What Is the Stock Market?

The stock market is a network of exchanges — the New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange, and others — where shares of publicly traded companies are bought and sold. When you buy a share of Apple (AAPL), you're buying a small ownership stake in Apple Inc. If the company's value grows, your shares are worth more. If it shrinks, they're worth less.

The stock market isn't just for wealthy investors. With commission-free brokers and fractional shares, you can start participating with as little as $10. But starting smart requires understanding some basics first.

How Stock Prices Are Determined

Stock prices change constantly during trading hours based on supply and demand. If more people want to buy a stock than sell it, the price rises. If more want to sell, it falls. What drives those buying and selling decisions? A combination of company fundamentals (earnings, revenue growth, profit margins), macroeconomic conditions (interest rates, inflation, economic growth), market sentiment, and technical factors like momentum and trading volume.

Key Terms Every Beginner Should Know

Market capitalisation: The total value of a company's shares. Large-cap companies (over $10 billion) like Apple and Microsoft tend to be more stable. Small-cap companies (under $2 billion) can grow faster but are more volatile.

P/E ratio (Price-to-Earnings): How much investors pay for each dollar of earnings. A P/E of 20 means the stock costs 20x last year's earnings. Higher P/E = more growth expectations priced in. Compare P/E within the same industry — tech stocks typically have higher P/E ratios than banks.

Dividend: Some companies pay shareholders a regular cash payout from profits. Dividend-paying stocks (utilities, REITs, consumer staples) tend to be more stable but grow more slowly.

Volume: How many shares are traded in a given period. High volume on a price move adds credibility to the move. Low-volume moves are often reversed quickly.

52-week high/low: The highest and lowest price a stock has traded over the past year. These are key reference points for support, resistance, and context for where the stock currently sits.

Types of Stock Market Orders

Market order: Buys or sells immediately at the current best available price. Fast execution but you can't control the exact price, especially in fast-moving markets.

Limit order: Buys or sells only at a specified price or better. Gives you price control but the order may not execute if the price never reaches your level.

Stop-loss order: Automatically sells your position if price falls to a specified level. Essential for managing downside risk on every trade.

For most beginners, using limit orders for entries and always setting a stop-loss is the safest approach.

Technical Analysis vs Fundamental Analysis

Fundamental analysis evaluates a company's financial health and business outlook. You look at earnings growth, revenue trends, debt levels, competitive position, and management quality. This is the approach used by long-term investors like Warren Buffett.

Technical analysis studies price charts, patterns, and indicators to predict future price movements based on historical behaviour. This is the approach used by short-term traders looking for entry and exit points. Indicators like RSI, MACD, and moving averages are technical analysis tools.

Most successful traders use both — fundamentals to identify which stocks are worth trading, and technicals to time entries and exits.

Common Beginner Mistakes to Avoid

Buying based on hype: If everyone is talking about a stock on social media, the move is usually already largely priced in. By the time retail traders hear about a trade, the smart money has often already entered.

Not using a stop-loss: The single most common cause of large losses for beginners. A stock can fall 40%, 60%, even 90% if a company goes through difficulties. A stop-loss at 7-10% limits your worst-case loss on any single trade.

Over-concentrating in one stock: Putting 80% of your capital into a single company is not investing — it's gambling. Diversify across sectors and asset classes.

Trading with money you can't afford to lose: Even the best traders have losing months. Only use capital you can genuinely afford to have sitting in the market for months or years.

Paper Trading: The Best Way to Start

Paper trading (simulated trading with virtual money) is the safest way to learn. TradeProview provides a $100,000 virtual portfolio where you can buy and sell real stocks at live market prices, track your P&L, and practise strategies without risking a penny. Most experienced traders recommend paper trading for at least 3-6 months before committing real capital.

Use the learning period to understand not just how to place a trade, but how to manage it: when to move your stop-loss, when to take partial profits, and how to respond when the market moves against you.

Your First Trading Checklist

Before placing your first real trade, make sure you can answer: What is the trend on the daily chart? Where is my stop-loss? What is my target price? What is my risk-to-reward ratio (aim for at least 2:1)? Why is this the right time to enter? If you can't answer all five clearly, wait.

Stock trading involves risk of loss. This article is for educational purposes only and does not constitute financial advice.