5 basic rules of the stock market

If the thought of investing in the stock market scares you, you aren’t alone. These tips may help you understand the stock market.


No one likes to lose money. According to Online Trading Academy’s John Henkel most new investors are struggling to grow and protect their savings while Wall Street Professionals consistently make money. Here are a few basic rules of the stock market:

Stock Market Basics Rule #1: Know the Difference Between a Share and a Stock

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A stock is a piece of a company. When a company needs to make money, it issues shares. This is done through what’s called an IPO or Initial Public Offering. The price of shares is set based on how much the company is estimated to be worth and how many shares are being issued. The company gets to keep the money raised to grow its business while the shares continue to trade on an exchange such as the New York Stock Exchange (NYSE).

Stock Market Basics Rule #2: Focus on Price

Educated traders follow a very different set of rules. These traders focus on one single thing: the price. It may be a poorly run company but, if conditions call for a brief improvement in its price, it’s a good buy for the trader who knows when to get in and when to jump out for a quick profit. In the same light, a company may climb out of its comfort zone to a price where suddenly there are more willing sellers than buyers. When the price plummets, the short seller will reap the benefits.

Stock Market Basics Rule #3: Stay Liquid

The stock has to be actively traded. There need to be at least 100,000 shares in daily volume. Below that level, you run the risk of being stuck in a position simply because there are no traders on the other side. Second, you should stick to tickers with a price below $50 because the liquidity requirements above that level can be distracting for most traders.

Stock Market Basics Rule #4: Practice Before you Jump In

Consider following a few tickers and get to know their trading range before you jump in. Remember the stock market basics approach on focusing on price. That knowledge will help you know where it “should” trade and you’ll be better positioned to identify when things change so you can act quickly for a positive result. This is the opposite of “buy and hold” because you may load up on a stock in the morning and then dump it in the afternoon a day or two later and then buy it again when conditions change. The most important consideration is your own desire to be successful.

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Stock Market Basics Rule #5: Don’t Try to Out-Think the Markets

If you focus solely on price, the basis of the patented trading strategy taught at Online Trading Academy, you don’t need the markets to be logical. You simply want to identify the zones where supply and demand are likely to be out of balance, then buy or sell when the price enters these zones. Experience tells us there are large quantities of unfilled buy or sell orders at these price levels…and once the orders are filled, the price will change direction regardless of what else is happening in the economy or market.

These are just a few of the examples that follow the Online Trading Academy patented trading strategy that you can learn about in a free half-day class. Online Trading Academy has been chosen by the New York Stock Exchange, NASDAQ and the Chicago Mercantile Exchange to create educational content for their employees. Their instructors have been training main street investors powerful Wall Street insider techniques since 1997. Today there are more than 200,000 investors that have learned to trade with skill and confidence of professional traders.

Learn how to trade and invest like the pros. To get started, attend a free half day class at the Denver campus. Students will also receive a complimentary wall street insiders kit with five powerful home study courses. Register online at TradingAcademy.com or call 303.547.3581 for more information.