Stocks - Investing Basics
The mysmp.com Stocks Education Center provides a comprehensive list of articles related to trading stocks.
| 100% Equities Strategy Benefits & Risks | A 100% equity strategy is when a trader, mutual fund, or hedge fund only invest in equities as part of their strategy. |
| 52-Week High | The 52-Week high is a rolling count of the high of the stock over the past 52 weeks. This of course translates into the yearly high for the stock. |
| 52-Week Low | The 52-Week Low is a rolling count of the low of the stock over the past 52 weeks. This of course translates into the yearly low for the stock. |
| Above the Market Order Type | An above the market order is a request to buy or sell a security above its current price. This type of order is utilized for both short and long positions. This order type can be used to both initiate and exit positions. |
| After Hours Trading Times & Order Types | After-Hours Trading is the post session for the U.S. equities market. It takes place between 4:00pm - 6:30pm. |
| Alpha | The term alpha, when related to portfolio returns, is based off the expected return of a security or portfolio using a market benchmark and the portfolios' inherent price sensitivity (Beta) as a gauge for relative performance. Alpha is basically calculating the security or portfolio’s performance which exceeds the expectations that are set by the market and the securities price sensitivity to the market |
| American Depository Receipt (ADR) | An American Depository Receipt, or ADR, references the trading shares of a foreign entity on a US stock exchange. They provide easy access to gaining international equities exposure without actually having to exchange currencies and open additional accounts to transact in overseas. |
| American Stock Exchange | The American Stock Exchange, or AMEX, is the third largest stock exchange in the United States. As of the end of 2007, 592 US equities with a total market cap of $258 billion traded on the AMEX, with most of them being stocks from the small cap sector |
| Auction Market Defintion & Theory | An auction market is when buyers and sellers place their orders in the same environment and then negotiate the best execution price. These orders were done mechanically in the past, but are now executed in seconds electronically. |
| Average Up - Adding to a Winning Position | Averaging up is rarely discussed in the financial world. Traders and money managers always speak of averaging down. How many times have you heard traders say, "The stock is cheap here, buy more!". I have never quite understood this logic. |
| Averaging Down - Ineffective Trading Methodology | Averaging down is when a trader increases their position size as the trade goes counter to their initial investment. |
| Basket Trade | A basket trade is an order to buy 15 or more stocks at once. Basket trades are initiated by large institutions or hedge funds with substantial amounts of money to invest. |
| Bear Market Definition, Effects and Chart Example | A bear market is occurs when an major index experiences a drop of 20% or greater from its most recent high point. Beyond just the price movement, a bear market also has a time component associated with the move. |
| Bear Market Rally Definition & Chart Example | A bear market rally is a snap back rally in the context of a larger bear market. |
| Bear Raid - Market Manipulation | A bear raid occurs when a group of traders manipulate a security's price in order to drive down the value of the stock. The goal of a bear raid is to push the security lower as quickly as possible in order to create fear in the market. |
| Below the Market Order Type | A below the market order is a request to buy or sell a security below its current price. This type of order is utilized for both short and long positions. It can also be used to both initiate and exit positions. |
| Beta | Beta is a systematic risk measurement which quantifies the correlation of a security or portfolio to a benchmark index such as the S&P 500 or Dow Jones Industrial Average |
| Block Trade - Definition | A block trade is a transaction that is a minimum of 10,000 shares of stock or $200,000 of bonds. |
| Blue Chip Stocks | The term "blue chip" refers to the stocks of leading companies in the US economy. These stocks are financially sound, have high brand name recognition, and are consistent performers. Blue chips are typically aged companies who have stood the test of time and have established a large footprint throughout the ecomony |
| Boiler Room - Fraudulent Brokerage Firms | A boiler room is an telemarketing operation where sales reps attempt to lure unknowing investors into purchasing micro cap stocks in hopes of securing a hefty commission. |
| Bottom Up Investing - Trading Methodology | Bottom-up investing is the process of focusing on the specific stock based on their individual performance and not factoring in the broad market or other macroeconomic conditions. |
| Bracketed Buy Order Definition & Trading Example | A bracketed buy order is when three orders are placed simultaneously in order to take on a long position. |
| Bracketed Sell Order Definition & Trading Example | A bracketed sell order is when three orders are placed simultaneously in order to take on a short position. |
| Bull Market Definition & Examples | A bull market occurs when the market is expected to continue higher over an extended period of time. Bull markets are primarily described when discussing stocks, but it can be related to bonds, commodities, futures, or forex markets. |
