A Beginner's Guide to the Stock Market

by Matthew R. Kratter

The stock market is a complex emergent system. It won't listen to you or to anyone else. It's like the weather-- it just does what it does, so you might as well get used to it. Take the time to learn how the stock market really works.

That being said, there's one important lesson that we can all learn from Buffett's investing style. You want to own businesses that have good pricing power. This means that they can raise prices without losing customers.

The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.

Until you become an advanced investor, don't ever buy a stock with a P/E of 10 or less.

Never buy a growth stock if the stock is trading below its 200-day moving average, or if the 50-day moving average is trading below the 200-day moving average. If

If a growth stock is trading above its 50-day moving average, and the 50-day moving average is trading above the 200-day moving average, I am happy to be long. If

Also, I like to look for growth stocks that have a market cap of $5 billion or less. It takes a lot less money to push a $5 billion stock higher than it does a $500 billion market cap

I also like to look for growth stocks, where the float is less than 20% of the total number of shares outstanding. The “float” is simply the number of shares of a stock that are actually available for trading.