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Man on the shoulders of giantsIsaac Newton, who turned people's view of the world upside down, once said: "If I have seen further than others, it is by standing on the shoulders of giants". And indeed, each of us has a chance to discover something new for ourselves and others by drawing on the wisdom of our predecessors. I want to say a big thank you to Benjamin Graham, David Dodd, Warren Buffett and Peter Lynch, who openly shared their ideas with the world and inspired more than one private investor in their first investments. I'm sure Mohnish Pabrai will join me in saying the same. Born in Mumbai, an engineer by training, he had no interest in the subject of stock investing until he was 30 years old. But by chance, after reading a book by Peter Lynch, he began to study the subject more deeply. Inch by inch he climbed the shoulders of the giants of value investing to see hitherto unknown horizons. He is now known as a successful investor, author of books on investing, and creator of incredibly kind philanthropic initiatives. Listening to Mohnish Pabrai's lectures, I noted his ideas, which in many ways coincide with my own. I am happy to share them with you: 1. The market is always concerned about what will happen to the company in the future, so it cannot be 100% efficient (*). (*) Let me remind you that according to "efficient market" theory, a company's current price reflects its "fair value" because any publicly known information instantly affects the price. Thus, an investor is unlikely to make a profit on any information, such as a company's strong financial statements, because the market has already reflected the event. However, this theory does not take into account the future, which we all think about every day and act in the present, including the market, based on those thoughts. For example, someone may think that a company's future is murky because of the news that has come out. This concern will be picked up by the crowd, and the stock will go down. Or on the contrary, the success of the company may be perceived as over-optimistic, and a real stir will start around the stock. No one knows the future, but thinking about it affects the present. For this reason, the current price of the company may not reflect its fair value, contrary to the "efficient market" theory. 2. Continuing with the first thought, the waves of pessimism and optimism will always be present in the market. They distort a company's value so much that they give us private investors a chance to buy and sell a company's stock profitably. 3. The more time you spend analyzing a company, the more you "fall in love" with it. Try to grasp this idea. After all, by spending a lot of time studying something, such as a company's excellent financial statements, we set ourselves up for what it must pay off as a profitable investment. Remember: the market doesn't owe you anything. 4. Often the decision to invest in a company can be made based on just a few surprising figures. For example, if the value of a company is equal to 50% of the amount of cash in its checking account. Mohnish Pabrai said that Warren Buffett used a reference book with the statements of thousands of companies, not to spend months studying each of them, but to find something that would really surprise him. 5. Mohnish Pabrai admitted that he has never once played the short and has no intention of doing so for the rest of his life. His math is really simple. If you play the short by selling a stock at $100, your maximum earnings are capped at $100 (which will happen when the stock drops to zero). Whereas a buyer of a $100 stock has a chance to sell it at both $1,000 and $2,000. There is no upside restriction by its very nature. 6. And the thought I want to conclude this post with is don't look for people to hand you a treasure on a platter. Looking for treasure is much more interesting! It's about not trying to replicate someone else's trades or portfolio positions. Try to make your own decisions. Try to see your horizon. The unwavering shoulders of giants will help you in all of this.