| Buy and Hold Strategy - Negatives & Benefits | Buy and hold is an investment strategy in which stocks are bought and held for a number of years in hopes of making a sizable return, without focusing on daily price fluctuations. |
| Buy Back - Stock Repurchase Program | Buy back is the process of a company repurchasing its issued shares. This can come in the form of repurchasing stocks and bonds. |
| Buy Limit Order | A buy limit order is an instruction to buy a security at or below a specific price. |
| Buying Power - Overnight & Day Trading | Buying power is the money extended by the brokerage firm to a trader for the purpose of buying and selling short securities. An account must be approved for margin trading in order to have a buying power that is beyond the cash on hand in the account. |
| Buyout Definition & Types | A buyout is a purchase of a company where a controlling interest is transferred to another entity. Many people believe that a buyout means the entire company is purchased; however a buyout can occur when 51% or more of the company's stock is bought. |
| Canceled Order | A canceled order is an instruction to cancel a request to buy or sell a security. |
| Cash Flow Statement Example and Components | The cash flow statement is part of a company's financial reports and is comprised of three main components: (1) Operations, (2) Investing, and (3) Financing. |
| Cash Trading - Conservative Investing Approach | Cash trading is a term used to describe a speculator that only trades with the cash on hand and does not use any margin. |
| Choppy Market | A choppy market is defined as a market without any clear direction. Choppy markets can present themselves after an extended bull or bear market has been in place. |
| Class A Shares - Common Stock and Mutual Funds | Class A shares is a term for both stocks and mutual funds which describes a type of class of investment. Class A shares carry additional rights and privileges that are not associated with common stock and are used as a means to retain controlling ownership of a company. |
| Closing Bell History & Present Function | The New York Stock Exchange originally used a gavel to signal the end of a trading day. This was later adapted to a gong during the 1800s, in order to accommodate for the larger trading floor. |
| Common Stock | Common stock represents an ownership interest in a corporation. Rather than purchasing bonds, of which most have a fixed rate of return, investors look to purchase an equity stake for the possibility of stock price appreciation |
| Curbs In Definition & Thresholds | Curbs in is the restriction of the trading of a security in order to reduce the volatility. This measure is primarily used to prevent the market from falling too much during the regular trading session. Below are the trading curbs in rules for the Dow Jones. |
| Cyclical Stocks - Repeatable Market Patterns | Cyclical stocks are securities that respond to economic issues on a seasonal or cyclical basis. For example, when the demand for gold increases during the Indian holiday season, many gold issues will experience an annual bounce due to the increase demand. |
| Day Order - Trading Instruction | A day order is a buy or sell instruction to a broker that are valid for one trading day. Day orders are the default order type for most trading platforms and are the most common order type. |
| Days to Cover - Market Sentiment Ratio | Days to cover is a formula which tracks the number of shares short in the market relative to the available float. This allows a trader to see how bearish or bullish traders are on a security. The last component of the ratio is the amount of daily volume. |
| Dead Money Equals No Returns | Dead money is a common Wall Street phrase that refers to an investment that has little or no chance of earning a return. Dead money is most often used to refer to stocks from the Internet bull market that are still worthless some 8 years later. |
| Defensive Stocks - Hedge Against Bear Markets | Defensive stocks are securities which are do not react strongly to movements in the market. These stocks are generally companies which provide services that consumers need on a daily basis. |
| Delisting of a Stock | Delisting of a stock is the process of removing a security from one of the major exchanges. Delistings can be either voluntary or involuntary, but generally they occur when a company is unable to maintain the financial requirements for the exchange. |
| Direct Access Broker Defintion & Reviews | A direct access broker is a firm that provides their clients direct access to the exchanges via electronic communication networks (ECN). Direct access brokers focus more on the trading platform and order execution. |
| Dogs of the Dow Definition & 2008 List | The dogs of the dow are the 10 stocks which pay the highest dividend relative to the current stock price. The basic trading strategy is to buy these stocks at the beginning of the year and to hold them throughout the entire year. |
| Dollar Cost Averaging Plan & Trading Example | Dollar cost averaging is a trading methodology used to limit risks by investing in a security or mutual fund over a specified time frame with set investment amounts. |
| Dow Jones Industrial Average | The Dow Jones Industrial Average is a price weighted index to track the stock performance of 30 large cap giants of the US economy |
| Downgrade - Stock Evaluation Rating | A downgrade is a lowering in the rating of a security by one of the analysts in the financial industry. A downgrade can come about as a result of a negative change in the fundamentals or financial situation at the company. |
