Stock Market Investing & Day Trading for a Living the Best Guide for Beginners 2022 6 Books in 1 Improving your Trading Psychology to Master Financial Markets, Stocks, Options and Cryptocurrency: WARREN MEYERS, #7

By WARREN MEYERS

• Are you looking for an action plan to maximize your Investing Strategies?
• Would you like to get rich with trading?
• Do you want to know which are the risks, how to control them, and not to lose your profits?
• Are you tired of making paltry profits?
• Why does that weirdo get so rich with investments?
• How did that man get all of that money?

If this is what you've been wandering… well, get in line! You are facing the tough world of investments and trading. Sure, you are original, determined and highly skilled in your field, daily trying to win the market; but, somehow, you keep losing, while that pimply teenager with some unknown strategies gets rich. There's nothing more frustrating! What's missing to your trading career? A strategy! And, lucky you, we've got what's right for you.
 
You will stop working hard for poor incomes. You will acquire up to date knowledge to make higher revenues with less effort.
 
Here's what you'll find in these 6 manuscripts

Manuscript 1: FINANCIAL MARKETS
The Best Beginner's Guide

The 8 types of financial markets explained

The 5 fundamental principles of economics

How to prevent crisis and use them to make great profits

What are the 7 assets of your future portfolio

How to define your financial goals for investments

How Modigliani - Life Cycle Hypothesis can let you understand how the market moves

 

Manuscript 2: TRADING PSYCHOLOGY
Change your Mindset and Achieve your Success

The 9 fears of trading

4 personalities of the investor

The technique of the boiled frog to change your life

9 Strategies to seek success in life

Static vs dynamic mindset

10 habits to change your life

The law of Pareto in trading

 

Manuscript 3: STOCK MARKET
Quickstart Guide to Financial Freedom

Fundamental analysis for trading

The 7 golden rules of Benjamin Graham

The 7 golden rules of Warren Buffet

How and when to buy and to sell stocks

5 best free analyzers for 2021

The 8 points of Phil Fisher's investment philosophy

25 high yield stocks

 

Manuscript 4: FOREX TRADING
Mastering the Global Foreign Exchange Market

All you need to know about Forex trading

Principles of fundamental and technical analysis

The ultimate money management guide

The 3 best advantages of trading explained

How to win with Forex Swing trading, day trading with Forex, margin trading, and Forex scalping

How to choose the perfect broker

 

Manuscript 5: DAY TRADING
The Ultimate Guide

What's the mindset of the successful day trader

5 good reasons to day trading 

The 3 best strategies to win in day trading

How to make the best profit with the minimum investment

Warren Buffett's strategies and secrets

10 mistakes you need to avoid

 

Manuscript 6: CRYPTOCURRENCY INVESTING
Blockchain Revolution 2022

The ultimate guide to master the blockchain world

7 steps to make a good youtube content

The best strategies to make money with cryptocurrencies

How to master the 5 best cryptocurrencies and make money with them

Top 10 cryptocurrency investors

How the Halving Bitcoin can make you huge profits

 

Well, these are the tools you needed, the only step missing is your action!
 
WHAT ARE YOU WAITING FOR?
HIT THAT BUY NOW BUTTON!!!

• Language: English
• Publisher: WARREN MEYERS
• Release date: Oct 16, 2022
• ISBN: 9798215543764

Book preview

STOCK MARKET INVESTING

&

DAY TRADING

FOR A LIVING

THE BEST GUIDE FOR BEGINNERS 2022

6 BOOKS IN 1

Improving your Trading Psychology to Master Financial Markets, Stocks, Options and Cryptocurrency

WARREN MEYERS

WARREN MEYERS ACADEMY

Acknowledgment

I want to thank you for buying my book and for the trust, sincerely ...Thanks!

Writing a book is harder than I thought and more rewarding than I could have ever imagined.

My thanks go to all of you, readers, I thank you because without you I could not be what I am, without you my books simply…would not exist!

I would like to invite you to know all my books and audiobooks that I have written and if you like my works, please, leave a positive tought, this will help me to move on on my work and will help other people to buy what they are find!

Again…Thanks You!

Find my Books and my Audiobooks

Copyright 2022 by Warren Meyers

All rights reserved.

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TABLE OF CONTENTS

FINANCIAL MARKETS

Introduction

CHAPTER ONE FINANCIAL MARKETS

Types of Financial Markets

The Fathers of Economic Theory

How Markets Work

The Biggest Stock Market Crashes

Trading Indices

Currency Pairs

Exchange Versus Over the Counter

Opening Brokerage Accounts and Costs

CHAPTER TWO ASSETS

Stock Exchange

Stocks

Bonds

Currencies

Commodities

ETFs

Cryptocurrency

Options

Derivatives

CHAPTER THREE STOP! READ THIS BEFORE YOU START

Important: with financial investments there are no guarantees.

Modigliani - Life Cycle Hypothesis.

Define your financial objectives for investments

Conclusion

TRADING PSYCHOLOGY

Introduction

CHAPTER ONE WHAT IS MINDSET

Thinking by Walter D. Wintle

What The Mindset Is

4 Different Personalities

Meeting Basic Needs

The Weak Will

The Boiled Frog

Static And Dynamic Mindset

CHAPTER TWO MINDEST FOR SUCCESS

Start By Thinking At The End!

How To Find Your Talent

Try To Be Proactive

9 Strategies To Seek Success In Life

10 Habits To Change Your Life

How To Eliminate A Bad Habit

Objectives For The Beginning Of The Year

CHAPTER THREE SUCCESS MINDSET PEOPLE

Shakespeare And The 7 Habits That Bring Us Closer To Our Goals

Benjamin Franklin And His 13 Virtues

Steve Jobs: Willpower And How To Increase It

Elon Musk - How Your Mindset Determines Your Destiny

CHAPTER FOUR TRADING MINDSET

Trading And Emotions: How Do You Form A Price?

