Stock investment info

Question

lets just say you were to invest a dollar in a stock, and when the stock goes up ten and you decide to sell it you make 10 dollars right? what happens if it goes down 10 do you owe 10 dollars or one dollar? if you only lose your dollar and say you lost it all (if thats the case) why not just leave the dollar which you lost until the stock goes back up?

also who pays for the investment you make? and why is the stock market so random day by day? is it because of supply and demand? if so how can that change so frequently?

Answer 1

I'll answer these questions the best I can.

Money you make:

Everything you make or lose in the stock market can be determined as a net percentage.  For example, if you buy 100 shares of a $10 stock for $1,000 and pay $10 in commissions, then...

     If it goes up to $20, then you sell for $10 commissions, you make $980, or 98 percent on top of your investment.

     If it goes down to $5 and you sell with $10 commissions, you lose  $520, or 52 percent

    If the stock goes down $10 in this scenario, it will be zero and the company goes bankrupt.

Waiting for the stock to go back up...

    This is the most common amateurs strategy in the stock market, and the type of thing that traders love.   At any time, you want to cut your bad stocks and move your money into better stocks.  If your original stock has a good chance of going up, then keep it, but if there are others with better chances, sell, take your loss, and move on.

Who pays for the investment...

    You are buying the stock.  it is your money at risk.

Stock randomness/volatility

    For any stock, you can expect the average daily volume to be very generally 1 percent of the total number of shares outstanding.  This means that approximately one in one hundred shareholders are deciding the value of this stock, and many of these shares belong to in and out traders.  Also, say if a stock's normal volume is 1,000 shares (500 buying 500 selling to keep it simple), and a news announcement  makes people want to buy 100 more shares, there is a huge supply and demand imbalance.  Inevitably, very small supply and demand imbalances occur at any time (especially with bigger stocks), and the stock market will forever be trying to constantly correct them.

Why does it change so frequently...

The stock market will move in one direction until the imbalance is corrected.  At that point, no movement will occur until there is another imbalance.  This happens on every time frame -- minute, hour, day, week, month, year.

Randomness...

It is impossible to figure out what stocks will be bought.  If everyone playing the stock market ate soup for breakfast instead of cereal, the market would be entirely different.

Start learning the market at investopedia.com if you are interested

http://investopedia.com/university/?view...

Answer 2

Yes, if you buy a stock for $1, and it goes up to $11 and you decide to sell it, you would make $10. However, if you only paid $1 for the stock then it is impossible for it to go down ten dollars, it could only go down one dollar, meaning that the stock would be worth nothing and you would lose the dollar you invested, but that's all you could lose. When this happens (well not when the value goes to zero, but when the stock loses value to the point of being worth almost nothing), it probably is a better idea to keep your money in the stock on the off chance that it goes back up, rather than losing next to everything.

For the second part of your question, I'm not entirely sure what you mean by 'who pays for the investment you make,' because the best answer I can think of is that you pay for it. The stock market really isn't random and if you knew everything that happened in the business world you would understand why each and every stock value fluctuates. For a pharmaceutical company the stock value might fall if it were announced that the FDA didn't approve one of its drugs, or conversely it might rise if the FDA approved a new revolutionary drug made by that company. The reason that the value would rise or fall would be because the consumers, the people investing, would feel more confident (or less confident) that the company was doing well and making money, so they would be willing to pay more for the stock. At the moment, the stock market is going crazy because of multiple different factors like the housing market and the supposed recession, but if you look at a graph that details the stock market over a thirty year period or so, you'll see that the stock market usually moves very slowly and gradually.  

Answer 3

If you invest $1 per share in a stock, the most you can lose is $1 per share, and that would only happen if the stock went to $0. It can't go below that. If the share price reaches $0, it means the company no longer exists (except on paper), so don't wait for it to go up from $0.

Stock prices are based on supply and demand. Demand changes with every trade -- this could be every second in a major, very active stock. Supply changes less frequently. If a company issues more stock, supply will grow, lowering prices over a period of time, or sharply when the announcement of the new issue hits the press. If a company buys its own stock back, this will raise prices over time -- perhaps sharply when the announcement is made.

Answer 4

Stock prices do not go into the negatives, that would be free stock! No one is really sure what the markets will do next. In the short term, crowd psychology controls the prices, over the long term prices are generally controlled by how the company is actually doing. The market is a prime example to how weird the human psychology is.