| Downtick | A downtick is a trade that occurs at a lower price than the previous transaction |
| Drawdown - Stocks | Drawdown represents the drop in account value from peak to trough. |
| Earnings Season - Key Dates | Earnings season takes place quarterly when the majority of corporations file their financial reports. Earnings season takes place at the end of January, April, July and October. |
| Easy-to-Borrow List Definition & How it Effects Active Trading | The easy-to-borrow list is the securities which are available for short selling activities. In order for a stock to be on the easy-to-borrow list, the security must have a large number of outstanding shares in order to assure there will be stock on hand to handle the short position. |
| Electronic Communication Network - ECN | An electronic communication network, or ECN, is an order matching platform which connects investors directly to brokerage houses, rather than processing trades through a middle man. |
| ETFs | Learn about one of Wall Street's hottest products; ETFs or Exchange Traded Funds. ETF's allow you to trade market indices like stocks. |
| Fade Stocks - Contrarian Investment Strategy | Fading the market is the process of taking a position that goes counter to the primary trend of the market. This trading strategy is a suited for traders that are more open to taking risks and are able to handle the emotional run sometimes associated with going against the market. |
| Falling Knife - Stocks | A falling knife is a security which has a steep decline with virtually no counter move on the way down. |
| Find ETF With Berkshire Hathaway Holdings | There is no ETF that mimics the Berkshire Hathaway investment holdings. The best bet for an investor is to invest directly in Berkshire Hathaway BRK, which is traded on the NYSE. |
| Float - Total Number of Shares Traded Publicly | Float is the total number of shares available for a publicly traded company. The float is equal to the total number of restricted shares minus the number of outstanding shares. |
| Form 10-K | The form 10-k is a summary of a company’s performance over a year. The report must be filed within 60 days after the end of the fiscal year. |
| Form 10-Q | The Form 10-Q is submitted by public companies quarterly as required by the U.S. Securities and Exchange Commission. The 10-Q contains financial statements that have not been audited, which provide insight into a company’s financial health throughout the course of the year. |
| Free Stock Charts, Stock Prices & Stock Quotes | Utilize our free stock chart application to receive stock quotes and prices. Create your own virtual portfolio to track your investments. |
| Front Running - Illegal Trading Activity | Front running is an illegal trading activity where a brokerage firm or manipulator buys or sells a security before executing their client's order. This allows the brokerage firm to enter at a low price and the subsequent orders of their clients pushing the stock higher. |
| Good Til Cancel Order Type | A good til cancel (GTC) order is a buy or sell order that remains in effect until executed or canceled. Now this does not mean that the order will remain in queue indefinitely. The majority of brokerage firms will only allow an order to stay active for 30-90 days. |
| Green Investing Strategies and Top Mutual Funds | Green investing are the activities of investing funds into companies which promote alternative energy sources, reducing toxic waste, and environmental conscious practices. |
| Hard Stop Order Type | A hard stop is a protective order placed in the market to close a position. Unlike other stops, which traders might move as the stock goes against them, a hard stop is an order that is placed and does not change. |
| How Do I Sell My Stock | Many investors are confused on how to sell their stock. There are a number of methods for closing out a position and this article details out a few methods for getting your cash. |
| Inside Day - Pause in Trend | An inside day is when a security trades within the high and low range of the previous day. This candlestick is nothing more than a breather day which can lead to a further extension of the primary trend, or the beginning of a counter move. |
| Insider Trading | Insider trading occurs when an individual who has access to non-public information about a security, uses this information to make profits on the stock. |
| January Effect in the Stock Market | The month of January in the stock market has strong significance in predicting the trend of the stock market for the rest of the calendar year. This phenomena occurs between the last trading day in December of the previous year and the fifth trading day of the new year in January. |
| Jesse Livermore Money Management Rules | Learn about Jesse Livermore's rules for money management; don't lose money, always have stop loss orders in place, have cash on reserves, let winning positions ride, and always take profits. |
| Leveraged Buyout (LBO) Definition | A leveraged buyout is a highly financed buyout when the bidder uses financing to purchase the majority stake in a company. A company will secure the loan by using the collateral from the company they are looking to purchase. |
| Leveraged ETFs - ProShares Ultra Funds | Leveraged ETFs offer investors a simple way buy a broad index or sector, but at the same time, they allow traders to double the returns of a traditional unleveraged equivalent. |
| Limit Order | A limit order is an instruction to buy or sell a security at a specific price. |
