Investing in the Stock Market.

[spider_007]

that makes sence.

current status;
http://i19.photobucket.com/albums/b151/spider007/123-1.jpg

I'm thinking of selling the EXL and take the profits before i become a pig and get knocked out..... They are doing something wierd merger with another company that i totaly don't understand..... will see how the day goes. Eather way, not bad for 2 months.

I was partialy right on Sears. It didn't take off up as much, and as fast as i thought it would, but it's going up. Eather way, that's my long term investmen (along with ford)

Rogers just might bite me in the azz. will see.

 

[Reyaj]

So with shares that are "outstanding" means what? Shares owned by the chief officers? Just trying to understand what capitalization refers too.

Also I know the difference between preferred and common stock is that preferred shareholders get paid first.

Does this mean they get paid with dividends first... or when they sell the stock? And also how does one buy preferred stock as opposed to common?

Thanks!

 

[spider_007]

So with shares that are "outstanding" means what? Shares owned by the chief officers? Just trying to understand what capitalization refers too.

http://www.investopedia.com/articles/basics/03/030703.asp
http://www.investopedia.com/articles/basics/03/031703.asp

basicly all shares that other then what the company owns.

 

[Reyaj]

Thanks Im going to read these!

 

[Reyaj]

Does volume refer to how much stock is both bought and sold in one day, or just shares bought? I guess I am trying to figure out how to read this to figure.

Like if it says volume = 40,000 what exactly does that mean?

 

[spider_007]

number of shares traded.....there is usually a note somewhere near or on the chart showing if it's in millions or thausands.....

 

[Bible_Belt]

Every share traded is both bought and sold by somebody. A transaction requires both sides.

If the average daily volume is only 40,000 shares then you should probably stay away from the stock, or at least don't buy very many shares. That low of volume means wide spreads and a lack of liquidity.

 

[Celadus]

Volume is quoted with a few zeros taken off the end in a lot of cases. I think its 2 zeros generally. 40,000 could mean 4,000,000

 

[Bible_Belt]

You're right. It's probably x 1000, which would be four million on the day.

For a short term trade, a stock with volume of one million shares a day is very liquid. With less volume, it can be frustrating to get orders traded.

 

[Reyaj]

I guess thats not what Im clear on. First of all when I hear the term liquid that means what can be coverted to cash. It sounds like the volume just shows how active a stock is since its both a buy and sell transaction. I guess here is my basic question.

Lets say I buy 100 shares of a stock. That 100 then gets added to the stocks day volume right? Then lets say I sell those same 100 shares, then that also gets added to the volume, so we have Volume = 200, is that correct?

Who buys my shares back? The instiution that underwrites them? Like if I execute that transaction on Ameritrade or some other online broker....

I guess volume just shows how active a stock is right? Doesn't necesarily mean its good or bad because it could be just a lot of shares being sold back to the instituion which would make the stock go down?

Thanks for the help!

 

[Bible_Belt]

One trade for 100 shares increases the daily volume by 100. You are right about that. The same trade is a buy for one party and a sell for another.

You never really know exactly who is on the other end of a trade. Even with the increased transparency of nasdaq, when you send an order to a market maker, you don't know if that market maker is executing a customer order or trading for their own account.

Volume is the activity of a stock, and the more active it is, the more liquid it is as well.

it could be just a lot of shares being sold back to the instituion which would make the stock go down?

You don't know for certain that scenario would make the stock go down. An issuer buying back its own shares is usually a bullish event.

 

[spider_007]

and another note;

high volume, with no price movement, can be (sometimes) a sign of the top (or bottom, depending on how it's been trading for the past few weeks/months.)

 

[Reyaj]

Thanks BB! When you say trading for their own account would that mean for example that Ameritrade may buy the shares and hold them?

And yeah you were are right about the instituion buying back shares being bullish. Just so I have this clear does that mean the underwriting institution, for example Dean Witter, Goldman Sachs etc...

Also.... do you knwo anything about After Hours trading? How is it different from regular market hours trading? Can you just do limit orders I'd assume?

I just bought some stock based on Cramer's advice and executed it as market. So I'm guesing its giong to try and buy it when the market opens tommorow?

 

[Bible_Belt]

I don't think Ameritrade has their own trading division outside of order flow. The big companies like goldman sachs have a separate trading division, but still most of their trading is working customer orders. Traders can be wrong, but the order flow commission is guaranteed.

And yeah you were are right about the instituion buying back shares being bullish. Just so I have this clear does that mean the underwriting institution, for example Dean Witter, Goldman Sachs etc.

Usually it means the actual company itself, the issuer, is buying back its own shares. This reduces their debt to the public, and is a bullish sign. The brokers are confusing because they are also issuers themselves if the brokerage is a publicly traded company.


Also.... do you knwo anything about After Hours trading? How is it different from regular market hours trading? Can you just do limit orders I'd assume?

It's overly hyped. Traders live off of liquidity, and the liquidity starts to dry up as soon as the bell rings. On rare occasions when there is news or earnings, there is some liquidity, but price moves are erratic and fast. Some people can make money off it, but it's like trading an ipo on the first day - risky business. Also, many of the rules are different in pre and post market. If you route a trade through the exchange during the day and due to an obvious keyboard error get filled several points away from the market, the exchange will break the trade. With pre/post market trading, the trader is at the mercy of whatever ECN he sent the order through. Overall, traders get fewer protections when the market is closed.

I just bought some stock based on Cramer's advice and executed it as market. So I'm guesing its giong to try and buy it when the market opens tommorow?

