How to Study the Stock Market

by Gail Cohen

    You don’t need a PhD in economics to learn how the stock market works, but the more education you seek as you invest, the greater your chances of coming out ahead. Sure, there are plenty of classes and workshops available. You can even sign up for tutorials online that are designed to impart the theory and practice of stock market activity, but since there are multiple ways to study the stock market, figure out which one is tailor-made for you.

    There’s no shortage of books written about the stock markets currently operating throughout the world. Start your education by reading one or two for background and history. Meteoric changes taking place every day in the world's financial capitals make it essential to keep current. Newspapers like the “Financial Times of London,” “The Investor’s Business Daily,” the “Wall Street Journal” and the “International Herald Tribune” offer contemporary updates on market activity. Bloomberg, CNBC and online and broadcast financial networks make studying the stock market timely and convenient.

    When Warren Buffett, Peter Lynch, George Soros and Benjamin Graham speak, investors listen. Veterans of stock market wars and activity make the best role models. Pick one as your guru or follow several. While you study the habits of these investing pros, learn the lingo of the stock market so terminology doesn’t stop you from understanding the materials you study. Stock-savvy pros can teach you how to spot signs of weakness or lack of strength when you analyze investment opportunities. Emulate them and you can learn to do the same.

    There are two types of stock market investors. Choose one. Decide whether you want to be an active investor or a passive one. Your stock market studies can be more finely tuned to the style you expect to practice. For example, if your primary interest is in managed funds, you are considered a passive investor, so you don’t have to study as much market data as you would if you choose to become an active trader. “ ... Much greater levels of market knowledge and understanding” are required if you trade actively, say analysts writing for Stock Exchange Secrets.com.

    According to investment firm Market Smith, trends are the key to wise investing. “Our studies of stock market history revealed that three of out of four stocks will follow the general market trend.” Identify up-trending markets and your studies should pay off. Of course, timing is everything. Short of getting insider-trading information, taking advantage of financial firm research focused on stock market trends is one of the best ways to learn the market. Market Smith analysts recommend reviewing the charts of at least four indexes every day: Standard & Poors, NASDAQ, Dow Jones and the New York Stock Exchange, for example.

    According a study published by “Wired Science,” “The emotional roller coaster captured on Twitter can predict the ups and downs of the stock market.” Graduate students experimented with Twitterverse data to portend Dow Jones Industrial Averages. A Google database provided the 9.8 million Tweets researchers used to analyze moods and chatter. They applied an algorithm and predictions were accurate in 86.7 percent of trades. Using Twitter as a stock market study aid portends the future. Become adroit at translating Tweets and other social media into stock market predictions and you may even morph your studies into a career.

    About the Author

    Based in Chicago, Gail Cohen has been a professional writer for more than 30 years. She has authored and co-authored 14 books and penned hundreds of articles in consumer and trade publications, including the Illinois-based "Daily Herald" newspaper. Her newest book, "The Christmas Quilt," was published in December 2011.

    Zacks Investment Research

    is an A+ Rated BBB

    Accredited Business.