| Lock In Profits - Key To Successful Trading | Asking the question of why to lock in profits, is really a silly question when one thinks about it. The whole point of trading is to make money, and locking in profits is in sync with this line of thinking. While this sounds so elementary, the vast majority of traders are unable to do this on a consistent basis. |
| Long-Term Capital Gains Definition & Tax Brackets | Long-term capital gains are investments that are held for 12 months or longer and then sold. Long-term capital gains are common with long-term investors and are seen as a positive because these investments are in a lower tax bracket. |
| Margin Trading - Borrowing Money to Buy and Sell Short Stocks | Margin trading is the act of buying and selling short stocks using borrowed funds from a broker. This additional leverage can provide the active trader the opportunity to dramatically increase their earning potential. |
| Market Maker | A market maker is a dealer that buys and sells securities for their clients, firms, or their own individual accounts. Market makers primarily operate on the Nasdaq Stock Exchange and provide the structure and order for trading. |
| Market Strategies for Trading in a Volatile Market | Market strategies for trading in a volatile market. |
| Mutual Fund Expenses | There are five main components of mutual fund expenses: (1) management fees, (2) legal fees, (3) administrative costs, and (4) marketing fees. |
| Naked Short Selling - Prohibited Trading Activity | Naked short selling is an illegal trading activity that occurs when a stock is sold short on the market without ever borrowing any shares. In a normal trading transaction, the broker will provide the required shares in real-time or acquire them shortly thereafter to ensure there are shares on hand for the short position. |
| NASDAQ Composite | The Nasdaq composite, founded in 1971, is a broad based market capitalization weighted index tracking more than 3,000 stocks |
| Nifty 50 - Large Cap Stocks on the NYSE | The Nifty 50 was a list of stocks from the 60s and 70s which had high price earnings ratio. Many large institutions recommended these stocks to their clients as life long buy and holds. |
| October Effect - Bear Market Killer | The October effect is the belief that the stock market tends to decline into the month. This is a result of a number of crashes occurring in October such as, the Panic of 1907, 1929 Crash, 1987 Crash, and the 2008 credit crisis. |
| Online Stock Trading | Online stock trading is when an investor actively trades the markets over the Internet. |
| Online Trading Commissions | Online trading commissions are one of the most important factors a trader must consider when deciding where to conduct their trading activities. In recent years trading commissions have drastically been reduced as a result of the Internet and the number of brokers in the retail trading industry. |
| Opening Bell - Trading Strategies | Strategies for trading the opening bell. The opening bell is for seasoned traders due to the increased volatility. |
| Oversold Market Condition | An oversold condition can occur in two forms within the stock market: (1) value of the asset is well below the true market value and (2) in technical analysis a drop in the security has pushed an indicator to an extreme level. |
| Penny Stocks | Penny Stocks - if you must trade them, follow these simple rules. |
| Philadelphia Semiconductor Index (SOX) - Chip Industry | The Philadelphia Semiconductor Index (SOX) is one of the most heavily traded indices on the Philadelphia Stock Exchange. The SOX is a price weighted index of the 19 U.S. semiconductor companies. The SOX is comprised of 15 chip makers and 4 semiconductor equipment makers. |
| Pink Sheets OTC - History and Listing Requirements | Pink sheets are companies which trade over the counter. |
| Pre Market Trading Strategies & Chart Example | Pre-market trading is when stocks are traded before the regular session begins at 9:30 am Eastern. The pre-market session is from 8:00 am est - 9:30 am est. Prior to the advent of the Internet and Electronic Communications Network (ECNs), retail investors were unable to easily place pre-market orders. |
| Preferred Stock | Preferred stock refers to a class of shares which has a higher ranking than common stock. Preferred stock does not carry any voting rights as do the common shares, however, they command priority over the common stock in the event of bankrupcy or liquidation and as far as dividends are concerned |
| Price Target | A price target is the expected level at which to exit an open position. |
| Pullback - Stocks | A pullback in stocks is a drop in price after there is an impulsive move up. Traders use a pullback as an opportunity to initiate a new position. |
| Pump and Dump - Fradulent Trading Activity | Pump and dump is an old phrase used in the stock market to categorize illegal activities where a stock's price is inflated by a group of investors only to sell it for a quick profit. The price gains on a pump and dump are extreme and can range from 25% to 200%+. |
| Pyramiding - Leverage Trading Strategy | Pyramiding is an old trading strategy where a speculator adds to their position size by using margin from unrealized gains. This trading strategy is based solely on the power of using leverage and was made popular by one of the greatest traders of all-time, Jesse Livermore. |
| Real Estate Investment Trusts REITS | A Real Estate Investment Trust, or REIT, is an entity that invests money into many different types of real estate assets |
