🐂 Byki, niedźwiedzie i historia giełdy

If terms like long, short, bulls, bears or GAPs still leave you stumped — you're in the right place. This module is the entry point to the entire chapter: vocabulary and history first, then from Module 2 onwards the mechanics of the stock market.

Every other module builds on these basic terms. If you already know what a stock is, what bulls and bears mean and how a GAP is created, you can jump straight to Module 2 (market structure) — everyone else should take the next 15-20 minutes.

Six compact sections, each building on the previous one:

Before we talk about strategies, indicators and risk management, three questions everybody should be able to answer: What is a stock? What is a stock exchange? And what does a broker actually do?

What is a stock?

A stock (also called a share) is a certificate of ownership — it makes you a legal co-owner of a company. When you buy one Apple share, you own exactly one piece out of roughly 15 billion outstanding shares. That sounds tiny — and it is — but it makes you a real owner.

Three rights flow from this ownership status:

• Voting rights: At the annual general meeting you get to vote — on dividends, executive compensation, capital increases.
• Dividend entitlement: If the company makes a profit and pays out, you receive your proportional share.
• Liquidation proceeds: If the company is wound up, you receive your proportional share of the remaining assets — after all creditors have been paid. In practice: when a company goes bankrupt, there is usually nothing left.

Stocks only exist for a corporation (AG, Inc., PLC, S.A., NV …) or comparable legal forms. A German GmbH does not have stocks but „Geschäftsanteile" (company shares) — these are not traded on a stock exchange.

💡 Deep dive: Common vs. preferred shares, growth vs. value, REITs, dividend aristocrats — you'll find all of that in Module 6 (asset classes).

What is a stock exchange?

A stock exchange is an organised marketplace for securities. It performs three functions without which the modern economy would not work:

1. Primary market — bringing capital to the company. In an IPO (Initial Public Offering) the company sells new shares to investors for the first time. The money flows directly to the company — for investments, growth, debt repayment.
2. Secondary market — investors trade among themselves. After the IPO, shares are traded between investors. The company sees none of this money — but this trading is what makes the share attractive in the first place: without a secondary market, you would be stuck with your investment for 30 years.
3. Price discovery — what is a stock really worth? A new price emerges every second from thousands of buy and sell offers. This price discovery is transparent, regulated and verifiable.

💡 Deep dive: How exactly the primary and secondary markets work, how bid and ask meet, and which exchanges exist worldwide — see Module 2 (market structure).

What is a broker?

A broker is your intermediary to the exchange. Retail investors cannot trade on an exchange directly — you need a licensed entity that accepts your order and routes it to the exchange. In return it earns a fee (order commission) and/or a spread mark-up.

Well-known brokers for retail investors:

• Germany/Austria: Trade Republic, Scalable Capital, Comdirect, ING, DKB, flatex, Smartbroker
• USA: Interactive Brokers, Charles Schwab, TD Ameritrade, Robinhood, Webull
• Specialists: Interactive Brokers (all asset classes, worldwide), TastyTrade (options-focused)

💡 Deep dive: Which broker fits which strategy, what order fees, spreads, margin and platform quality entail — see the broker selection chapter.

An anecdote to close

The first modern joint-stock company was the Dutch East India Company (Verenigde Oost-Indische Compagnie, VOC), founded in 1602. Ship expeditions to Asia were extremely expensive and high-risk: if a single shipowner financed a ship and it sank, everything was lost. The solution: spread the risk by issuing shares of ownership. Every Amsterdam citizen could buy in for relatively little money — and share in the profits of the expedition.

At the Amsterdam Stock Exchange these certificates were traded daily. The principle — risk-sharing ownership of companies — has not changed in 423 years. More on this in Section 6 (timeline).

The stock market only has two animals, and they are as old as trading itself: bulls and bears. The terms originate from the 18th century (London Stock Exchange) and describe the symbolism of attack: a bull thrusts its horns upwards, a bear strikes its paws downwards.

So if you are bullish on a stock, you expect rising prices. If you are bearish, you expect falling prices. The German synonyms are Hausse (up market) and Baisse (down market) — both borrowed from French.

How do you actually make money?

There are two fundamentally different ways to profit in the market:

Going long means: you buy a stock hoping the price will rise. Sell later for more than you paid = profit. This is the classic form of investing. When somebody says they are „long NVIDIA", they own NVIDIA shares and expect rising prices.

Going short (or: shorting) means: you borrow a stock (via your broker), sell it on the market right away, and hope to buy it back cheaper later in order to return it to the lender. If the price falls, you make a profit. If it rises — you have a problem.

⚠️ Caution — asymmetric risk: In a long trade your maximum loss is capped at the purchase price (a stock can fall to a maximum of $0). In a short trade your loss is theoretically unlimited — a stock can rise infinitely. Anyone who shorted GameStop in January 2021 learned this the hard way.

