A share market is where shares are either issued or traded in.

A stock market is similar to a share market. The key difference is that a stock market helps you trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A share market only allows trading of shares.


The 4 Basic Rules of the Stock Market

Rule #1: Focus on Price

Educated traders follow a very different set of criteria. These traders focus on a single consideration: price. It may be a poorly run company but if conditions call for a brief improvement in its price, it’s a good buy for the trader who knows when to get in and when to jump out for a quick profit. Conversely, a great company will sometimes climb out of its comfort zone to a price where suddenly there are more willing sellers than buyers. Price is about to plummet, and it’s the short seller who will reap the benefits.

Rule #2: Stay Liquid

If you’re interested in this much more pragmatic view of stock market basics, here are some guidelines to know about. First, the stock has to be actively traded — at least 100,000 shares in daily volume. Below that level you run the risk of being stuck in a position simply because there are no traders on the other side. Second, you should stick to tickers with a price below $50 simply because the liquidity requirements above that level become distracting for most traders.

Rule #3: Practice Before You Jump In

Finally and most important, rather than investing in the broad market you should consider following a few tickers and get to know their trading range very well. This is a stock market basics approach focusing on price, remember. Once you know where it “should” trade then you’ll be well positioned to identify a departure from the norm and act quickly for a positive result. This is the opposite of “buy and hold” because you may load up on a stock in the morning, dump it in the afternoon or a day or two later, then buy it again when conditions change. It’s an agnostic approach to the markets in which the most important consideration is your own desire to be successful.

 Rule #4: Don’t Try to Out-Think The Markets

Here’s a scenario you’ve probably witnessed: a company in a sector has a bad quarter, or maybe a product recall, and all stocks in that sector decline even though the other companies have done nothing wrong. It’s illogical but that’s how the market works. Similarly, mediocre companies will go up in price when the market is hot because “a rising tide lifts all boats”.