SP:SPXEducation
by Be_Capy
A pill for missed opportunitiesPrevious parts of the post: Part 1: My Three Comrades: the Chart, the Screener, and the Watchlist Part 2: Two captains of the same ship The market is an element we take for granted. It can't stop when we're busy doing other things, and it can't work if the stock market is off and you personally have work days. The small investor's impact on the market is close to zero. Some may not like it, but I see it as a big plus. I'm not the only one. Even Peter Lynch wrote about this . It is because of our size that we small investors have the ability to get the best buy and sell prices on stocks. Just imagine an elephant and a mouse trying to drink water from a coffee mug. Who has a better chance? Like the best sales, attractive stock prices don't last long. This also applies to the period of increased stock prices that are interesting to sell. To make sure you don't miss this time, TradingView has an alert service. Why do we need an alert system? For our convenience. Once we have selected fundamentally strong companies, our next step is to keep an eye on their stock price so we can buy them at a price we can benefit from. You remember our strategy, right? Buy rooms in a great hotel, and even during a sale period. How do you monitor these "sales"? You have two options: to monitor the price chart yourself during the trading period, or set up alerts so that if the stock price reaches a certain level, you will receive an SMS message to your phone or email, or a push-notification in the TradingView app (depending on your settings). Agree, this is very convenient. So how do you set up the alerts? 1. First of all, you must open the chart of the stock you are going to configure the alerts for. 2. Then click on the "Alert" button at the top toolbar of the chart. 3. Set the alert parameters in the settings menu. How do I read the settings in this picture? If the Apple stock price is less than $130 per share, I will receive an alert every minute, all the time the stock is trading below $130. The alert I will receive will contain the following message: AAPL Less Than 130.00 If you don't want to get an alert every minute, set the trigger to "Only Once". 4. In the "Notifications" tab, you can configure where the alerts and the sound will go. The system of customized alerts will allow you to use your time effectively. You will not be chained to the monitor and you can calmly wait for the cherished message. In the picture you can see that alerts can come as: - push notification to your phone (if you have the TradingView app installed); - a pop-up window on your monitor; - a letter to your email address; - a message to a web address (advanced feature for developers); - SMS to your phone, but via email (i.e. your email service must have the ability to send copies of emails via SMS). As for my investment strategy, it's quiet enough to work on it even without alerts. Mr. Market doesn't often come with insanely interesting prices , so it takes time to get to the target values. It's like waiting for an astronaut from the Moon: he can't return to Earth in a day, you have to wait patiently, with the occasional peek at the situation. So, I'm concluding my series of posts dedicated to the basic functions of TradingView. I advise you to "play" with the platform for a while to get used to it as quickly as possible. In fact, it has a lot of features that you will discover over time. For now, that's it. In the following posts, we will begin to examine perhaps the most important aspect of an investment strategy, which is fundamental analysis. Get ready, here comes the part that will require the most concentration. But then you will be able to navigate this topic with ease. See you next time!
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NASDAQ:AAPLEducation
by Be_Capy
20
Two captains of the same shipPrevious part of the post: My Three Comrades: the Chart, the Screener, and the Watchlist Now let's move on to the fundamental analysis. Remember in this post I gave the example that a joint stock company can be thought of as a hotel, and owning shares can be thought of as owning one or more rooms in that hotel. So, imagine now that our hotel has a terrible foundation with lots of holes in it. What would happen to such a hotel? Of course, it could collapse, dragging everything down with it. It would also affect the value of the stock, and in our case, the value of the rooms. Because no one will want to buy rooms in such a hotel, on the contrary, they will try to sell them at any price, and then the value of rooms (stocks) will go down. The purpose of fundamental analysis is to understand how financially stable and profitable the chosen company is. Sometimes they say that a company has a strong or weak foundation - a generalized conclusion based on analysis of its financial statements. So, our task will be to find stocks of companies with strong foundations. Let's go to "Chart+" and select "Indicators" in the upper toolbar. A menu will open for you, where on the left we will select "Financials". Here we can select data from company reports: Balance Sheet, Income Statement and Cash Flow. They are issued quarterly and annually. Accordingly, you can select any indicator from the statements, such as revenue, select the period - quarter or year, and add it to the chart. In this way, you can study the dynamics of this indicator over time. In addition to the reporting data, you can add so-called multipliers to the chart. They are placed in the same menu after the "Cash Flow" > subsection called "Statistics". What is a multiplier and how to analyze the statements, we will discuss in our separate posts on the fundamental analysis, and now let's move on to the technical analysis. Technical analysis is a search for recurring patterns on a price chart in order to predict its future behavior. Let's go back to the time when candlesticks were invented. These charts appealed to traders so much that they began to look for repeating combinations of candlesticks, which served as signals of future price movement. For example, there is a combination called "bearish engulfing" . When the market has a clear upward trend, and in one day, a massive bearish candle appears, the body of which closes the body and shadows of the previous candle - it can herald the reversal of the uptrend. Or, if the market for three days in a row is drawn three black candles with massive bodies - they are called "three crows" . Traders interpret this as a sign that the downtrend is continuing. Doesn't that sound like an omen to you? In fact, people have made up dozens of similar patterns and many more that, like weather forecasts, don't always come true. You must have sensed that I cover this topic rather cursorily? This is due to the fact that I do not use technical analysis at all. That is, I do not make predictions based on recurring situations from the past. I do, however, use one of the tools of technical analysis, which is the average value of the stock price over the year. Not to make predictions, but to have a guideline: when to buy and when to sell stocks of companies with strong fundamentals. I will surely elaborate on this in my next posts, but for now, wrapping up the topic of technical analysis, I want to give one analogy. Stock price movements can be compared to the sea: sometimes it is calm and sometimes it is subject to strong waves. An investor can be compared to the captain of a ship who has to decide whether to put to sea now or not (i.e. whether to buy stocks or not). A captain who looks at the official weather reports and gauges is like an investor who uses fundamental analysis. And a captain who is only guided by omens and his gut is like an investor making a decision based on technical analysis. You can be captain number two without me, but how to become captain number one is the subject of my blog.
