What does Investing in the Stock Market really consist of?

At all times, more due to ignorance or bad luck, the world of the stock market has been dangerous and a place where losing money is almost certain.
Many people think of the stock market as a place where money is played and, for example, in a casino, you depend on chance to win or lose.
In the world of the stock market there are two completely different scenarios, those that have ever earned a lot of money and those that have lost even more than they should. Obviously, whether we talk about profits or losses, the stock market is not a game of chance.
With this we want you to be aware that investing is not a game, but it is not a method to lose money because then, how do more and more people decide to invest? Those who left less benefited from an investment will of course discourage you when it comes to investing and even they may not bet on the stock market again.
We are going to encourage you to at least understand the mechanism of investing in the stock market and observe for yourself whether or not it is worth investing.
The bag
To talk about the Stock Exchange, you must first begin by explaining what it is, so you should know that the stock exchange is a private organization that offers its members the possibility of generating benefits through purchase and sale orders and negotiations.

In stock markets, securities are traded based on known prices that are set in real time. It is a regularized market, where investors will enjoy a secure environment to carry out their transactions.

The Stock Exchange helps boost economic and financial development and this strengthens the capital market of the different countries of the world. In our case, that of Spain. In the Exchange we can highlight three main participants:

Companies, which can sell their shares to the public for financing.
Savers, who become investors who benefit from dividends.
The State, because through the Exchange they can also find financing and take care of public expenses, as well as carry out works of a social nature.
In the Stock Exchange they are negotiated with the purchase and sale of all types of securities, such as stocks, public and private bonds, participation securities and other types of investment instruments. Usually, there is a lot of trading with stocks, as there are very solid companies and many operators see an opportunity becoming shareholders.

Bubble pop dot com
Many of these people suffered in a very different way the bursting of the bubble of internet-linked companies better known as the dot com bubble.

Between 1997 and 2001, these types of companies rose like foam as it was a new market, the Internet. At the time the closures began and a smooth but long recession of this type of business. Some of those who lost investments possibly put aside the results that were giving small losses every day or were too confident when thinking that it was just a bad run.

Others at the time they were living decided to leave soon taking with them interesting benefits. Both used the same way when investing but the decisions they made during their investment obtained very different results.

Really, investments in the stock market can have many risks, but how you see the attitude of the investor can also do a lot, since in this case there are those who did not notice the losses until it was too late and others who instead managed to get out on time With some benefits.

How the stock market works
When a company decides to sell shares in the stock market we must understand this as a need for capital to be financed but without resorting to expensive loans from a bank where they should pay interest in a short period of time. A company that wants to go public may be thinking of expanding its market by opening new offices or expanding the staff hired to multiply its production.
That entails an expense and of course, it must be paid in advance since the benefits do not usually occur in the first moments.

If you decide to buy shares, you are part of the company, you will carry with you both the benefits you get, and the losses you may suffer. Therefore, before investing, you must carry out a preliminary study of the possibilities of each asset. No one blindly bets on the actions of a company, it has to see that it is solvent and that of course its future is promising.

Theory of Elliot Waves

In the days of the old school around the 20’s and 30’s, there was this great genius named Ralph Nelson Elliot. Elliot discovered that stock markets do not really work in a chaotic way as was believed.

Elliot discovered that markets operated in repetitive cycles, which were influenced by the emotions of investors and traders, which in turn were influenced by external factors such as economic news or by the predominant psychology of the masses at that time. .

The Elliot Wave theory explains that the upward or downward changes iven by the psychology of the masses always show the same repetitive patterns, which in turn are divided into patterns that he called waves. Hence the name.

Wave patterns 5-3
Elliot showed that a trend market moves in a way that he called: 5-3.
The first 5 are grouped in the impulse wave pattern. And the last 3 are called corrective waves.

This is a short description of what happens during each wave. The Elliot Wave theory was used in the first instance for actions, since it was what Elliot also used, but it does not really matter. They can easily be used with bonds, gold, oil, … The important thing is that this theory can also be applied to the Forex currency market.

Wave 1
The market initially moves up. This is usually because a small group of people suddenly feel (for various reasons, real or imagined) that the price of the stock is very cheap so it is the perfect time to buy. This causes the price to rise.

Wave 2
At this point, enough people who bought according to the previous wave, consider that the stock is overvalued and decide to take profits by selling. This causes the market to go down. However, the market will not reach its lowest previous point before the stock is considered a bargain again.

Wave 3
This is the longest and strongest wave. The action has caught the attention of the public. More people investigate about the action and want to buy it. This causes the price of the stock to rise more and more. This wave usually exceeds the point reached in wave number 1.

Wave 4
People take profits because the price is considered high again. These waves tend to be weak because there are usually more people who are still selling and still waiting to buy in the falls.

Wave 5
This is the point that is handled mainly by hysteria. You usually see the head of the company on the cover of an important magazine where they name him the “character of the year”.

Teoría de las Ondas de Elliot

The theory of Dow and its applications

Theory Dow – Who was Charles Dow?

Charles Dow was the son of a farmer and was born in Sterling in 1851. His father died when he was only 6 years old. This forced him to leave school and work as a laborer to support his family.

Later he began his career as a journalist. In 1889, he founded the company “Dow Jones Company”. The Dow Jones company published the first index, designed to represent the movement of the stock market. This index was called “Dow Jones”

Theory Dow- Definition

Dow’s trading theory is based on the analysis of maximum and minimum fluctuations of the market.

According to the Dow method, the importance of these maximums and minimums is a function of their location with respect to the previous maximums and minimums.

This methodology allows you to learn how to read a Trading chart and to better understand what happens in an asset at a specific time.

This simple analysis can allow even the most novice of us to identify the context in which an index of Forex or CFD shares evolves.

Another important point! Charles Dow supported the common belief of all traders and technical analysts that the price of an asset and the resulting swings in a Trading chart have all the information available and anticipated necessary.

Trading according to Dow theory
Basic principle:

The principle of the Dow Method in the technical analysis is to use the maximum and minimum points of the market to determine the context of the market, therefore:

If in a Forex chart you can identify a succession of increasingly high peaks and valleys.