The Dow Theory: The 6 Principles Of Market Trends

Emotional Balance And Mindfulness

The Psychology and Rules of Trading

Trading and discipline

The Deadly Habits In Trading

The 9 Fears Of Trading

The 6 Most Common Emotions In Trading

The Law Of Pareto In Trading

Small Final Suggestions

Conclusion

STOCK MARKET INVESTING

Introduction

CHAPTER ONE WHAT IS STOCK

What Is An Action

Why Listing On The Stock Exchange

Value Stocks And Growth Stocks

Fundamental Analysis For Trading

Technical Analysis

Market Multiples

Moving Average

MACD Indicator

RSI Indicator

CHAPTER TWO HOW THE MASTER TELL US TO INVEST

The 7 Golden Rules Of Benjamin Graham

The 7 Golden Rules Of Warren Buffett

The 8 Points Of Phil Fisher's Investment Philosophy

The Peter Lynch’s Phylosophy

The Investing Style of William O'Neil

The Bill Miller’s Strategic Value Investment

CHAPTER THREE GET READY TO INVEST

Top 5 Discount Brokers In 2020

5 Best Free Analyzers For 2020

10 Best Financial Sites

The Permanent Portfolio Investment Strategy

The Dividend Capture Strategy

25 High Yield Stocks

10 Upcoming IPOs

How To Buy Shares

How To Sell Shares

When To Sell A Stock

Track Your Trades

Mistakes To Avoid As A Beginner

Conclusion

FOREX TRADING

INTRODUCTION

CHAPTER ONE THE FOREX MARKET

What is the Forex Market

Forex, from its Origins to Today

Forex Market Operators

How to Trade on Forex

The Main Currencies of the Forex Market

CHAPTER TWO HOW DOES FOREX WORK

How Does it Work

What Moves the Currency Market

CHAPTER THREE VOLATILITY

CHAPTER FOUR BENEFITS OF FOREX

Trading Fees

The Forex Market is Open 24 Hours a Day

Market Liquidity

Forex- The Most Liquid Market in the World

CHAPTER FIVE TECHNICAL AND  FUNDAMENTAL ANALYSIS

Fundamental Analysis

Technical Analysis

CHAPTER SIX FOREX SWING TRADING

CHAPTER SEVEN DAY TRADING FOREX

CHAPTER EIGHT MARGIN TRADING

CHAPTER NINE FOREX SCALPING

CHAPTER TEN TRADING PSYCHOLOGY

CHAPTER ELEVEN TRADING PLAN

CHAPTER TWELVE METATRADER 4 OR 5

CHAPTER THIRTEEN MONEY MANAGEMENT

CHAPTER FOURTEEN WHICH FOREX BROKER TO CHOOSE?

CONCLUSION

CRYPTOCURRENCY INVESTING

INTRODUCTION

CHAPTER ONE BLOCKCHAIN

Blockchain

How Blockchain Works for Bitcoin

How Blockchain Works for Ethereum

The 3 Best Sharesfor 2020

CHAPTER TWO ICO

Differences Between IPO and ICO

Successful ICO

CHAPTER THREE IEO

What is an IEO

Pros and Cons of IEOs

CHAPTER FOUR DIGITAL TOKEN

The Token in Cryptocurrencies

What is tokenizable

Token, stock exchange and circular economy

CHAPTER FIVE START INVESTING IN CRYPTOCURRENCIES

Investing in Cryptocurrencies

Investingin Cryptocurrencies With CFDs

CHAPTER SIX  INVESTING IN CRYPTOCURRENCIES SUCCESSFULLY

CHAPTER SEVEN HOW TO TRADE CRYPTOCURRENCIES

A Few Steps to Facilitate the Process

CHAPTER EIGHT BITCOIN

History of Bitcoin

Bitcoin Trading

CHAPTER NINE  RIPPLE

Ripple VS Bitcoin

Risks of Investing in Ripple

Invest in Ripple Successfully

CHAPTER TEN DASH

A Valid Alternative to Bitcoin

CHAPTER ELEVEN  ETHEREUM

History of  Ethereum

Investingin Ethereum

CHAPTER TWELVE HALVING BITCOIN

Halving Bitcoin

When and how it will happen

CHAPTER THIRTEEN HOW TO TRADE

Hot storage vs. cold storage

CHAPTER FOURTEEN TOP 10 CRYPTOCURRENCY INVESTORS

CHAPTER FIFTEEN CRYPTOCURRENCY IN THE FUTURE

CHAPTER SIXTEEN LIBRA FACEBOOK

The Launch of Libra

How the Calibra Wallet Will Work

Similarities and Differences With Other Cryptocurrencies

Facebook Updates Its Digital Currency Project

CONCLUSION

DAY TRADING

INTRODUCTION

CHAPTER ONE WHAT IS DAY TRADING

What is day trading?

Pros of day trading

Cons of day trading

CHAPTER TWO PSYCHOLOGY AND  MINDSET

Trading errors

Beware about your decisions

Controlling emotions in online trading

The importance of being patient

CHAPTER THREE THE BEST TOOLS AND SOFTWARE FOR DAY TRADING

CHAPTER FOUR RIGHT STOCKS TO TRADE

Choosing the right stocks to trade

CHAPTER FIVE STRATEGIES

High-frequency

Momentum

Pre-market and after-market

CHAPTER SIX SUCCESSFUL TRADE

How to create an efficient trading plan

Set your personal goals

Risk management

Trading indicators

CHAPTER SEVEN 10 MISTAKES TO AVOID

1. No trading plan

2. Do not use Stop-Loss orders

3. Leaving support for losses

4. Calculation of the average

5. Too much margin

6. Follow the flock of sheep blindly

7. Do your homework

8. Don't trade on multiple markets

Conclusions

CHAPTER EIGHT FIVE GOOD REASON  TO DAY TRADING

1) Become a financially independent trader

2) Work wherever you want

3) The benefits of diversifying investments

4) Opportunity at any time

5) Money always safe and secure

CHAPTER NINE WHY DO MOST ASPIRING TRADERS FAIL?

1. Strict method:

2. Money management:

3. Cold Mind:

CHAPTER TEN THE BEST TRADERS  IN THE WORLD

Who are the best traders in the world?

