Stock Market Trading and Newton’s Laws of Motion

What new stock market investor should know?

We run a small stock market investment club and we educate all of new investors in our club using articles, software and stock market game. Currently, there is euphoria in the stock market and several people are investing money with some highly ambitious return of investment.

In this article, we will share with you some basic facts on stock market investment.

What is equity market?

Common stock is ownership of a company and sometimes it referred as shares, securities or equity. This means you are entitled to a portion of the company’s profits and any voting rights attached to the stock. The most common method for buying stocks is to use either full service or discount brokerage firm.

Why people invest in share market?

People invest in stock market for a possible high return for the entire duration of the company.

What are the risks of stock market investment?

However, your original investment is not guaranteed in share market. There is always the risk that the stock you invest in will decline in value, and you may lose your entire investment. As a stockholder, you will not receive money until the creditors, bondholders and preferred shareholders are paid.

How you can interpret Newton’s law to become better stock market trader?

Rule 1: “A Stock is not moving tends to stay at rest and a Trending Stock tends to stay in trend unless acted upon by an equal and opposite reaction or an unbalanced force.”

This means you should always trade in the direction of a trend. You should look for a force may take the form of a drastic change in the market sentiment or drastic change in the performance of the specific company.

Rule 2: “The acceleration of a stock as 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 stock.”

This rule teaches us that a stock moves up or down into a trend due to a force created by market consensus. Movement of stock is determined by the price of stock and the amount of total agreement in market sentiment.

Stocks market is a zero sum game. In the realm of stock market investment we can interpret Newton’s third law as “for every buyer, there is a seller.” This is 3rd law of Stock market trading.

This means there cannot be more buyer than seller however there may be a very high or low demand for a particular stock.

Once you follow the Newton’s law of stock trading, you will under how easily you can invest in equity market and make good profit regularly irrespective of bull or bear market.