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Legendary hockey player Wayne Gretzky is famous for saying: I skate to where the puck is going to be, not to where it has been.
Some people like to buy stocks and hold them for many years. We call them "investors."
Other people like to buy and sell stocks more quickly, maybe holding them for only an hour, a day, a week, or a month. We call these people "traders."
broker is simply a middleman who gives people access to a stock exchange.
Not any more they aren't. 💩💩💩
The first is called a "market order." This order tells the broker to get you into the stock as quickly as possible, regardless of price.
“You sell to the bid, and you buy from the ask.”
liquid stock is defined as a stock where you can buy or sell a lot of shares without moving the stock too much.
it is usually best to stay away from illiquid stocks.
limit order is the second type of order, after a market order. Whereas a market order tells your broker to just get you into or out of the stock as fast as possible, a limit order specifies a price.
Day order will only be executed during regular market hours today. If the order has not been filled by the time the stock market closes for the day, it will be automatically cancelled by the broker.
If you are going to trade before the market opens or in the after-hours market, always use a limit order.
"Volatile" means that the stock wiggles around or jumps around a lot.
Until you become an advanced trader, it is probably best to stick to normal market hours.
don’t ever trade an IPO using market orders.
Technical note: indices like the S&P 500 are market-cap weighted, which means that the companies in them that have larger market caps are given higher weightings and thus have a greater influence on the index. If Apple has a bad day, the S&P 500 will go down more than if the Campbell Soup Company has a bad day.
Indexing is a form of "passive investing." Passive investing refers to any strategy that does not involve a lot of thinking ("which stocks should I buy today?”) or a lot of buying or selling.
Today indexing is widely considered the safest and best way for most people to invest in the stock market.
That being said, most people lose money when they try to trade or invest on their own, so they will still be better off pursuing an indexing strategy. That's because active investing strategies (as opposed to passive investing strategies like indexing) are difficult.
By buying a stock or index/ETF at different times, you are allowing the wiggles of the stock to smooth themselves out, since you are always buying at a different price.
When you are indexing, it doesn't make any sense to check daily stock or index prices.
a great time to invest in an index like the S&P 500 is during a bear market. If stock prices have been falling for 6 months or more, and there is a lot of pessimism in the air, it might be a good time to invest some extra money into index funds.
In order to pay a dividend, a company needs to be making money itself. Occasionally a company will borrow money to pay its dividend, but that can never last for very long.
Dividends are usually paid out of a company's free cash flow.
One of the great things about investing in dividend stocks is that you know that the company is making money. Otherwise it wouldn't b...
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Owning a basket of dividend stocks over a long period of time is one of the be...
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paid for each stock. Just take the "cost" for each stock and divide it by the "number of shares."
You want to own businesses that have good pricing power. This means that they can raise prices without losing customers.
As Buffett says: 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.
At its most basic level, value investing is about buying something for less than it is worth. It is a very appealing strategy, since who doesn't like to get a great deal?
Companies that are growing their revenues or earnings quickly ("growth stocks") tend to have P/E's above 25.
Companies that are in trouble often have P/E's below 10.
Until you become an advanced investor, don't ever buy a stock with a P/E of 10 or less.
Another mistake that new investors make is buying "bargain stocks."
Low P/E stocks are almost always pricing in future bad news.
As we mentioned before, if you are going to be a good investor, you need to learn how to think like Wayne Gretzky: you must “skate” to where earnings are going to be, not to where they have been.
Paying a cheap price for a stock that is going to zero is never a good deal. We call these situations "value traps."
A low or falling stock price will make it difficult for the company to attract top talent. In this way, stocks don't just reflect a company's current prospects, but also play a role in determining a company's future prospects.
A company with a high or rising stock price can use that stock to buy out competitors and pay for top talent. That's what Facebook did with WhatsApp and Instagram.
When you are just getting started, it is probably easier to trade growth stoc...
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A growth stock is simply the stock of any company that is expected to rapidly grow its revenues or earnings.
There is, in fact, something wonderful and magical about a stock at an all-time high: Every single holder of the stock has a profit.
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.
In a strong market, you can also buy every pullback to the 50-day moving average. This kind of trade has a great risk/reward ratio, since you can stop yourself out if the stock actually closes below the 50-day moving average.
Growth stocks perform much better when the entire stock market is also in an uptrend.
The “float” is simply the number of shares of a stock that are actually available for trading.
“Short interest” is the quantity of shares that have been sold short by those who believe that the stock will go down.
High short interest is simply more fuel for a rocket stock’s ascent.
Exit (with a profit or loss) when the stock closes below its 50-day moving average. Use this method to capture shorter moves.
Exit (with a profit or loss) when the stock closes below its 200-day moving average. Use this method to capture longer moves.