NASDAQ:AMZNEducation
by Be_Capy
2
My Three Comrades: the Chart, the Screener, and the WatchlistToday we will continue to explore the fascinating world of stock investing. And TradingView will help us with that. I sincerely recommend making friends with this platform, as I haven't found anything more convenient to implement my strategy yet. After you have registered on the site, move to the main menu "Products" > "Chart+" . This is where you'll spend most of your time with the platform. What opportunities are in front of you: - Find companies to invest in; - Make a fundamental analysis of the companies; - Make a technical analysis of stock charts; - Receive alerts on the buy or sell price of a stock that is right for you. So, let's break down each item. How to search for stocks on TradingView? Hopefully, you've already entered the "Chart+" section. In the upper left corner is a line to enter the ticker of the stock. If you don't know the ticker, just enter the first letters of the company name: the system will find the ticker that corresponds to that company on its own. However, keep in mind that stocks of the same company may be traded on different exchanges from different countries, so sometimes one company may have several tickers. As an example, let's enter the name "Tesla" in the search bar to open a chart of their stock. As we can see, the system tells us that Tesla is traded on NASDAQ and some exchanges in other countries. To the right of the search bar is a button with a choice of time frame. You can try different time frames, but for me the most important is the time frame of 1 day (i.e. one candle shows the price change for 1 day). So, the way of selecting a company via the search bar is convenient when you know at least its name. But there are thousands of companies listed on the stock exchange, and it is impossible to know the name of every company. In this case, the "Stock Screener" will help us. It is located in the lower left corner. Clicking on the Screener will open a list of stocks, filtered according to the parameters you set (you can customize the parameters by clicking on the bright blue button "Filters" on the right). Let's go to filters and configure the parameters we need. First of all, let's select the country - the USA . In the second turn, on the tab with general parameters, let's choose the instrument type - common stocks , and let's choose the exchanges - NYSE , NASDAQ , and one more - NYSE ARCA . Now we have a list of all stocks, which are traded on the exchanges that we have chosen. What we are interested in, we can add to the "Watchlist" . This is the first (top) button in the menu on the right. Just right-click on the ticker from the screener and select "Add to Watchlist". The same can be done by right-clicking on a chart. Switching between the tickers in the Watchlist you will consequently switch between the charts. So, we have figured out how to find the shares of a company. In the next post, let's see what we have in terms of fundamental analysis of companies.
