The document summarizes key aspects of common stock markets including:
1) Types of markets such as exchanges and OTC trading as well as major exchanges like NYSE and Nasdaq.
2) Trading mechanics such as order types, short selling, and buying on margin.
3) Stock market indexes that measure market performance like the Dow Jones Industrial Average and S&P 500.
4) Theories of market efficiency and evidence that U.S. markets exhibit weak and semi-strong forms of efficiency.
Have you ever caught yourself dreaming of a trip to Spain in the summer, that brand new set of golf clubs, or even the holiday home down in Cape Town you've always wanted?
Who says they only have to be dream?
Not me.
I want you to have these things…
That’s why today I want to tell you that whatever you're dreaming about, my simple Forex methodology and techniques could help put you on the road to all of this and more!
Forex is a $5 trillion-per-day market!
That’s an insane amount of money changing hands EVERY day.
And if you know exactly where to look and what to do you can bank fast currency profits…
Have you ever caught yourself dreaming of a trip to Spain in the summer, that brand new set of golf clubs, or even the holiday home down in Cape Town you've always wanted?
Who says they only have to be dream?
Not me.
I want you to have these things…
That’s why today I want to tell you that whatever you're dreaming about, my simple Forex methodology and techniques could help put you on the road to all of this and more!
Forex is a $5 trillion-per-day market!
That’s an insane amount of money changing hands EVERY day.
And if you know exactly where to look and what to do you can bank fast currency profits…
The following eBook’s purpose is to outline all the necessary fundament skills needed to understand the capital markets in a trading context. The three-part guide will walk you through the markets, trading concepts, and technical analysis and trading strategies. Produced after hours of research and planning by current and former professionals in the trading industry, you will become familiar with applicable knowledge that will allow you to be competitive in today’s markets.
Individual Forex Trading - Practical Knowledge and HintsVision Capital M
This presentation is about individual trading on the Foreign Exchange market (FOREX). I will try to give you some hints and "tricks" on how to survive at the market at first, and how to grow your capital later. A lot of it will be concentrated on managing risk. I will present wisdom from several famous traders of the last century as I believe that a trader should always be willing to learn. Besides standing on the shoulders of great men before us we could go even farther in the art of trading (or speculation), which essentially is the art of making money based on our own decisions.
Type of Indicators
CCI is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Lambert originally developed CCI to identify cyclical turns in commodities, but the indicator can successfully applied to indices, ETFs, stocks and other securities.
Animals In Stock Market
A Bull represents the rise or expected high rise in the prices of securities.A Bear represents the decline or expected decline in the prices of securities for a particular period.Chicken refers to those investors who are risk – averse and do not like to take much risk in investment.Pigs are usually the greedy, high-risk investors who want maximum benefits in shortest possible time.Wolves are the expert & powerful traders who use knowledge in unethical way to make money from the stock market.A dead cat bounce which means a small, brief recovery in the price of a declining stock. Stags are short-term spectators. They buy and sell stocks very quickly, usually within just a few hours of the day and many more.
Do watch the attached video
The following eBook’s purpose is to outline all the necessary fundament skills needed to understand the capital markets in a trading context. The three-part guide will walk you through the markets, trading concepts, and technical analysis and trading strategies. Produced after hours of research and planning by current and former professionals in the trading industry, you will become familiar with applicable knowledge that will allow you to be competitive in today’s markets.
Individual Forex Trading - Practical Knowledge and HintsVision Capital M
This presentation is about individual trading on the Foreign Exchange market (FOREX). I will try to give you some hints and "tricks" on how to survive at the market at first, and how to grow your capital later. A lot of it will be concentrated on managing risk. I will present wisdom from several famous traders of the last century as I believe that a trader should always be willing to learn. Besides standing on the shoulders of great men before us we could go even farther in the art of trading (or speculation), which essentially is the art of making money based on our own decisions.
Type of Indicators
CCI is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Lambert originally developed CCI to identify cyclical turns in commodities, but the indicator can successfully applied to indices, ETFs, stocks and other securities.
Animals In Stock Market
A Bull represents the rise or expected high rise in the prices of securities.A Bear represents the decline or expected decline in the prices of securities for a particular period.Chicken refers to those investors who are risk – averse and do not like to take much risk in investment.Pigs are usually the greedy, high-risk investors who want maximum benefits in shortest possible time.Wolves are the expert & powerful traders who use knowledge in unethical way to make money from the stock market.A dead cat bounce which means a small, brief recovery in the price of a declining stock. Stags are short-term spectators. They buy and sell stocks very quickly, usually within just a few hours of the day and many more.
