A lot of people have struck gold by playing the stock market. Many of the success stories are by ordinary people who took it upon themselves to learn stock trading. Once they got a feel of how the whole system worked, they plunged right into it with their hard-earned money and played according to a strategy and some stock trading sense. In the face of the recession, it is important that you find innovative ways of generating additional income so you’re not stuck to your monthly pay. Stock trading is one such way. Learning how to trade in the stock market can be complicated in the beginning, but can be very financially rewarding and fulfilling once you go off on your own after learning the ropes.

Where should your stock trading education begin? Of course, you need to have an idea of how the stock market works. So you probably know already that the stock market is a place where people buy and sell shares of stocks of companies. The goal of every stock trader is to make money from buying stocks at a low price and selling them at a higher price, or selling stocks at a low price, and buying them back later at an even lower price. The whole stock market system is based on the fact that the prices of stocks are so dynamic they can rise or fall by the minute. But what is it that causes stock prices to fluctuate? There is a set of factors responsible for the frequent changes in stock market prices. This is loosely called “market forces,” and includes such Economics 101 concepts like the law of supply and demand, public perception, investor perception of the company’s worth, the posted earnings (which is the most unequivocal factor) and other economic factors that bear an impact on the performance of corporations. Now we’re getting deeper into our trading education.

The main theory behind stock price fluctuation is that stock prices are dictated by how investors valuate a company, or how they perceive its worth. The “worth” of a company is of course “calculated” using a mixture of factors such as earnings, sales projections, expansion plans, and even the credibility of its high-level principals. Your stock education shouldn’t be limited to understanding what makes the stock prices go up and down. So here’s a summary of points that you need to remember when it comes to stock prices:

First, stock prices are fundamentally linked with supply and demand.

Second, when you begin to evaluate the worth of the stocks of one company with another, you will need to multiply the stock price with the number of outstanding shares—also called the market capitalization—so you can arrive at the value of the company.

Third, in theory, it’s how much a company makes that dictates its valuation. But in practice, investors factor in so many other things such as public sentiments, impact of corporate decisions, visions, etc.

Finally, you will read about so many technical and complicated theories about stock price valuation, but not one theory is fool-proof or comprehensive enough to cover every nook and cranny.

Now that you have an idea of how the stock market works, it’s time to move on to the next level of your stock market trading education, which is all about buying stocks. So how do you start trading? Do you have to go to that place that you see on television where people look busy and are incessantly haggling or talking on the phone? By the way, this place is called the trading floor, and you don’t need to be there to trade. There are two ways by which you can buy or sell stocks:
1.    Through a broker. This is how most every stock trader does their trade. There are also two kinds of brokers or brokerages: the full-service brokerage and the discount brokerage. The former works like a stock trading consultant while managing your stock portfolio. The latter, on the other hand, simply buy and sell for you upon your instructions on a cheaper fee. The Internet has in fact provided an opportunity for even the lay people to participate in the stock market through cost-effective online discount brokerages.
2.    Through DRIPs and DIPs. “DRIP” stands for dividend reinvestment plan while DIP refers to direct investment plan. Both are plans through which the corporations themselves sell directly to their shareholders without going through a brokerage, usually at regular intervals.

There are a couple more important things that you should know to complete your stock trade education. Let’s talk about the different animals that you will see on Wall Street so you can decide later which one you want to be.

First, meet the bulls. When you hear people saying “it’s a bull market,” that means the economy is healthy and everybody is happy—the employment rate, the recession rate and the inflation numbers are all looking good. During a bull market, it’s easy to choose which stock to buy because almost everything is rising. But of course, bull markets subside after some time. In worst cases, as when stock prices rise up to overvalued levels, the bull market can plunge straight to the bears. When it comes to traders, bulls are optimistic and are always hopeful that prices will perpetually rise.

Next come the bears. In contrast to a bull market, a bear market happens the economy is lagging and all indicators are in the red. During bear markets, it is extra challenging to pick and predict stocks that will make profit at the end of the day. But that doesn’t mean there are no opportunities for earning during bear markets. Some resort to short-selling their stocks—selling at a low price and wait for the price to decrease further before repurchasing them—while others wait out the bear market and trade actively again when the bulls get back. Bears are pessimistic, and are typically afraid to let go of their money in anticipation of stock price drop.

There are other animals in the farm that you should know about to complete your stock option trading education. There are chickens, too, who hold back trading for fear of losing. Because they don’t want to take big risks, they don’t make big profits either. Then there are pigs. They are the stock market’s high rollers who are intent on striking gold or making big money in the shortest period of time. Unfortunately, most of the time, pigs’ desire for profit clouds their judgment of what a good investment is and what is not. When they lose, they lose big time.

In case stock trading sounds too easy and laid-back for you, you can also try getting the best forex education online to get started on foreign exchange trading. Forex trading can be easier or more complicated than stock trading, depending on where you’re standing from. You can also easily sign up for a forex education course online if you are interested in learning more about it.

To jumpstart your forex education, here are some reasons why the forex market can be better than the stock and other markets.

First, trading forex costs less than trading in other markets. Most forex traders do all their transactions online, which eliminates costs associated with middlemen and brokers. The forex market is also very much liquid. Forex traders trade cash, not equities or stocks that represent interest in companies.

Add to this the fact that the market is open 24 hours a day, seven days a week. From your PC, you can find who’s interested in buying the currency that you have with the currency that you want, or vice versa. Another advantage that forex trading education will teach you: the forex market is so dynamic and automated that transactions are opened and closed in real time. This also limits slippage usually cause by the lapse of time between the stages of a transaction. Most often, the quote you get is the same price that you pay for the currency.

Trading forex is also convenient because you can choose what time you want to trade: from early morning when you wake up to before you sleep at night. When you trade in the forex market, you are allowed to trade on high leverage, even as much as 100 to 200 times your capital. This means you can potentially gain big profits but incur big losses as well.

Finally, the forex market can give you the opportunity to make money when the market is falling or rising, or at anytime in between. All you only need to have are: a working knowledge of the basic principles of positioning, as in how to sell low and buy at a lower price, or buy low and sell at a higher price. Also, most of the forex traders who make the money are those that take risks and put their money where their mouth is. But when you do decide to trade, make sure you make calculated risks so you also mitigate your losses.