE and hold them for a few years. The downside is that conservative stocks usually don't gain value very quickly. Ensure and Increase Your Safety with

Diversification. The more different stocks you purchase, the more safe you will be in case one stock drops significantly. Of course,

you will probably also make less money because some stocks will go up and some will go down.

Do you like some risk? Then try some more volatile stocks you have a chance at making a larger and faster gain.

DOW JONES: 30 U.S. large blue-chip companies in the USA

STOCK MARKET INDECES

EURO STOXX 50: 50 large blue chip companies in the Eurozone.

IBEX 3530 U.S. large blue-chip companies in the Spain

FTSE 100 (“Footsie 100”) Financial Times Stock Exchange.100 blue-chip in the London Stock Exchange

NIKKEI 225: 225 major companies in the Tokio Stock Exchange.

NASDAQ 100: It is an Amercian Electronic Stock Exchange.

(An index is a method of measuring a section of the STOCK MARKET, used to measure its performance).

DAX (30 major companies trading in the Frankfurts stock Exchange)

Some important concepts

PRICE

Company news

World news

Terrorist attacks

Supply and demand

Human psychology

Technical analysis

Oil prices

Inflation

Analyst recommendations

Bull and bear markets

One of the most popular methods for helping predict a stock's price, at least in the

short term, is called Technical Analysis. This method involves

looking for patterns or indicators in stock prices,

volumes, and many others, over time. Obviously nobody

can predict the future but this method can be effective in

many cases because human beings are somewhat

predictable.

TECHNICAL ANALYSIS

Many traders rely on experts' opinions about companies and future stock prices. Are they

always correct? Of course not. Nobody can predict what will

happen in the future. They can, however, make educated guesses based on past performances and

future prospects for the companies and industries they follow.

ANALYSTS RECOMMENDATIONS

Fear and greed are the two of the strongest human emotions

that affect the market. For example, it is easy to get

caught in the trap of selling a stock prematurely because it dipped temporarily and fear

set in. On the other hand, it is also easy to miss out on a respectable gain because

greed was telling you to hold out for more, and then the stock drops back down.

HUMAN PSYCHOLOGY

Although they sound negative (and they may be, for instance when they are signs of

corruptions and the signal that there are more negative announcements to come),

these are often good news for the company’s stock price because expenses will be

reduced significantly and quickly. This should help increase earnings right away. It is not

always a major warning sign; it could just be a reaction to a slower economy. It is one of

the quickest ways a company can cut expenses if sales have not been meeting expectations. Drastic actions may help

companies in the long run.

COMPANY NEWSCompany current and future earnings

Layoffs

Store closings

Market scandals

Firing CEO or company officials

WALL STREET by Oliver Stone.

With Michael Douglas (Gordon Gekko) and Charlie Sheen (Bud Fox).

A young and impatient stockbroker is willing to do anything to get to the top, including trading on illegal inside information.

In 2001, Gordon Gekko (Michael Douglas) is released from prison after serving eight years for insider trading and securities fraud. Seven years later, Gekko is promoting his new book Is Greed Good?, while his estranged daughter, Winnie (Carey Mulligan), runs a small news website and is dating Jacob Moore (Shia LaBeouf), a trader at Keller Zabel Investments. Jacob is a protégé of managing director Louis Zabel (Frank Langella), and is trying to raise money for a research project. 

WALL STREET 2: Money Never Sleeps by Oliver Stone.

With Michael Douglas (Gordon Gekko) and Shia Saide LaBeouf.