The best traders in the world are:

The richest traders in the world

CHAPTER ELEVEN THE STRATEGIES  OF THE GREATS

Warren Buffett's strategies

Warren Buffett's ten strategies

Investing in the stock market like George Soros

CONCLUSION

FINANCIAL MARKETS

The Best Beginner’s Guide

How to Master Bonds, Cryptocurrency, Options, Stocks and Achiving your Financial Goals

Introduction

According to the The Modern Trader report published by Broker Notes, there are approximately 13.9 million online traders worldwide.

It would be wrong to assume that all these people live and work in big cities like New York, London, Hong Kong or near major world financial centers. Thanks to the Internet your location is not important! Anyone anywhere can trade online.

You do not have to be an economist, a connoisseur of finance or a mathematical genius. Some readers of this guide certainly will be but the majority are normal people.  Your age, background and race do not matter.

This book was conceived as a basic guide to learn about financial markets and to allow anyone to start taking their first steps in this environment.

If you think that by reading this book you will learn how to get rich, well I invite you first of all to read chapter three. What I want, firstly and above all, is to avoid you unconsciously investing your hard-earned money without the right advice.

In the first chapter you will learn what financial markets are and how they work, but also what or who moves them and what has caused the biggest financial crises. We will also look at how to open your first account and what you need to be wary of.

In the second chapter we will look at all the financial instruments with which we can move in the financial markets, analyzing the pros and cons for each.

The third chapter is the most important! Read it before you start!

CHAPTER ONE

FINANCIAL MARKETS

Figure n. 1 – New York Stock Market Exchange

Financial markets are systems where people and companies buy and sell assets such as stocks, bonds (debt), commodities and other products. People have traded on financial markets for many years and they grew out of a real and practical need – to assist people in buying and selling things more efficiently, and to assist companies that need money.

Over the years, markets have become bigger and faster. More people than ever before are now ready to access those markets. They were once reserved for massive banks, finance houses and really wealthy individuals, but not now.

In a financial market, people can trade financial securities and derivatives with very low transaction costs. Some securities include stocks, bonds and precious metals.

The term market is usually used for what we call exchanges and for organizations that facilitate the trading of financial securities, such as a stock market or commodity exchange. This could be a physical location (such as NYSE, LSE, JSE, BSE) or a totally electronic system (such as NASDAQ). Most share exchanges take place on an exchange; however certain corporate transactions (mergers, spinoffs) are outside an exchange, while any two companies or people, for whatever reason, may comply with selling stock between one another without using an exchange.

The exchange of bonds and currencies takes place mainly on a bilateral basis, however some bonds are already traded on the stock exchange and electronic systems for such exchanges are already under construction.

Types of Financial Markets

Within the financial sector the term financial markets is often used as a catchall, though it is usually used to refer to markets that are wont to raise finance. Capital markets are usually used for long-term loans and money markets for short-term loans.

Capital markets consist of:

Stock markets, which give financing through the issuance of shares or common shares, and enable the next trading thereof.

Bond markets, which give financing through the issuance of bonds, and enable the next trading thereof.

Commodity markets, make commodity trading easier.

Money markets, which give short term debt financing and investment.

Derivatives markets, which give instruments for the management of monetary risk.

Futures markets, which give standardized forward contracts for trading products at some future date; cf. forward market.

Foreign exchange markets, used in the trading of various foreign currencies.

Cryptocurrency markets, for the negotiation of digital resources and financial technologies.

The capital markets can also be divided into primary and secondary markets. Newly formed (issued) securities are bought or sold in primary markets, such as initial public offerings. Secondary markets allow investors to shop for and sell existing securities. Exchanges between issuers and investors take place in primary markets, while transactions between investors exist in secondary markets.

Liquidity can be a crucial aspect of securities that are traded in secondary markets.

Liquidity: refers to the ease with which a security is often sold without a loss. Securities with a lively secondary market mean that there are many buyers and sellers at a given point in time. Investors enjoy liquid securities because they can sell their assets whenever they want; an illiquid security may force the seller to sell his assets contained in it by applying a significant discount.

The Fathers of Economic Theory

Adam Smith

Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the father of recent economics. Smith argued against mercantilism and was a serious advocate of laissez-faire economic policies. In his first book, The Theory of Moral Sentiments, Smith proposed the idea of an invisible hand—the tendency of free markets to manage themselves by means of competition, supply and demand, and self-interest.

Smith is also known for creating the concept of gross domestic product (GDP) and for his theory of compensating wage differentials. Consistent with this theory, dangerous or undesirable jobs tend to pay higher wages to attract workers to those positions. Smith's most notable contribution to the sector of economics was his 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations.

GDP: Gross domestic product (GDP) expresses the total monetary or market value of all finished products and services produced within a country's borders over a given period of time. As a general measure of total domestic production, it functions as a global assessment of the economic health of a given country.

Adam Smith’s Early Life

The earliest record of Smith's life is his baptism on 5 June, 1723 in Kirkcaldy, Scotland; his date of birth is not documented. Smith attended the University of Glasgow in Scotland at age 13, analyzing moral philosophy. Later, Smith enrolled in postgraduate research at the prestigious Balliol College at Oxford University.

After coming back to Scotland, Smith held some public lectures in Edinburgh. The success of his speeches helped him get a professorship at Glasgow University in 1751. He eventually earned the seat of Chair of Moral Philosophy. During his years spent working and teaching at Glasgow, Smith worked on getting a number of his lectures published. In 1759 his most famous work The Theory of Moral Sentiments was published.

Smith moved to France in 1763 to accept a more lucrative position as a private tutor to the stepson of Charles Townshend, an amateur economist and the future Chancellor of the Exchequer. During his French period, Smith met the contemporary philosophers Voltaire, Hume, and Franklin.

The Wealth of Nations

Smith published his most vital work, An Inquiry into the Nature and Causes of the Wealth of Nations (shortened to The Wealth of Nations) in 1776 after returning from France, to his native Scotland. In The Wealth of Nations, Smith popularized many of the ideas that form the pillars of classical economics. Other economists built on Smith's work to solidify classical theory, the dominant school of economic thought during the Great Depression. Smith's ideas are found in the 19th century works of Marx and Ricardo and later in the 20th century works of Maynard Keynes and Friedman.

