The Real Deal on the Neopian Stock Market by jedinaboo |  |
The Neopian Stock Market
is a action-filled place to invest in Neopia's premier companies, ones "behind"
many of Neopia's best-loved games and services, such as Dice-A-Roo, the Alien
Aisha Vending Machine, even the Auction Genie and the National Neopian Bank.
Many have made and lost fortunes in a single trade. Although many Neopians frequent
the market every day to trade and bite their nails in anxiety, many still do
not know what the market is, and even some regulars don't know how it works
and exactly what it represents.
Very basically, a stock market is a place where people and organisations go
to trade stocks. A stock is a share of a company. It has a "ticker symbol,"
which is a code that represents the stock, such as LUPE
or DROO.
It represents a very small slice of the company's total worth. Say you have
a stock in a company. When that stock goes up, it means the total worth of the
company has gone up, and so your share, since it's a percentage of that company,
has gone up in value, as well, and you didn't have to work any harder or pay
any more to make it do so. When you sell, you relinquish that share of that
company for a monetary sum, in this case a bunch of Neopoints.
That's how one makes money in the Neopian stock market: buy low, when you
think the price (total worth) will rise, and sell it when you think it's at
its peak. The problem is deciding when you believe the stock will rise
and when you believe the stock will fall. Why just "believe" and not
"determine" or anything to that effect?
Since Neopia is an artificial world, its economy is not real. And thus, the
stocks are not really based on any real Neopian conditions. Because of this,
nobody can really know to any degree what the market will do. In the Neopian
stock market, everything is 90%-100% guesswork. The best anyone (except the
staff) can really do is look at the patterns of the stocks (most specifically,
when they fall a ton) and buy in when it looks like the worst is past, selling
when enough gains are satisfactory.
Here's a good metaphor: baking bread. In the beginning, you invest by putting
in dough to create the investment loaf. Then, you get it to rise. When it's
risen and hot enough, then you take it out of the oven and eat it. You're capitalising
on the gain, but afterwards, there's no more bread! You've gotta invest more
dough to get more bread.
In the market there is something called the Neodaq Index. It shows how the
market is doing overall. They get the index by adding together all the stock
prices. Don't believe me? Try adding up all the current prices one day.
Why Do Stocks Move?
The biggest rumour about the stock market, one that is widely held and unfortunately
very easy to come to, is that consumer buying and selling in our market affects
stock price. It's so easy to come to because that's what happens in real life!
It does not happen here, however. I'll give you an example. Say a stock, such
as LUPE, drops down to 12, when nobody can buy it. That happened this month.
If nobody can buy, then how did it make a recovery to 15 NP and beyond? It did,
believe you me, it did. But it wasn't because everybody was buying, because
nobody could!
I'll give another example. Few will be able to relate to this, but one morning,
everybody was in an uproar to buy DROO. It was at 15, and everybody said it
was bound for the sky. Its volume (the price times how many shares are bought)
rocketed up 150,000 points. That's a LOT! Everybody was buying. What happened?
It dropped 2 points. If everybody was buying it, then it it'd have to go up...
unless... buying didn't affect price.
So, what does affect the price? Nobody but the NeoPets Team knows. It'd be
nice if they could tell us, but until then, there are three ways they're most
likely doing it. One is that they have all the stocks attached to a random number
generator, which moves the stocks randomly. The second is that they're doing
it manually, picking numbers out of a hat or just fiddling with the prices.
The third, and most interesting, is that they might actually have chosen real
stocks and based the movement of the Neopian stocks on them.
What Do You Buy and Who Can You Trust?
When it comes to finance, everybody's asking, "Whom can I trust with my money?
Who knows what's going on?" It'd be nice if I could dish out a list of names,
but I can't. Truly, you can't trust anyone to know what will skyrocket and what
will fall. Not Nigel the Chia Stockbroker, not the Swamp Ghoul, not your cousin,
not the Light Faerie. In fact, I remember the day someone came into the message
boards yelling that the Light Faerie had said BOOM, a stock, was to double overnight.
You know what happened? It dropped several points. Nigel once suggested VPTS
to me. Too bad I can't buy it! You can't believe anyone to know what stocks
will do. You can trust them to tell you what are good stocks, such as LUPE and
AAVL, but anybody who says they can predict the market is either a prophet of
spectacular talent or lying. It's never been the former.
The key to buying stocks is to watch the flow of individual stocks. They all
have some sort of range that they almost always stick with in the short term.
Buy when they fall down, and sell when you've gotten enough gains. When judging
gains, always look at either the total earnings (math work there) or the percentage
gain (in the rightmost column of your portfolio). Don't judge just by the change
in NP/share. A change in a small-cap stock (in this case, one with a small value,
typically under 30 NP/share, e.g. LUPE) yields more money than the same change
in a large-cap stock (e.g. AAVL,
usually in the 50s and up). This is because, although the changes per share
are the same, you can have more shares of a small-cap with the same money as
you would have with a large-cap.
Basic Selling, Buying, and Interacting With the Market
All the interactions you'll make with the market are in the stock market pages.
There's a link at the bottom of the games page and one on the homepage. When
you're in, you can look up stocks by pressing "Find Stocks" and then the little
blue "here" link, or by clicking on "Buy" and then "click to list." There will
be several columns in the page. The leftmost three are the logo, ticker symbol,
and full name of the company. To the right of that are four very important columns.
The first is the volume, the total shares held times the price of the shares
(though it isn't always accurate). It's a good indication of how popular the
stock is; how many people have it. To the right of that, the "Open" column shows
where the stock was at the beginning of the session (day). The next column,
"Current," shows where it is at that very moment. The last column shows the
percent change in the stock. Green text shows positive changes, red negative.
The usual way to buy stocks is, in the main stock page, to click on "Buy"
and type in the name and number of shares. To sell stocks, follow "Sell" and,
when all the stocks you own come up, you can sell a certain amount of them,
counted in shares. Whenever you sell a stock, in any amount, Nigel
the Stockbroker Chia will charge you commission. This 20 NP charge is
a service fee for his work.
Any trader's best friend in the world of NEODAQ is the portfolio. This shows
all your stocks in a plain and simple light. It lists the stocks you own, how
much you own of each of them, how much you bought them for, how much each is
at the moment, its total worth, and the percentage gain. This is your elegant
guide to how your stocks are doing.
Good Tactics For the Market
There are many good stratagems and behaviours that can make you a winner.
One good rule is not to sell when stocks dip unless it's just beginning to do
so. Buying high and selling low is not the way to go. Hold onto the stocks.
If possible, buy more when they're low! This tactic is the most widely used,
so simple and elegant that most people don't even think of it as a tactic.
One strategy thought up by an illustrious trader in the boards was to buy
a certain amount of every stock that was available, initially between 10 and
70 or so shares, sell any that fly high, hold (or even buy) any that fall, and
then continue, so you never miss any trends. It's a perfect example of diversification
and how it's a good idea.
Finally, don't invest any money you can't afford to lose. I see many people
in the boards all the time saying they lost all their money in a foul stock
trade and they need money fast. Luckily, in Neopia it's not as bad as it would
be in the real world if you lose thousands, but it's still a tragedy.
The most important thing is knowledge. In this case, it comes from experience
and communication. Talking in the boards and reading articles such as this one
can give any trader the edge they need to succeed. |
