Below is a snap-shot of my previous trading account, prior to the MBA which has now utilised a huge amount of my reserves and thus stopped me trading . During my trading period, I was trading values as high as £45,000 and in some cases just a tad higher. I started trading the stock market in 2012, it is now over 5 years and I can honestly say I loved the time I spent trading (including the ups and downs). The thrill of the research, the ‘aha moments’. My first encounter of the stock market came from a book by Robert kiyousaki entitled, ‘Rich dad, poor dad’ which most of you will have read. This book opened my eyes to the importance of residual income, I began to realise how the stock market can help to achieve this.
To understand the stock market, one must first decipher the rationale behind its existence. I have learnt to always ask ‘Why?’ it provides insights to many dilemmas – you should try it. The pursuit of the answer to this question led me to converse with many individuals across professions and to read multiple books ( I will share some in the next blog).I realised that the stock market is not a ‘magical’ or ‘special’ market which is reserved for the elites. No, the market can be accessed by both you and I. The market, exist the same as any market -to facilitate an exchange and thus raise equity. Think of it as going to your local supermarket, or any other market – the items i.e. the bread, cereals or eggs are just company shares which are purchased by other people.
Value is a function of demand
The value of shares is affected by demand and availability. This is the same principal we go through daily and it’s actually just common sense! Imagine if you went to the market to buy some fish and there was a scarcity of fish i.e. only one fish left but multiple buyers. The fish may have initially cost £5 but you may soon realise that the price of that fish rises to £50+. This is the same basic principle that undermines share prices – the trick is to predict or foresee the events in the market.
So, now that we have established that the stock market is not some ‘magical’ market reserved for the elite and also the value of shares is affected by common sense factors such as demand and availability we can begin to discuss in the next blog how identify and tactics taken to trade.