Concrete scenario — NVIDIA long trade over 5 days

Market sentiment in three words — bullish, bearish, neutral

When traders talk about their expectations, they use three buckets:

💡 In sTraderZ.com all trades and strategies are automatically categorised by these three market expectations. In the live trades feed you can immediately tell from the 📈/📉/↔️ badges which market direction the trader expects.

Ten terms that come up in every trading conversation. A short definition, a concrete example — and a link into the full glossary if you want to go deeper.

💡 Deep dive on order types: There is more than market and limit — also stop, stop-limit, bracket, OCO, time-in-force variants. Module 3 (trading mechanics) has a full table of all 17 order types.

A GAP is a hole in the price chart — the closing price of one day and the opening price of the next day are not at the same level; instead, there is a visible gap. These gaps form outside regular trading hours: overnight, on weekends, due to earnings, central bank decisions or geopolitical news.

GAPs are not an indicator gimmick — they are one of the most important price patterns there is, because they show the jump with which the market has recalibrated its expectations.

Three examples at a glance

Three GAP types — and what they mean

Concrete Apple earnings example

💡 Deep dive: How GAPs are interpreted in technical analysis (gap theory after Edwards/Magee, volume confirmation, gap-fill statistics) — see the technical analysis chapter.

A compact journey through the history of the stock markets — from the birth of the joint-stock company to today's smartphone trading. Ten stations at which something fundamental changed.

1. 1602

   VOC — birth of the joint-stock company

   The Dutch East India Company (VOC) is founded in Amsterdam. For the first time, shares are issued that are tradeable — every citizen can share in the profits of ship expeditions, and everyone can resell their stake at any time. The Amsterdam Stock Exchange becomes the world's first organised secondary market. The idea — risk-sharing, tradeable ownership of companies — has not changed in 423 years.

2. 1637

   Tulip Mania — the first speculative bubble

   Tulip bulbs become a speculative asset in the Netherlands. At its peak, a rare bulb costs more than an Amsterdam townhouse. In February 1637 the market collapses. The first documented bubble — and the lesson that has been forgotten every few decades since.

3. 1720

   South Sea Bubble — Newton capitulates

   The South Sea Company in London collapses from £1,000 to £100 in six weeks. Sir Isaac Newton, the smartest man of his age, loses £20,000 (today ≈ £3M). His quote: „I can calculate the motion of heavenly bodies, but not the madness of people." More details in Module 2 (market structure).

4. 1792

   Buttonwood Agreement — birth of the NYSE

   24 securities traders meet under a Buttonwood tree (Platanus occidentalis) on Wall Street to standardise trading. From this informal pact emerges the New York Stock Exchange. To this day, the NYSE remains the place where the most important US companies list their shares.

5. 1844

   Telegraph — real-time price data

   With Samuel Morse's electric telegraph, prices are transmitted from New York to Boston in minutes — previously this took days by courier. This changes everything: stock exchanges become global, arbitrage between venues becomes possible, and the term „real-time quote" is born.

6. 1929

   Black Tuesday — the crash that changed the world

   On October 29, 1929 the Dow Jones plunges 12% — the climax of a series of crashes that has accumulated more than 50% in losses by December. The Wall Street Crash kicks off the Great Depression: banks collapse, a third of the US population becomes unemployed, and the DJIA only regains its 1929 level in 1954. Consequences: founding of the SEC in 1934, the Glass-Steagall Act, and the beginning of modern financial regulation.

7. 1971

   NASDAQ — the first electronic exchange

   The National Association of Securities Dealers Automated Quotations launches as the first fully electronic trading system. No floor traders, no paper slips, no phone calls — computers trade with computers. Tech stocks (Microsoft, Intel, Apple, later Amazon, Google) primarily list on the NASDAQ. Today it is the home index of all the major tech companies.

8. 1987

   Black Monday — −22% in a single day

   On October 19, 1987 the Dow Jones falls 22.6% in a single day — the largest percentage daily loss in history. Trigger: the first wave of programmatic „portfolio insurance" selling that amplifies itself. Consequence: introduction of the first circuit breakers (trading halts during extreme moves).

9. 2010

   Flash Crash — algorithms out of control

   On May 6, 2010 the Dow Jones plunges 1,000 points within 36 minutes — and recovers almost completely in the next hour. The cause: a single large sell hits a market that is 70% dominated by high-frequency algorithms. Turning point: algo trading and HFT become central topics of market regulation.

10. Today

    Smartphone trading, retail boom, crypto

    With apps like Robinhood, Trade Republic and Scalable Capital, buying a stock is as easy as ordering a pizza. While the GameStop and AMC waves of 2021 showed what retail swarms can move, crypto is changing the very question of what counts as a „tradeable asset class". AI-powered analytics, on-chain data and 24/7 markets are the next wave. The history of the stock market isn't finished — it's being rewritten right now.

💡 Four centuries. One lesson that keeps coming back: markets are people, and people understand mathematics. Only the tools change. Newton 1720, the Hunt Brothers 1980, Bill Hwang 2021 — all three learned the same thing: leverage, lack of diversification and excessive expectations are the same risks in every era. More on these three stories in Module 2 (market structure).