NASDAQ:TSLAEducation
by Be_Capy
2
A little bit about volumes and the master of all averagesSo, let's refresh our knowledge from the previous posts (read part 1 and part 2 at the links): - The chart is based on the data from the tape; - The X-axis is the time scale, and the Y-axis is the price scale; - To avoid having to analyze a huge number of trades, interval charts were invented for convenience; - The most popular chart type is the Candlestick chart; - The candlestick consists of a body and shadows (upper and lower). The body is drawn at the open and close prices of the interval. The shadows are built by the maximum price (high), and the minimum price (low); - The time interval for one candle is called a time frame. The smaller the time frame, the more detailed information we get about the price changes. In addition to information about the price dynamics, from the stock chart, we can get information about the dynamics of trading volume. These are bars that we see below the candlesticks. They are also drawn on the basis of information from the tape. Let's return to our example: FB $110 20 lots 12/03/21 12-34-59 FB $115 25 lots 12/03/21 12-56-01 FB $100 10 lots 12/03/21 12-59-12 FB $105 30 lots 12/03/21 12-59-48 If you add up all the lots of trades in the interval from 12-00-00 to 12-59-59, we get 85 lots. Then the lots need to be multiplied by the number of stocks in one lot, for example, 100. It turns out that 8500 shares changed their owners in 1 hour. This information is displayed as a bar below each candlestick. My strategy does not use a trading volume analysis, but it is important to understand that increasing trading volumes are a sign of increasing attention to the stock. However, this attention does not always translate into higher prices. If there is negative news about a company, we will see both a drop in the stock price and an increase in volume. What is constantly used in my investment strategy is the moving average . What is it? This is the average of the close prices of a selected number of candles, starting with the last one. I use the average of the close values of the last 252 candlesticks. Why this number? The number 252 corresponds to the average number of trading days per year on the NYSE and the NASDAQ. That is, in fact, the average annual moving price . Why is it moving? Because every day there is a new candlestick with a new close value, and it begins a new calculation of the average value of the last 252 daily candlesticks. You can plot the moving average chart on a candlestick chart and see how far the current price has "run away" from the annual average price. I will tell you exactly how to apply this in investing in the next posts, and that's all for today. Finally, I will ask you to reflect on one thought: One who is true to the golden mean will always find something that someone else missed and give it to someone who is afraid to miss it. See you in future posts.
NASDAQ:TSLAEducation
by Be_Capy
5
Japanese Candlesticks: Game of Body and ShadowsSo, in the last post we learned how to build a simple line chart based on the tape. Each point on the chart is defined by coordinates from the time (X scale) and price (Y scale) of a trade. But some stocks are traded at a frequency of hundreds of trades per second, at different prices. The question arises: which trade price to choose from this set? Interval charts were invented to solve this question. The most popular is the Candlestick Chart. They appeared in Japan three hundred years ago, when the Japanese exchanges were trading rice. They were invented by a trader named Homma. Apparently, being tired of drawing a lot of points on charts, he decided that it would be more convenient to show the price change over the time interval. So, what he came up with. Let's take a time frame equal to one hour and plot a 1-hour candle on the basis of the following tape: FB $110 20 lots 12/12/22 12-34-59 FB $115 25 lots 12/12/22 12-56-01 FB $100 10 lots 12/12/22 12-59-12 FB $105 30 lots 12/12/22 12-59-48 A candle consists of a body and upper and lower shadows. Like a float. The body is formed from the open and close prices of a certain time frame. In our case the hour interval is from 12-00-00 till 12-59-59. Only 4 deals were concluded in this time interval. The price of the first deal is $110, which is the opening price of the period or the so-called " open ". The price of the last deal was $105, which is the period closing price or " close ". These two prices are enough to form the body of the candle. Now let us move on to the shadows. The upper shadow is drawn at the maximum price of the interval (115$) and is called " high ". The lower shadow is drawn at the minimum price of the interval ($100) and is called " low ". The shape of our candle is ready. However, it should also have a content, namely the color. What is it for? Let's take a look at another candle. Here we can see where is the high and where is the low. But how do we know which is the open or the close? After all, the open is not always at the bottom of the candlestick body, as in the previous example, it can be at the top. To understand where is the open and where is the close, Homma has invented to paint the body of a candlestick in black, if close is lower than the open, i.e. if the price in the interval is falling (falling candle or bearish candle ). But if close is higher than open, the body of the candle remains white, it will indicate the growth of price during the interval (rising candle or bullish candle ). Sometimes a candlestick has shadows, and the close price is equal to the open price. Then it will look like a cross. This candlestick is called a doji . White and black are the classic colors for the bodies of Japanese candles. However, you can come up with your own colors. If you want the rising candles, for example, to be blue, and the falling orange - you're welcome. The main thing is to make it convenient and understandable for you. So, one candlestick allows us to understand where we had the first trade, the last trade, the price maximum and minimum in a given time frame. But it does not allow us to understand how the price changed within the interval: when the maximum or minimum was reached and what was happening within this price range. But the problem can be easily solved if we switch to a smaller time frame. If we look at the daily candlesticks (this is when the time frame of one candle is equal to one day), and we want to see what was during the day - we switch to the hourly time frame. If we want to see even more details - we switch to 15-minute candles and so on down to the seconds. But you and I will most often use daily timeframes, so as not to be distracted by the fluctuations that occur during the day. To be continued :)
