In therory, it is not a hard concept. By stock when prices are low and sell stock when prices are high. But upon further analysis of this simple therory I have learned a few things that people should consider and make the desicion about playing the makrt very easy. I will explain how to make money on this game in 3 easy to follow steps.
1. Start-Up
In order to buy and sell stock you must have an account with a online website like TD AmeriTrade, E*Trade, USAA, or any other company. Many of these companies required a "start-up fee" or "deposite." On average this fee starts at 500 dollars and climbs. The most expensive fee I saw was anything overthe 1,000,000,000(billion) mark. This is a very large sum of money for the average college student. The fee corrisponds to a level on whatever website you are using. Basic Bronze, Silve, Gold Platinum. Right away many people turn their heads at the large number and give up on their dreams of being a stock market trader right there. But wait it gets better (and much more expensive)
2. Trading
Once you throw that lump sum of money into this game, You can start buying Stock. Every company has them so pick a few and buy away. Buying and Selling is called "Trading." The website charges you a fee for every trade you make. This is how the wesite makes money. Based on your level of buy in at start up, your Trade fee goes up or down. At the Bronze level you will be charged 9.99 everytime you buy or sell. Platinum people are much lower at around 5.25 a trade. So not only must you pay for the price of the stock, you must also tack on this trade fee.
3. Money Making
Buy Stock, Wait until Stock prices go up, Sell Stock. That is how you make the money.
In more detail: buy the stock and wait for the price to rise, you must factor in the two trade fee's that will be charged to your account, then sell the stock.
Example:
Lets take a single share of google stock. Ticker Symbol GOOG
Single share of GOOG opened the market today at a price of $610.05
-
Trade Fee to buy Stock (Rounding) $10.00
-
Trade Fee to sell Stock (Rounding) $10.00
+
Single share of GOOG closed the makret today at $ 618.43
=
Net Profit $-11.62
In order to make money off this stock you would have to buy more then one share. at that price no one can afford. No Matter how many shares you buy the Trade Fee is always 9.99. This is were the money comes in. Lets say you bought 100 Shares of GOOG, Here is the sample equation:
100 shares of GOOG opened the market today at a price of $61,005.00
-
Trade Fee to buy Stock (Rounding) $10.00
-
Trade Fee to sell Stock (Rounding) $10.00
+
100 shares of GOOG closed the makret today at $ 61,843.00
=
Net Profit $818.00
Now there is a Number we like.
Of course this example is done with a fairly high priced stock. There are stocks on the market that trade a under $1.00 dollar a share. You can use the same equation to figure out your net income on that type of stock to. Just remember a stock that trades at under a dollar a share will not have as much price change as the GOOG stock. therefore in order to make money you will need to buy in the 100's of shares. And with a stock that has a price change of .25 cents, you will not make over 800 dollars at a time, instead your profit may only be in the single digits.
FAILURE
All the aboe is of course the happy and lucky side of the market. It could very easily (and more commonly) go the exact opposite of the examples above. You buy a stock at a certain price, and instead of going up, the Stock crashes. buy the time you get to click "Sell" on the computer you could have lost your 61,000 dollar investment.
World Influence in Stock
Lets play two examples here:
1) You Buy a stock in an airplane company. The stock is trading at 10 dollars a share. That day the airline company comes out with a media release that says they made an airplane that can fly farther, use less gas, and carry more people then any other airplane in the world. The stock prices skyrocket. You sell your shares for 1,000 dollars a share. You have just made a huge profit.
2) You buy stock in an airplane company. The stock is trading at 10 dollars a share. That day an airplane from that company crashes. They company comes out to the media and says that a certain part failed and caused the crash, the company must not fly any of their airplanes until the art has been replaced in all their airplanes. The stock price plummits. You have to sell your share at .10 cents a share. You have lost it all.
If you stay on your game and can afford the initial start up cost, there is alot of money to be made in the stock market. But the second you fall behind or trip up, you will loose almost all your money in a heartbeat. I read recently that almost 90% of people who try to play the stock market will loose all the money they put into it. Of that 90% over 30% of the people will have to go into bankruptcy because of the ammount of money they lost.
it would be a great learning experience to try to buy a few stocks and see how it all works first hand, but no college student has the moey to go and try this.
Still better off working at McDonalds then playing the Stock Market.
1 comment:
If there’s one thing I’ve learned about playing the stock market, it’s that you should never trade with money you’re not prepared to lose. I was always very skeptical as a person, and that single trait, I guess, is what kept me from putting too much of my own money into something that looks too good to be true. The stock market is one big roller coaster ride. Trends change in the blink of an eye. You win in one second, you lose the next. As far as amateur trading is concerned, just stay realistic and don’t bet too much.
Neil Salser
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