Smith's work discusses the evolution of man, from a hunter phase without property rights or fixed residences to nomadic agriculture with shifting residences. The subsequent stage was a feudal society where laws and property rights are established to guard privileged classes. At the end, there's modern society, characterized by free markets or laissez-faire where new institutions are established to conduct market transactions.

The Philosophy of Free Markets

This theory emphasizes playing down the role of state intervention and taxation within the free markets. Although Smith advocated for a limited government, he did see the government as liable for the education and defense sectors of a country.

Smith’s idea of an invisible hand is a metaphor used to describe the constant flow of individual actions which guide the natural movement of prices and trade; each person working for themself inadvertently helps to create an overall outcome. By selling products that people want to shop for, a hypothetical butcher, brewer, and baker hope to earn money in this economy. If they're effective in meeting the requirements of their customers, they're going to enjoy financial rewards, and while they're engaging in enterprise for the aim of earning money, they're also providing sought-after products. Smith thought that this kind of system created wealth for the baker, brewer, and butcher, in addition to making wealth for the whole nation.

A wealthy nation is one that's populated with citizens working productively to improve their lives and address their financial needs. During this quiet economy, consistent with Smith’s thinking, a person would invest his wealth within the enterprise presumably to assist him in earning the very best return for a given risk level. The invisible-hand theory is often shown as a phenomenon that guides free markets and capitalism within the direction of efficiency, through supply and demand and competition for scarce resources, as well as something that leads to the well-being of people.

An institutional framework is, for Smith, important to steer people toward productive pursuits that are beneficial to society. This framework consists of a justice system designed to guard and promote free and fair competition. However, there has to be competition to support this framework. For Smith, competition is that 'desire that comes with us from the womb, and never leaves us, until we enter the grave.'

Assembly-Line Production Method

The ideas promoted by the The Wealth of Nations generated international attention and were an interesting reflection on the evolution from land-based wealth to wealth created by assembly-line production methods made possible by the division of labour. Using the example of the work needed to create a pin, Smith demonstrated the benefit of this working methodology. If one person were to undertake the 18 steps required to finish the tasks, they might only make a couple of pins per week. However, if the eighteen tasks were done in an assembly-line by 10 workers, production would jump to thousands of pins per week. Smith claims that the division of labour and resulting specialization produces prosperity.

Gross Domestic Product (GDP)

The ideas shown in The Wealth of Nations were the genesis of gross domestic product (GDP) as a concept and they transformed the importing and exporting business. Before the book The Wealth of Nations was published, the wealth of countries was expressed on the basis of the value of their deposits of gold and silver. However, Smith was highly critical of mercantilism; he argued that countries should be evaluated and supported based on their levels of production and commerce. This idea was the basis for the creation of the GDP metric for measuring a nation's prosperity.

When his  work The Wealth of Nations was published, a lot of countries were hesitant to trade with other countries. Smith argued that a free exchange should be created because both countries can benefit from the exchanges. As a result of this shift in attitudes toward trading, there was a rise in imports and exports. Smith also argued for legislation that would make trading as easy as possible.

Smith’s Legacy

Smith's most famous ideas: the invisible hand and the division of labour  are now foundational economic theories. He died on 19 July, 1790, at age 67, but the ideas he popularized survive within the classical school of economics and in institutions like the Smith Institute, Britain's leading neoliberal free market think factory. In 2007 the Bank of England decided to put Smith on the £20 note.

David Ricardo

Who Was David Ricardo?

David Ricardo (1772–1823) was an important economist. His most-remembered ideas are those concerning wages and profit, useful work, comparative advantage and rent.

Ricardo and a variety of other economists also simultaneously and independently determined the law of diminishing marginal returns. His most well-known work is the Principles of Political Economy and Taxation (1817).

Understanding Ricardo

Born in England in 1772, one of 17 children, Ricardo began working with his father as a stockbroker at the age of 14. He was disowned by his father at 21, however, for marrying outside his religion. His wealth came from his success with a commercial enterprise he started that dealt in government securities. He retired at the age of 41 after earning an estimated £1 million speculating on the outcome of the Battle of Waterloo.

At age 42, Ricardo bought a seat in Parliament for £4,000 and he served as a Member of Parliament. Influenced by Smith, Ricardo held company with other leading thinkers like James Mill, Jeremy Bentham, and Thomas Malthus. In his essay "The Influence of a Low Price of Corn on the Profits of Stock" (1815), Ricardo devised the regulation of diminishing returns by referring to capital and labour. At the age of 37 Ricardo wrote his first article on economics, posted in The Morning Chronicle.  The article advocated for the Bank of England to scale back its note-issuing activity. His book, Principles of Political Economy and Taxation, includes his most well-known ideas.  Ricardo's principle contributions to theory are:

Comparative Advantage

Among the notable ideas that Ricardo introduced in Principles of Political Economy and Taxation was the idea of comparative advantage, which argued that countries can enjoy international trade by specializing in the creation of products with potentially lower production costs, even if that meant not having an absolute advantage within the production of any particular good. For instance, a mutual trade benefit would be agreed upon between China and the United Kingdom; with China specializing in the production of porcelain and tea and the United Kingdom concentrating on machine parts. Ricardo's ideas are strongly correlated to the advantages of free trade and the disadvantages caused by protectionist policies. Ricardo's idea of comparative advantage produced derivations and criticisms that are discussed to this day.

Labour Theory of Value

Another of Ricardo's best-known contributions to economics was the theory of value which states that the value of any product could be measured by the amount of work used to produce it. The idea stated that value should not only be commensurate with the labour cost necessary to manufacture it but by the entire cost of production. An example of this theory is that if it takes two hours to make a table and one hour of work for a chair, a table is simply worth two chairs, regardless of the hourly wages of whoever made the table and whoever made the chairs. The theory of useful work would later become one of the foundations of Marxism.