Do watch the attached video
Types of investments from CPA wayne lippmanWayne Lippman
Overview of the general types of different investments people can make in today's society, presented by Wayne Lippman CPA http://www.yelp.com/biz/wayne-lippman-lippman-and-associates-cpas-walnut-creek-2
1. Chapter 18. The Common Stock
Market
• Types of markets
• Trading mechanics
• Stock market indexes
• Pricing efficiency
2. Common stock
• equity security
• ownership
• entitled to distributed earnings
• entitled to share of assets
3. I. Type of Markets
• exchanges
• OTC trading of
• unlisted stocks & listed stocks
• direct trading
4. Exchanges
• physical location for trading
• trading by members
• own a seat on the exchange
• stock traded on exchange are listed
stocks
5. NYSE
• the “Big Board”
• about 2800 listed U.S. companies
• & 450 non-U.S. companies
• $18 trillion market value (2/04)
• 1366 seats (fixed)
• seat price $2 million 2002
• 10/2003 $1.35 million
6. • stocks trade at post on the trading
floor
• 20 posts, trading about 100 stocks
• each stock has one specialist
• 10 specialist firms, 470 specialists
• each specialist has 5-10 stocks
• process trades from floor brokers
(5%) and electronically (95%)
7. role of the specialist
• MUST maintain a fair and orderly market
for stock
• act as buyer or seller as needed (10% of
trades)
• match buyers and sellers
• maintain order priority
8. the future of the specialist
• may be phased on with next 5-10
years
• recent SEC fines for improper
trading for several major firms
9. AMEX
• merged w/ Nasdaq 1998
• specializes in equity derivative
securities and closed-end funds
10. Regional exchanges
• stocks may be listed on both NYSE
and regional exchange
• 5 regional exchanges
• cheaper seat prices
11. OTC markets
• electronic network of dealers all over
the world
• ECNs
• electronic communication
networks
• more than one dealer per stock
• not obligated to make a market
12. Nasdaq
• not the only OTC system, but the
largest
• over 4000 companies listed
• mkt. value $2 trillion (2/28/03)
• leader in daily share volume
• over 500 dealers
• listing requirements
13.
14. II. Trading Mechanics
• types of orders
• short selling
• buying on the margin
• institutional trading
15. Types of orders
• instructions from investors to
brokers
• market order
• buy/sell order to be executed at
best price
-- get lowest price for buy order
-- get highest price for sell order
16. • market order (cont.)
• market orders given priority in
trading
• no guarantee of execution price
-- price could rise/fall from time
order is placed to time it is
executed
17. • limit order
• buy/sell order where investor
specifies price range
• “buy at $50 or less”
• “sell at $52 or more”
• specialist records orders in
limit order book
18. • investor sets reservation price
BUT
• no guarantee that limit order will
be executed
19. • stop order
• order lies dormant
• turns into market order when
certain price (“the stop”) is
reached
• “buy if price rises to $60”
• “sell if price falls to $58”
-- stop loss order
20. • investor does not have to watch
market
• but in a volatile market stop could
be triggered prematurely
-- end up trading unnecessarily
21. • stop limit order
• turns into limit order when stop is
reached
• “buy if price rises to $60, but only
is executed at $65 or less”
22. • market if touched order
• turns into market order if certain
price is reached
• “buy if price falls to $55”
• “sell if price rises to $62”
23. how long is an order good?
• fill or kill order
• executed when reaches trading
floor, or canceled
• good until canceled/open order
• is good indefinitely
24. order size
• round lots
• lots of 100 shares
• odd lots
• less than 100 shares
• more difficult to trade
• block trades
• 10,000 shares or $200,000 value
25. short selling
• sale of borrowed stock
• profit from belief that stock price is
too high will fall soon
• how?