| Rogue Trader - Bad Boys of Trading | A rogue trader is the ultimate bad boy of trading. This trader has reached a point where they no longer care about protecting their client or the company for which they trade. The trader has fallen into a vicious cycle of reckless trading activity where proper risk assessment is no longer a concern. |
| Russell Midcap Index | The Russell Midcap Index is the benchmark for tracking midcap stocks in the U.S. Markets. The index is made up of of the smallest 800 companies listed on the Russell 1000 index and is weighted by the market capitalization of each stock. |
| S&P 500 | The S&P 500, or the Standard & Poors 500, is a market capitalization based US stock equity index made up of 500 of the largest and most widely held companies |
| Secondary Market | The secondary market is a forum where investors can buy or sell securities to/from other investors rather than directly from the issuer of the security |
| Sharpe Ratio | The Sharpe ratio provides insight into the risk/reward scenario of a security or a portfolio. It measures excess investment returns as a function of volatility. |
| Short Covering to Close a Position | Short covering is the act of buying back shares in order to close out a short position. Short covering is often a tough concept for novice traders to grasp, because it is the exact opposite of going long in the market. |
| Short Interest Formula & How to Interpret the Data | Short interest is the total number of shares short divided by the total number of shares in float. |
| Short Sale - How to Profit in a Bear Market | A short sale is when a trader borrows shares from their brokerage firm and sells them on the open market. The trader hopes that the security loses its value so they can make a profit when they buy the security back at the lower price. |
| Short Squeeze - Imbalance of Supply and Demand | A short squeeze is a direct result of the lack of supply and demand in a security. The resulting affect of the squeeze is a sharp rally in the price of the security. |
| Short-Term Capital Gains Definition & Tax Brackets | Short-term capital gains are investments that are held for less than 12 months and are sold. |
| Stock Market Bubbles & Why They Occur | Stock market bubbles occurs when securities run in a parabolic move up and then crashes lower in the same manner. |
| Stock Market Direction - Spot Important Trend Changing Indications | Learn how to spot a turn in the stock market direction through a few key indicators such as the A/D line, money supply, AAII sentiment, VIX, new highs new lows indicator, and more. |
| Stock Splits | A stock split, or stock divide, is a means for increasing the number of oustanding shares of a company. Based on the ratio, the share price will decline and the investor will receive proportionally more shares |
| Stock Tips | Avoid relying on stocks tips as it does not allow you to look at a stock through your own eyes. Also, there are many pumpers and dumpers out there on chat rooms. |
| Take Profits - one of the biggest misconceptions on Wall Street | One of the biggest reasons for so many losing traders on Wall Street is the fact they take profits too early. |
| Top Down Investing - Trading Methodology | Top down investing is the process of assessing first the broad market, than sectors, and lastly stocks within that sector. |
| Trading Range Definition & Trading Strategies | A trading range is when a security trades within a given high and low period for a given period of time. This back and forth price movement between extremes generates a trading range. |
| Trailing Stops | Trailing stops improve trade management discipline. Learn how to manage winning trades. |
| Unrealized Gains - Definition and Trading Example | Unrealized gains are the profits from trading activities which have not been closed out and cash received. These are also commonly referred to as paper profits. |
| Unrealized Losses - Definition and Trading Example | Unrealized losses are the losses from trading activities which have not been closed out and cash received. These are also commonly referred to as a paper loss. |
| Uptick | An uptick is a trade that occurs at a higher price than the previous transaction. |
| Wall of Worry | Climbing the wall of worry refers to the markets ability to rise in the face of negative news and economic conditions. |
| Wash Trading Definition | Wash Trading is the illegal practice of buying and selling a security in multiple brokers to create the appearance of increased volume and volatility in a stock. |
| Weak Longs - Learn How To Build Your Trading Confidence | A weak long is a trader who does not have the conviction to handle the risk associated with trading. This, in turn, causes unnecessary losses due to a lack of a risk appetite. |
| What is an Oil ETF? | An exchange traded fund (ETF) is an investment vehicle which selects a basket of stocks or mutual funds from which to invest. With the recent increase for the demand of oil there have been a number of retail investors looking to profit off the commodity. |
| What Is the Inflation Rate in Mexico | The inflation rate in Mexico has dropped drastically over the last 20 years from the double digit numbers from the 70's and 80's. Rising food costs due to the increase costs of oil, may push the Mexico inflation rate over 5%. |
| Who Started the NYSE | The New York Stock Exchange is the third largest stock index in the world behind the Bombay Stock Exchange and the Nasdaq. |
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