Rent Theory

Ricardo was the main economist to discuss the notion of rent, or benefits that accrue to property owners only because of their ownership rather than their contribution to any actual productive activity. In its application, the idea of rent, applied to the agricultural economy, shows that the benefits of an increase in grain prices will tend to increase the rent paid to landowners by their users. Ricardo's idea was subsequently also applied to property rent, ; particular public policies can help property owners  see their rental income increase.

Ricardian Equivalence

In the area of public finance, Ricardo wrote that regardless of whether a government chooses to finance its expenses through instant taxation or through loans and compensatory expenses, the results for the economic system will be the same. If the taxpayers are rational, they will explain any expected increase in future taxation to finance current deficits by saving the same amount as the expenditure needed for the current deficit, so the net change in total expenditure will be zero. So, if a government engages in deficit spending to restart the economy, then private spending will decrease by the same amount given that people will save more, and therefore the net effect on the mixed economy will be a wash.

Jean-Baptiste Say

Who said Jean-Baptiste?

Jean-Baptiste Say (1767-1832) was a French classic, economist and liberal scholar. He was born in Lyon in 1767 and had an illustrious career. He served on a government committee under Napoleon and taught economics in France at the Athénéé, the Conservatoire National des Arts et Métiers, and later at the Collège de France, where he was appointed president of the faculty of economic policy. Say's market law could be interpreted as a classical economic theory that production is at the same time a source of demand.

Consistent with Say's law, the power to ask for something is financed by providing a good of a different entity.

Understanding Jean-Baptiste Say

Jean-Baptiste Say is known for his contribution Say's Law of Market, also referred to as his Theory of Market, and for his work entitled A treatise on economics, published in 1803. In addition to his most famous treatise, there there are also two volumes Cours Complet d'Économie Politique Pratique, 1852, and a collection of his correspondence with fellow economist Malthus entitled Letters to Malthus, in these letters he addresses the people who criticized his economic thinking.

Say's Law has often been misinterpreted. According to this law, the economy is able to regulate itself, becoming itself a source of demand, it has often been confused with the idea that supply creates its own demand. Contemporary economists John Maynard Keynes and Malthus criticized Say's law, and later economists indicated Keynes as partially or primarily responsible for the confusion.

However, Say was closely influenced by Smith and his theories as set out in the 1776 Wealth of Nations treaty, he was also a strong supporter of Smith's free market theories, promoting his laissez-faire philosophies and helping to spread them in France through his academic work and teaching. Say's law still survives in modern neoclassical economic models where Smith's free market theories are always found.

Amongst his other teachings, Say also expressed the hypothesis that deflation could be viewed as a positive event if it stemmed from productivity gains. He also wrote about money and banking, shared his views on taxation as burdensome, and is credited by Robert L. Formaini in the Federal Reserve Bank of Dallas’s Economic Insights booklet among primary economists to discuss entrepreneurship and the notions of utility, describing entrepreneurs as important factors in achieving the satisfaction of human desires.

Deflation: Deflation occurs when we have a general decline in the prices of goods and services, usually associated with a contraction in the supply of money and credit in the economy. The purchasing power of money during deflation increases with the passage of time.

Jean-Baptiste Say and the Founding Fathers of the United States

Appearing in English translation, Say's works found an admiring audience in the founding fathers Jefferson and Madison, with whom he had a lively correspondence. Madison's letter thanking Say for sending him a reply to his treatise reads in part: Please, sir, be assured of the great value I attach to your esteem ...

How Markets Work

As we saw in the previous chapter, the theoretical foundations for market economies were developed by classical economists, such as Smith, Ricardo and Jean-Baptiste Say. These were supporters of the free market and believed that the invisible hand of profit and market incentives determined the economic decisions towards more efficient and more productive paths than the decisions taken by the government, and that these decisions also led to financial inefficiencies that also worsened people’s situations.

Market Theory

Market economies determine the prices and quantities of products based on supply and demand. Entrepreneurs use production factors such as land, labour and capital, combined with workers and financiers, to achieve the production of various goods and services that consumers or other companies can then buy. Those who buy and those who resell then voluntarily agree, based on customer preferences, upon the revenues that companies want to earn on their investments. The allocation of various resources by producers is made based on the profit they hope to obtain from them, creating goods that their customers will appreciate and pay more than the producers’ initial inputs. Entrepreneurs will then be rewarded with revenue that they can reinvest in future activities.

Modern Market Economies

Every financial system in the modern world is somewhere between a pure market and a completely planned market. Most developed countries are technically mixed economies due to the fact that they mix free markets with government interference however they are frequently labelled as market economies as they allow markets to guide most financial activity, leaving governments with just enough power to guarantee stability

Market economies do sometimes have some interventions from the authorities, in situations such as rate fixing, licenses, quotas and industrial subsidies. Often in market economies the government will produce public goods, and frequently hold the monopoly position. However, overall, market economies are characterized by using a decentralized decision-making process through consumers and retailers who carry out daily transactions.

Although the market economic system is considered to be a popular choice, the debate on how much government should intervene in decisions remains important. Economists usually trust that the more market-oriented economies will then be able to have wealth, economic growth and higher living standards, even if they differ in how much the state has to intervene in the various processes.

Supply and Demand

The two basic terms most frequently used by economists are supply and demand. The amount of something that is available (the offer NOT supply?), and the amount of something that people want (the demand), make up what is called a functioning market. The market is the way an economic activity is organized between buyers and sellers through their behavior and mutual interaction. Buyers, understood as a group, determine the general demand for a specific product at various prices, while sellers, always understood as a group, determine the offer of a specific product at various prices.

The interaction of buyers and sellers within the market helps determine market value by efficiently allocating scarce goods and services. The value is taken into consideration when deciding on the optimal quantity that is consumed and also the optimal quantity to be supplied. This connection between price and quantity demanded is so universal that it is called the law of demand. This law states that all other things being equal, when the value of a certain good increases, the number which is then requested by the market decreases - and when the value decreases, the required number increases. The offer curve works in the opposite direction: the higher the price of the property, the greater the number supplied; the lower the value, the smaller the number provided.