• borrow stock through broker
• sell stock
• buy and return later
26. • short selling could further
destabilize falling prices
• tick test rules on exchange
• short sales allowed if
• uptick or zero uptick in price for
previous trades:
• $20.75, $21 (uptick)
• $20.75, $20.75 (zero upick)
• $20.75, $20 (downtick)
27. • so short sellers
• believe price will fall and SOON
• but price not currently falling
• face unlimited losses if price rises
28. Buying on the margin
• buyer borrows part of purchase price
of stock, using stock as collateral
• borrow at call money rate
• Fed sets initial margin requirement
• minimum cash payment
• 50% since 1975
29. • if stock price falls
• collateral worth less
• if collateral worth only 125% of
loan (maintenance margin)
-- margin call
-- owner must put up more cash or
sell stock
• margin calls can worsen stock
crash
30. example
• 1000 shares, $20 per share
• $20,000 cost
• $10,000 cash, borrow $10,000
• leverage
• gains/losses on $20,000 capital
• but tied up only $10,000 capital
31. • if prices falls to $12,
• value of stock $12,000
• below 125% of $10,000 loan
• get a margin call
32. Institutional trading
• vs. retail trades
• institutional trades are larger
• special execution
• over 50% of NYSE share volume
33. block trades
• large # shares in one stock
• executed in “upstairs” market
• other firms directly take other side
of trade
• remainder executed on trading floor
or Nasdaq (downstairs)
34. program trades
• large # shares, different stocks
• used by mutual funds for asset
allocation
• want
• low commissions
• prevent frontrunning
35. what is frontrunning?
• brokers trade ahead of program
trade
• to benefit from anticipated price
movements
• due to large trade
36. example
• broker buys ahead of large buy order
• broker buys first
• large buy order pushes up price
• broker’s holdings increase in value
• result
• frontrunning starts to push up
price, so firm does not get best
price
37. agency basis
• brokers bid for trade by commission
• low commission, but
• frontrunning likely
38. agency incentive agreement
• set benchmark value for trade
• based on last day’s prices
• if broker does better
• gets commission + bonus
• higher commission, but
• frontrunning less likely
39. III. Stock market indicators
• measure average performance of a
group of stocks
• different indexes are highly
correlated:
• DJIA & S&P 500 .991 (1990s)
• DJIA & NYSE .95
40. indexes differ due to
• stocks included in the index
• weighting of stocks
• equal, price, value
• average
• arithmetic
• geometric
41. stock exchange index
• includes all stocks listed on
exchange
• NYSE Composite
• Nasdaq Composite
• (both value weighted)
42. subjectively selected index
• organization picks group of stocks
to measure
• Dow Jones Industrial average
• S&P 500
43. DJIA
• price weighted
• 30 large blue chip companies
• cross section of industries
• leaders
• large movements in DJIA may halt
trading on NYSE
44. S&P 500
• 500 large blue chip companies
• value weighted
• most popular benchmark for index
funds
45. objectively selected index
• inclusion of stock based on objective
criteria
• market value
• Wilshire 5000
• all publicly traded stocks
• Russell 2000
• largest 3000 companies, then take
smallest 2000 of those
46. IV. Pricing Efficiency of the
Stock Market
• what information is reflected in
current stock prices?
• what implications does this have
for active vs. passive investment
strategies?
47. 3 levels of price efficiency
• what are they?
• implication?
• evidence for U.S. stock markets?
48. Weak form efficiency
• current stock prices reflect
• information about past prices
• and trading history
49. implication
• if markets are weak-form efficient
• using past price/trading pattern to
predict future stock prices will not
work
• so, technical analysis will fail to
beat the market
50. evidence
• U.S. stock market is weak-form
efficient
• technical analysts do not beat the
market
• especially after trading costs
51. Semi strong form efficiency
• current stock prices reflect
• all publicly available information
relevant to stock
-- economic data
-- financial statements
52. implication
• using public info to predict future
stock prices will not work
• fundamental analysis will fail to
beat market
53. evidence
• mixed
• Yes
• most actively managed portfolios
do not outperform randomly
selected portfolios
54. • No.
• certain pricing anomalies persist
for long periods of time
• January effect
• size effect
57. evidence
• U.S. stock market is not strong form
efficient
• why?
• corporate insiders consistently
outperform market
• & they have access to private info
58. active strategy
• using fundamental or technical
analysis to select stocks to buy/sell
• growth, sector, value funds
• trading on this info increases
• trading costs
• tax consequences
• odds of working are low
59. passive strategy
• believe market is efficient, just
capture long-run returns of market
• buy-and-hold diversified portfolio
• index funds
• lower expenses, defer taxes
• index funds outperform most
actively managed funds