Stock Trading and Newton’s Laws of Motion
What new stock investor should know?
We run a small stock investing club and educate all new investors in our club using stock trading articles, software and games. Currently, there is euphoria in the stock market and several people are investing money with a very ambitious return on investment.
In this article, we will share with you some basic facts about investing in the stock market.
What is the stock market?
Common shares are owned by a company and are sometimes referred to as shares, securities, or equity. This means that you are entitled to a portion of the company’s profits and the voting rights associated with the shares. The most common method of buying stocks is to use a full-service or discount brokerage firm.
Why do people invest in stock markets?
People invest in the stock market for possible high returns throughout the life of the company.
What are the risks of investing in the stock market?
However, your original investment is not guaranteed in the stock market. There is always a risk that the stocks you invest in will lose value and you will lose your entire investment. As a shareholder, you will not receive any money until creditors, bondholders, and preferred shareholders are paid.
How can you interpret Newton’s law to become a better stock trader?
Rule 1: “A stock that is not moving tends to remain at rest and a trending stock tends to remain in trend unless acted upon by an equal and opposite reaction or unbalanced force.”
This means that you should always trade in the direction of a trend. You should look for a force that can take the form of a drastic change in market sentiment or a drastic change in the performance of the specific company.
Rule 2: “The acceleration of an action created by a market vote is directly proportional to the magnitude of that consensus, in the same direction as the agreement, and inversely proportional to the mass of the action.”
This rule teaches us that a stock moves up or down in a trend due to a force created by market consensus. The movement of the shares is determined by the price of the shares and the amount of total agreement in the market sentiment.
The stock market is a zero sum game. In the field of stock investing, we can interpret Newton’s third law as “for every buyer, there is a seller”. This is the third law of stock trading.
This means that there cannot be more buyers than sellers, however, there may be very high or low demand for a particular stock.
Once you follow the newton’s law of stock tradingYou will understand how easily you can invest in the stock market and make good profits on a regular basis, regardless of the bull or bear market.