A key function of the market is to look for the equilibrium price, that is, the point where supply and demand are in equilibrium. At this price, the products supplied are the exact number of those required, thus determining the most efficient allocation of the products. If the allocation of products is efficient, no one will be happier than anyone else, but everyone will be satisfied.

However, there are factors other than the price that can prevent the market from being perfectly balanced and therefore efficient:

Variables that influence buyers (demand)

• Price

• Income

• Prices of related goods

• Tastes

• Expectations

• Number of buyers

Variables that influence sellers (supply)

• Price

• Input prices

• Technology

• Expectations

• Number of sellers

On the demand side, income can play an important role. As incomes increase, people will buy more goods or perhaps start taking into consideration higher quality or more expensive goods. However, the value of related goods could also alter demand. For example, if the value of a cereal increases, the demand will likely shift to an identical cereal, which could be considered a substitute good. If the products are considered complementary - or are generally used together - a reduction in the price of one of the products will increase the demand for the other. An example of complementary products are cars and petrol, in which the value of petrol partly depends on the quantity of cars. Long-term preferences and expectations also influence individual requests as well as the quantity of buyers (an increase in buyers who want to buy a select number of products will increase demand and consequently we will have a general increase in the purchase price).

From the availability point of view, both expectations and the number of sellers can influence the quantity of goods produced. Furthermore, the cost of producing the goods themselves, or of the input prices, and therefore the level of technology used for the transformation of the inputs into goods will greatly influence both the final price and the quantities of products produced.

Although most economic analyses specialize in finding market equilibrium, there are many other forms of market. For example, when we talk about using natural resources or other environmental quality services, it is often difficult to seek balance through simple market prices since we are not talking about real market goods. Above all as regards the use and extraction of natural resources, it would be important to try to maximize current costs and benefits, also taking into consideration possible future costs and benefits, as well as keeping in mind both the intrinsic and existing value of the resources.  When the market fails to allocate resources efficiently, market failure can occur. An example of this is the creation of externalities that often occurs in the absence of clear property rights, such as air and some water resources. Attempts to market efficiency and bring the market back into balance are often through market options, such as economic incentives and disincentives, or the creation of property rights, or through government intervention.

What Affects the Markets?

Market prices are determined by the demand and supply of goods, which are influenced by an important number of factors, some of the most common are featured below:

The news: many market participants monitor the news in real time; bad news hitting a company or country could bring prices down. Political news can also have an important effect on markets.

Company results: publicly traded companies will publish regular results that can encourage investors to buy or sell their shares

Central bank policy: central banks make decisions such as setting interest rates and these can have a profound effect on the flow of currencies worldwide and can have a huge impact on markets

Government data: governments will release data that can move markets, such as unemployment information or inflation data

Interest Rates: the amount that the lender charges for the use of capital with reference to the percentage of the capital. This rate is usually indicated on an annual basis.

Market Participants

There is a good range of individuals and companies that trade in the financial markets.

Institutional investors: pension funds, asset managers and open-ended fund providers participate in financial markets to form profits for themselves and their clients

Banks: Banks act as brokers for other companies, such as fund managers. They don't want to trade a lot on their own, but new regulations mean they need less chance to trade their book

Broker: specialists who carry out operations for their clients

Market maker: some institutions have the task of selling stocks or bonds on the market. Their job is to try and find the best quote for their customers; for example, if a company decides to issue multiple shares, a market maker is given the task of selling them on the market.

Retail investors: Daily investors can participate in financial markets by investing in funds, buying shares or actively trading in markets through spread bets and CFDs.

How are Financial Markets Negotiated?

Typically, markets are often traded in two ways:

In the bag

In the past, these were real buildings where brokers met to buy and sell company shares or other assets, such as corn or livestock. Now most trading deals take place online, with orders from all over the world. Trading on the stock exchange means that contracts are standardised with a transparent way of operating regarding types, quantities and time you will receive the products.

On the counter

It is here that two parties agree on mutual buying and selling, without trading on an exchange.

The Biggest Stock Market Crashes

A stock market crash can be a sudden and dramatic decline in stock prices across an important part of a stock exchange, leading to a large loss of paper wealth. Collapses can be due to both panic and underlying economic factors. Economic speculation and bubbles often follow.

A stock market crash can be a social phenomenon in which external economic events are combined with the herd mentality, an example could be when some of the market participants start selling, and so, for no apparent reason, others also follow suit. Crashes are generally due either to a prolonged period of rising stock prices (a bull market) and excessive economic optimism, or to a market where price and earnings ratios exceed long-term averages and widespread use of debt and leverage participants in the market. Other aspects such as wars, major corporate hacks, changes in federal laws and regulations and natural disasters within economically productive areas can also lead to sudden and influential declines in the stock market value of a large part of securities.

There is no precise numerical definition that identifies a stock market crash, but the term commonly applies to large double-digit percentage losses during a stock market index over a period of several days. The crashes are often distinguished from the downward markets (periods of falling stock prices that are measured in months or years) by panic sales and sudden falls in prices. Crashes are often related to bear markets; however, they do not necessarily go hand in hand. Black Monday (1987), for example, did not cause a bear market. Similarly, the Japanese bear market of the 90s existed for several years without major accidents.

Crashes are generally unexpected. As Niall Ferguson said, Before the crash, our world seems almost stationary, deceptively so, balanced. So that when the crash finally hits - as it inevitably will - everyone seems surprised. And our brain keeps telling us that this is not the time for a collapse.

Historical examples

Tulip Mania

Tulip Mania (in the mid-1630s) can generally be considered the first recorded economic bubble. Historically, the first bubbles and stock market crashes had their roots in the socio-political-economic activities of the 17th century Dutch Republic (the birthplace of the first formal stock market, the Dutch East India Company (the first publicly listed company in the world), and in particular the Dutch West India Company (WIC / GWIC).

In medieval Italy, companies with several shareholders became popular contracts and Malmendier provides proof that share companies date back to ancient Rome.

