The stock market is not a place you should be scared of. Granted, for a newbie the financial news can be a scary and confusing montage of graphs, data and statistics. But understanding the stock market and its various terminologies is not rocket science.

The stock market works on the basic economic principles of demand and supply. When a company is doing well, its prospects are positive, it's an innovator and groundbreaker in its industry, and investors are hopeful about it growth and income potential, then demand for the company's stock is likely to be high. This in turn drives the prices of a company's shares up.

Conversely when a company is doing badly or the industry in which it operates is facing a downturn, or the economy is slowing down and is in recession, then the demand for this company's stock is likely to decrease, leading investors to sell their stock in it and thereby pushing its price down.

This fluctuation of prices is what is so interesting and crucial to monitor about the stock market and will lead you to understanding the stock market. The stock price fluctuation on a daily basis is what makes the stock market so volatile. So you might ask yourself why anyone would want to invest their savings in such an unstable environment.

The thing to remember here is that as long as the rate of return outweighs the risks, it will be profitable to invest in the stock market. The rate of return is the percentage you receive for putting your money in stock. And part of the risk you assume is one of calculating whether the stock price will go up or down and if so, during what time frame. The key to making a profit on the stock market is to make an educated guess about price fluctuations and invest in the right stock at the right time.

You might have heard television news anchors use sentences like "the Dow slipped 11 points today to close at 10,309". This means that the news is reporting on the Dow Jones Industrial Average, a stock market index which measures the performance of the companies listed on it. A listed company's stocks are traded on the stock exchange. Understanding the stock market means understanding stock market indexes and stock tables which measure the volume of trade (number of shares traded) and whether the market movement was generally positive (share prices increased overall) versus whether the market movement was generally negative (stock prices decreased overall).

Understanding the stock market also means understanding the role that brokers and specialists play in your transaction. The stock exchange floor usually contains people called stock brokers who relay messages from investors (people like you who want to buy or sell shares) to specialists (members of the stock exchange who complete the transaction). So a beginner investor will likely get a stock broker to buy or sell shares for him. Conversely a beginner investor might start trading online by opening a fund account.

The stock market need not be scary place provided you take the time to learn how it works and form a good understanding of the players involved. Once you do that, you can start investing and see the return on your investment grow by leaps and bounds!