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This is because every stock has a bid price and an offer (or "ask") price. The bid is the price at which someone is willing to buy the stock. The offer is the price at which someone is willing to sell the stock. Memorize this phrase right now: “You sell to the bid, and you buy from the ask.”
A liquid stock is defined as a stock where you can buy or sell a lot of shares without moving the stock too much. Liquid stocks in the U.S. usually have a bid-ask spread of just a penny or two.
If you are going to trade before the market opens or in the after-hours market, always use a limit order.
Some smart people came up with the idea of the ETF ("exchange-traded fund"). An ETF trades just like a stock. You can buy or sell it all day long in your brokerage account. Each ETF represents a certain index. So the ETF for the S&P 500 trades under the ticker SPY. The ETF for the DJIA trades under the ticker DIA. And the ETF for the Nasdaq 100 trades under the ticker QQQ.
There's an easy way to own a piece of every Dividend Aristocrat: just buy some shares of NOBL. It is the ProShares S&P 500 Dividend Aristocrats ETF. It trades just like a stock, and you can purchase it using any brokerage account.
The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.
Until you become an advanced investor, don't ever buy a stock with a P/E of 10 or less.
Never buy a growth stock if the stock is trading below its 200-day moving average, or if the 50-day moving average is trading below the 200-day moving average.
Also, I like to look for growth stocks that have a market cap of $5 billion or less. It takes a lot less money to push a $5 billion stock higher than it does a $500 billion market cap stock.
I also like to look for growth stocks, where the float is less than 20% of the total number of shares outstanding. The “float” is simply the number of shares of a stock that are actually available for trading.
Here's a day trading strategy that works to capture moves like this: Find a stock that is gapping up on good news (like a better than expected earnings report). Wait 15 minutes after the market's open, and note the stock's price at that time. Put in a limit order to buy the stock at that price. If your order is not executed in the next 15 minutes, cancel your order and walk away. If your order is filled, hold on to the stock for the rest of the trading day, and then take profits a couple of minutes before the market closes that day. Exit the stock early if it trades below the lowest price of
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Don’t buy stocks that are hitting 52-week lows. Don’t trade penny stocks. Don’t short stocks. Don’t trade on margin. Don’t trade other people’s ideas.