Malmendier: Ulrike M. Malmendier is an influential German economist. She is a professor of economics and finance at the University of California, Berkeley. Much of her work is devoted to the study of behavioral economics, corporate finance, law and economics. The American Finance Association awarded her the Fischer Black Prize in 2013.

Amsterdam of the 17th century deserves the title of the world's first stock exchange, where a lively secondary market for corporate shares emerged. The two main companies were the Dutch East India Company and the Dutch West India Company, founded in 1602 and 1621 respectively. There were also other smaller companies which did not take up much of the stock exchange.

The Panic of 1907

The manipulation of copper shares by the trust company Knickerbocker, in 1907 and 1908, led to a loss of values of almost 50%. United Copper's stock gradually increased until October and subsequently crashed, causing panic. Numerous investment funds and banks that had invested their money on the stock exchange fell and began to fail. Further banking problems were prevented thanks to the intervention of J. P. Morgan. The panic continued until 1908 and led to the formation of the Federal Reserve System in 1913.

Wall Street Crash of 1929

The economy grew for much of the roaring twenties. It had been a technological golden age, with the introduction of innovations such as radio, the automobile, aviation and the telephone; meaning the electricity transmission network had been implemented and adopted. Companies that had pioneered these advances, including Radio Corporation of America (RCA) and General Motors, saw their stocks rise. Financial corporations also did well, as Wall Street bankers, like Goldman Sachs Trading Corporation, floated open-end fund companies (later called mutual funds). Investors were infatuated with the returns available within the stock exchange, particularly through the use of leverage through margin debt.

Figure n. 2 – Dow Jones’s 1929 crash

The Dow Jones Industrial Average (DJIA) was at 63.9 on 24 August 1921. By 3 September 1929, it had increased sixfold, reaching 381.2, a level it did not regain for another 25 years. After a series of sharp falls in the stock market, during the summer of 1929, it was clear that the economy was starting to contract. These dips served to further increase investor anxieties and events peaked on October 24 to 29 (known as Black Thursday, Black Monday and Black Tuesday, respectively).

On Black Monday, the DJIA dropped 38.33 points to 260, down 12.8%. The deluge of the sale overwhelmed the ticker tape system that normally provided investors with the current prices of their shares. The phone lines and telegraphs were clogged and unable to cope. This information vacuum only led to more fear and panic. New Era technology, previously highly valued by investors, now served to deepen their suffering.

The following day, Black Tuesday, was a day of absolute chaos. Forced to liquidate their stocks due to margin calls, investors flooded the exchange with sell orders. The Dow lost 30.57 points that day, taking its value further down to 230.07. The previously glamorous investors of the time saw their values plummet. Within two days, the DJIA dropped 23%.

The week ending on 11 November brought the index to 228, 40% lower than in September. Markets recovered in the following months, but it was a short-lived recovery that led unsuspecting investors to further losses. The DJIA lost 89% of its value before finally hitting rock bottom in July 1932. The crash was followed by the Great Depression, which plagued the stock exchange and Wall Street in the 1930s.

October 19, 1987

The mid-1980s was a period of strong economic optimism. From August 1982 to its peak in August 1987, the DJIA went from 776 to 2722. In this era, the increase in market indices for the 19 largest markets in the world was on average 296 %. The typical number of shares traded on the new stock market rose from 65 million shares to 181 million shares.

Figure n. 3 - Dow Jones’s 1987 crash

The crash on October 19, 1987, Black Monday, was the culmination of a market decline that started five days earlier on October 14. The DJIA fell 3.81% on October 14, followed by another 4.60% drop on Friday October 16. On Black Monday, the DJIA lost a further 22.6% making it down by 508 points.

The S&P 500 index lost 20.4%, falling from 282.7 to 225.06. NASDAQ composite lost only 11.3%, not because of sellers' moderation, but because of the failure of the NASDAQ market system. Flooded with sell orders, many NYSE stocks faced trading stoppages and delays. Of the 2,257 stocks listed on the NYSE, there were 195 delays and halts later in the day. The NASDAQ market went much worse than S&P 500.

Due to its dependence on a market making system that allowed market makers to withdraw from trading, the liquidity of NASDAQ shares dried up.

The negotiation of numerous securities found a pathological condition in which the price of a security exceeded the requested price. These blocked conditions severely limited trade. On October 19, the Microsoft stock trading on NASDAQ lasted a total of 54 minutes.

The incident was the worst one-day loss that Wall Street has ever suffered in the continuous exchange so far. Between the start of trading on October 14 and the closing of October 19, the DJIA lost 760 points, a drop of over 31 percent.

The 1987 accident was a worldwide phenomenon. The FTSE 100 index lost 10.8% on Monday and a further 12.2% the following day. By October, all major world markets declined significantly. The least damaged nation was Austria (down 11.4%) while the main one to be hit was Hong Kong with a drop of 45.8%. Out of 23 main industrial countries, 19 recorded a drop of more than 20%.

Despite fears of a repeat of the 1930s depression, the market surged immediately after the crash, recording a one-day record gain of 102.27 the following day and 186.64 points on Thursday 22 October. It only took two years for the Dow to fully recover; by September 1989, the market had regained all the value it had lost during the 1987 incident. The DJIA gained six tenths of a percent in the 1987 calendar year.

No definitive conclusions were reached with regards to explanations behind the 1987 crash. Stocks had been enjoying a multi-year Bull Run and the market price-earnings indices in the United States were above the post-war average. The S&P 500 was trading for 23-fold gains, a post-war high and well above the typical 14.5-fold profit.

Herd behavior and psychological feedback circuits play a crucial role in the case of stock market crashes, but analysts have also tried to see them as external triggers.

Apart from the general concerns of the stock market's overvaluation, the blame for the collapse was attributed to factors such as trading, portfolio insurance and derivatives and previous news on the worsening of economic indicators (i.e. a large deficit of goods in the States United States and a drop in the US dollar, which appeared to imply future interest rate hikes).

One of the results of the 1987 crash was the introduction of the breaker or brake on the NYSE. Based on the thought that a cooling off period would help allay investor panic, these mandatory market crashes are triggered whenever an oversized market decline occurs during the trading day.