Remember that you haven't bought anything yet, because your order has not been filled. Did he recommend the stock for the first time after the market closed? If so, then it should gap up tomorrow. The general rule is to fade the gap, not buy into it. Good luck on it either way. Sometimes they gap up, drop a little, and then keep going up all day. But watch your order if you can when it gets sent and see if you don't go in the red the first few minutes after the open.

 

[cordoncordon]

I've been a daytrader for years. Last year I made about $350 k profit doing this. This is how i make my living. Mainly by playing penny stocks, ie stocks under $1.

I have currently what I consider the play of the year about to hit-MLXO. They are about to buy a bio diesel plant in New York that will be making the trans fat replacement oil. As you know, New york, along with a number of companies like Mcdonalds, are banning tans fat by this summer. This company will have one of only two factories in the entire USA making this replacement oil. the profits are going to be HUGE for such a small company. The float is low, 47 million, and it only trades at .04. They are currently getting funding for this factory, and expect an announcement by next week. By early spring I expect this to be well north of 50 cents, which is a 12-15 bagger from its current levels.

Gonna be a nice ride .

 

[Reyaj]

Bible boy were you right! The stock actually ended up going down some. I guess I realized something really fundamental here.

The price that the stock closes at the day before isn't necessarily the same price that is going to open up with the next day correct? Is this due to "after hours" training? I basically bought the stock right away that morning for what it opened at and it was already higher than its close. It then went down and hasn't risen back up yet. I have a stop loss set in there for $13.00 but I may sell it and try something else.

You were also right about penny stock trading. The only thing I noticed is that the "bid" and the "ask" price vary greatly with these stocks. I guess its cause of the inefficiency of the market they are on? Why do the ask price and bid prices of stock differ anyway? Shouldn't they be the same?

Concordon's response is reminding me about the section in reminiccences of a stock operator regarding tips. I actually would take a chance on it except that with my last penny stock when it looked like it went up based on the "ask price" but the bid price was still stayed lower and I guess you sell it for "bid" and buy it for "ask"

Like BB said I just don't feel secure with the effiency of trading those stocks...

 

[Bible_Belt]

'when on the side of the majority, take time to pause and reflect'

The price that the stock closes at the day before isn't necessarily the same price that is going to open up with the next day correct? Is this due to "after hours" training?

In part, yes, especially on nasdaq stocks, but mostly it has to do with the orders that have accumulated overnight, just like yours. If more people want to buy, which is what will happen when Cramer recommends a stock, it will present a rare situation where market makers and specialists are forced to sell stock out of inventory. They don't want to lose money, so they set the price as high as possible and accumulate the 'buy at market on open' orders, fill all those guys at the opening print, and then let the stock drop.

"Fade the gap" means to do the opposite of the crowd. Find good news like a Cramer mention and sell short on the open. It sounds crazy, but selling is what the market makers are doing, because they have to. To make money, you have to think differently than most people. Since you know Cramer so well, I suggest that you select his recommendations that you think will have the most impact on his viewers...and then enter a 'market sell short at open' order. This takes balls, but so does trading. Hindsight is 20/20, but that would have been the perfect trade on the last one. You also have to use stops, as you are wisely doing now, but after you set your stop, selling short is not any more dangerous than going long.


You were also right about penny stock trading. The only thing I noticed is that the "bid" and the "ask" price vary greatly with these stocks. I guess its cause of the inefficiency of the market they are on? Why do the ask price and bid prices of stock differ anyway? Shouldn't they be the same?...I guess you sell it for "bid" and buy it for "ask"

Yes, wide spreads are bad for traders and make for an illiquid market. But there always has to be some spread, because it is the difference between what the highest bidder will pay and the lowest seller will take. If they agreed on a price, then they would get traded, and two new highest/lowest would take their place, creating a new spread.

 

[Page]

I'm thinking of getting started in the stock market, and I need some advice.

Lately, I've been trying to learn everything that I can about charting, any good book recommendations? I'm somewhat comfortable reading a candlestick chart at this point and I know the basics, but I would like to learn more about it before I start using real money. (from my limited understanding on the matter, unless you know how to read and predict patterns, you are basically gambling)

Who are the best brokers to use?

Anything else I should know?

 

[Create Reality]

Lots of solid advice in this thread. I plan on tackling the forex thread one day too, with a large pot of coffee.

I wanted to ask you guys, what guarantees you buy or sell your stock at the price shown when you click the button?

 

[Bible_Belt]

There's no guaranteed fill. It's easiest to get an order filled when you are trading against the crowd. It's easy to sell on the way up and buy on the way down, because everyone else is trying to do the opposite. The hardest orders to get filled is when it hits your stop loss point, and you are trying to close a losing position that is going against you. Then it can seem like a conspiracy against you, but it's just that you are on the wrong side of the crowd. For nasdaq, if you are using an ECN and hitting the bid or taking the offer, you will almost always get an instant fill, your software confirms the trade and shows the new position immediately. Sometimes, the other guy will cancel his buy or sell order before your order gets there to be matched with it, or other times in a fast-moving market someone else could beat you to the shares by getting their order there first. For NYSE, the system is much slower. You are at the mercy of the specialist and the superdot computer system. I had better luck with market orders on nyse. Sometimes a fill would take 2-4 minutes. That seems like a lifetime when you are used to instant nasdaq fills.

For brokers, mbtrading is popular for new traders due to the good customer support they give, and interactivebrokers is popular for their low commissions, although their customer service is claimed to be lacking at times. Whatever you do, get a "direct access" broker, not a basic on-line broker like etrade or ameritrade.