Governments use tax to change behavior

Securities are never immune to the interference of central government. There is a saying among financial experts that you can work out the policies of a government by looking at the tax code. Those who participate in the securities market are not immune to this truth.

If the government so wishes, it can completely crush a certain sector of the securities market. The big bosses know this and so they make sure that they do not do anything to jeopardize their relationship with the politicians.

The business that you are doing will determine your wealth

The securities market is not just about buying shares and forgetting about them. It involves the daily grind of managing those shares and trying to extract as much profit as possible from them. Those who forget this important fact will only realize too late that their money has disappeared.

When we had the global downturn people forgot to mention the fact that there had been a degree of negligence on the part of the investors who were ultimately fleeced. They thought of the stock market in purely abstract terms and therefore did not look behind the securities purchase to understand what was really going on.

Financial market is the place where buying and selling of shares and securities happen. This acts as a mean for the buyers to sell their products. We will look at the financial markets of two countries namely United States and India.

United States financial market is considered to be the oldest financial markets. Trading was happening in their history since 13th century. The financial market condition in a country directly affects the economy of the country. The currency value of the country also has a direct relationship with the financial market situation. For this same reason, the currency value of dollar is always high compared to other countries.

Till 1987, nobody had a fear of the risk involved in financial market investment. But, the ‘Black Monday’ – October 19, 1987 showed the other side of risks involved in financial market. Many people brought shares and securities using margin values where the brokerage firms contribute a percentage of the amount for the investor to buy shares.

If the share or the security price goes down then the investor should pay back the amount contributed by the brokerage firms. So, when the prices of the shares had a temporary drop, every brokerage firms started margin call to the investors asking for the payment. Scares arouse among people and every investor started selling shares and there was no one to buy shares. Shares and securities were stagnated in the exchanges.

Stock trading basically means to buy and sell shares. A stock trader can either be a single person or a firm. A stock trader usually looks to invest in a company which has price volatility. Typically, trader would like to buy the shares when its price is low and sell the share when the market price is high. This method of trading is called as buy and hold policy.

Single person traders are usually part-time traders. They involve in trading for a short time and maintain their profession on the other side. Trader will have fundamental analysis of the market and they should choose the right company to invest.

Stock traders should have a stock broker. There are many banks and brokerage firms who act as stock brokers. They have access to the stock market. They usually take a small percentage of the amount they trade.

Stock market is a place where people can either earn or lose money in high numbers. Different people have different strategies for investing in stock. Some people looks for profit in short time span while some look for a long term investment. Most of them are people who look for a short time return. Here are some of the tips for both types of investors:

1.   Traders should have patience. If a share drops in its price value, then it shouldn’t be sold out suddenly.  Market should be watched carefully looking for a rise.

2.   The simple concept of buy low and sell high should be followed. Buy shares when they reach to a low level and sell the shares when they reach to a reasonable high amount.

Financial market efficiency is one of the main terms used in financial markets. Financial market efficiency can neither be 100% efficient nor 100% inefficient. But, there are many theories and research done on market efficiency.

There is an old saying that a financial market is said to be efficient if the prices fully reflects the available information. In financial markets, efficiency refers to the efficiency of resource allocation. This is also called as allocation efficiency. An efficient financial market should produce right goods at the right place for the right people.