Crash of 2008–2009

Figure n. 4 - Dow Jones’s 2008 crash

On 16 September 2008, the bankruptcies of huge financial institutions in the United States, mainly due to exposure to subprime mortgages and credit default swaps issued to secure these loans and their issuers, quickly went into a global crisis.

Subprime Mortgages: is a particular type of mortgage that can be used for customers who have a low credit rating and therefore a risk of default that may be above average.

Credit Default Swaps: (CDS) is a financial agreement. The seller of this instrument will pay the buyer of the CDS if the debt is not paid, either by the debtor or by another credit event.

This also led to a series of bankruptcies in Europe and sharp reductions in the value of stocks and commodities worldwide. The bankruptcy of Icelandic banks occurred during a devaluation of the Icelandic crown and threatened the government's bankruptcy. Iceland obtained an emergency loan from the international fund in November. In the US, 15 banks went bankrupt in 2008, while many others were rescued through government intervention or acquisitions by other banks. On 11 October 2008, the International Fund (IMF) summit warned that the planetary economic system was staggering on the brink of systemic collapse.

On October 8, the Indonesian stock exchange stopped trading after a tenth drop.

The depression caused countries to temporarily close their markets.

The Times of London reported on the 2008 Crash and that older traders were comparing it to the 1987 Black Monday. The fall of 21% that week compared to a 28.3% fall 21 years before, but some traders were saying it had in fact been worse.

From 6 to 10 October 2008 the Dow Jones Industrial Average (DJIA) closed a total of five lower sessions. The volume levels were record-breaking. The DJIA dropped by over 1,874 points, or 18%, in the worst weekly decline ever in terms of points and percentages. The S&P 500 fell 20%. The week also set three top ten NYSE volume records with October 8 at no. 5, 9 October at no. 10 and 10 October at no. 1.

After being suspended for 3 consecutive trading days (9, 10 and 13 October), the Icelandic stock exchange reopened on 14 October, with most of the index, the OMX Iceland 15, closing at 678.4, which was about 77% less than the 3,004.6 at the end of October 8th. This reflected that the value of the three major banks, which had made up 73.2% of the value of the OMX Iceland 15, was set at zero.

On October 24, 2008, many of the world's stock exchanges suffered the worst dips in their history, with drops of around 10% in most indices. In the United States, the DJIA dropped 3.6%, not much compared to other markets. By contrast, both the US dollar and the Japanese yen rose against other major currencies, notably the British pound and the Canadian dollar, as global investors sought safe havens. Also on this day, the Deputy Governor of the Bank of England, Charlie Bean, suggested that This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history.

By 6 March, 2009 the DJIA had dropped 54% to six, 469 (before it started to recover) from its peak of 14,164 on October 9, 2007, over 17 months.

2020 Coronavirus stock market crash

Stock markets around the world dropped dramatically in late February, from 24 to 28 February the FTSE 100 fell 13%, wiping out £ 200 billion of the value of the UK's main shares. This was the most important weekly drop after the global financial crisis in 2008. On March 9, Black Monday, the FTSE declined by nearly 8%; other major European markets also opened trading with losses of around 8%, following huge drops in Asian markets. On March 12, the DJIA dropped 9.99%, while the S&P 500 and therefore the Nasdaq fell by around 9.5%. At the beginning of that day, the main equity indices in Great Britain, France, Germany and Italy fell by more than 10%.

Figure n. 5 – Coronavirus 2020 crash

Stock index futures declined sharply during President Trump's speech, and therefore the DJIA declined 10% the following day - the most significant daily decline since 1987's Black Monday - despite the Federal Reserve System also announcing that it could inject. $ 1.5 trillion into the money markets.

On March 16, the DJIA dropped 12.93%, which was the biggest point drop since the 1987 Black Monday crash, outpacing the drop from the previous week, the Nasdaq also saw an oversized drop of 12, 32%, the S&P 500 fared slightly better with a drop of 11.98%. As for the percentage, the accident of that day was between those of 28 and 29 October 1929.

Trading Indices

The price development of the index reflects the dynamics of the stock's base price group.

What is an index?

An index typically measures the aggregate price development of a group of shares in a given country. Indices are often used to track and compare stock market performance.

The performance of each index is determined by the price performance of the underlying shares making up the index. The indices are constructed and calculated independently by specialised index providers such as banks and FTSE groups. The selection of companies to be included in the index is determined by the index calculation rules or the Commission. However, not all indices use the same rules.

DNA Stock Index

Price-weighted index

It is calculated by adding up the share prices of each share in the index and dividing them by the number of shares in that index. The more expensive the stock, the greater the impact on the index. The Dow Jones Industrial Average Index is an example of an index calculated with price weighting.

Market capitalisation weighted indices.

Figure n. 6 - Dow Jones composition by capitalization

The index is based on the total market capitalization per share, divided by the number of companies. The greater the market capitalization of the company, the greater the impact on the index. An example of this is the FTSE 100.

Composite index

Composite indices provide a statistical assessment of a market or sector's performance over time. They are useful for measuring the performance of an investor's portfolio. They can be weighted by price or market capitalization. The Nasdaq is an example of a composite index because it measures the performance of a highly technology weighted index.

Not all companies in this index are created equal.

The composition of the index changes from time to time, according to rules determined by the index calculator. Some companies give it more importance than others. In other words, they form a larger part of the index and their share price will have a greater impact on the index.

Let's analyze the indicators.

- Which companies are included.

- What are the rules for adding or removing companies?

- How often does the indicator change?

Sometimes we talk about rebalancing, but some companies are removed and others are added regularly.

- Which market areas do they cover?

Not all indices cover the largest stocks, and some, such as the FTSE 350 and Russell 2000, are calculated to measure the performance of smaller companies.

The price of an index changes constantly as the price of the underlying stock changes.

Benchmark index

From time to time, journalists and analysts may refer to the reference market index, which is the most widely used index to chart the direction of the market. Some of the representative ones are

- The Dow Jones