SP:SPXEducation
by Be_Capy
4
The birth of the chart. The evolution of the tapeLast time we studied how the exchange price is formed, and we found out that it is important to learn how to read charts correctly in order to analyze price changes correctly. Let's see how a chart is made and what it can tell us. Everyone who went to school probably remembers: to draw a function, we need the X and Y axes. In stock charts, the X-axis is responsible for the time scale, and the Y-axis is responsible for the price scale. As we already know, a chart is built on the basis of data from a tape. At the previous post , we have produced the following tape: FB $110 20 lots FB $115 5 lots FB $100 10 lots Actually, in addition to ticker, price and volume the tape also fixes time of trade. Let's add this parameter to our tape: FB $110 20 lots 12/08/22 12-34-59 FB $115 5 lots 12/08/22 12-56-01 FB $100 10 lots 12/08/22 12-59-02 That's it. Now this data is enough to put points on the chart. We draw three points, connect them with straight lines and get a chart. At one time, this was enough, because trades on the exchange were not frequent. But now some popular stocks, such as Apple or Google, have hundreds of trades per second with different prices. If the minimum division on the X scale is one second, what price point should we put if there were many trades at different prices in one second? Or let's place all the points at once? We will discuss that in the next post. And now, as a postscript, I want to show you some pictures describing how the tape was born and evolved. Here is a picture of a stock player, looking through a tape with quotations, which is given by a special telegraph machine. Each telegraph machine is connected by wires which, like a spider's web, entangle New York City. 1930's broker's office with several telegraph machines and a quotation board. An employee of the exchange looking through a tape of quotes. It won't be long before all this is replaced by the first computers. We'll continue today's theme soon.
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AMEX:SPYEducation
by Be_Capy
10
Market order or the hunger games of stock tradingThe previous parts of the post can be found at the links: Part 1 - How is the share price formed on the stock exchange? We do it Part 2 - Bid/Offer: The Yin and Yang of Stock Prices So, let's continue. So why don't we ever see some orders in the order book? Because such orders don't have a price, which means they can't be arranged in a book where all orders are sorted by price. This type of order is used by buyers or sellers who don't want to wait for a counter offer with a suitable price. "But how can you buy or sell something without specifying a price?" - you ask. It turns out it's possible. When you put out an order without specifying a price, the order simply "eats up" the number of lots you need at the prices currently on the books. Such an order is called a " market order ". We can say that the most "hungry" investors who want to satisfy their "hunger" right now use the market order. Remember yourself: when you really want, for example, a cake, you won't stand at the counter and wait for the seller to set the price you want, you'll just buy the cake at the price that's valid at the moment. So, let's imagine that someone sent the following order to the exchange: " to sell FB stocks in the volume of 20 lots". Such an order will not appear in the book, but it will "eat" all bids within 20 lots, starting with the most expensive ones. In our example, there were a total of 15 lots left in the book, so the following concluded trades will be printed in the tape: FB $115 5 lots FB $100 10 lots What will happen to the remaining market order of 5 lots (20-15) that couldn't be filled? The exchange will cancel the order for this remainder, as there are no counter offers in the book. So, let's review what we learned in the current series of posts: - For each company, the exchange maintains its own order book for buying and selling stocks; - A buy order is called a "bid"; - A sell order is called an "offer"; - The order must contain the ticker (abbreviated name of the stock), the direction of the transaction (buy or sell), the price per share and the volume in lots; - The lot size is set by the exchange. It may be equal to 1 share, 100 shares or some other quantity; - All orders in the book are called "limit orders"; - There is a special type of orders, which are called "market orders". They have the following parameters: ticker, trade direction, volume in lots, and have no "price" parameter. - The intersection of buy and sell orders by price creates a trade; - The volume and price of a trade depends on how much volume was "eaten" in the counter offer and at what price; - The trade is recorded in the tape. Each company has its own tape. By the way, our book became empty because all limit orders were filled and no new ones came in. As a result, we have a tape of three trades. The trades are recorded in the tape according to when they were made: FB $110 20 lots FB $115 5 lots FB $100 10 lots So, when you see a flashing stock price somewhere, like in the broker's app, know that it's the last trade in the tape as of the current second. Or if you hear that Tesla stock has reached $2,000 a share, that means that there's a $2,000-a-share deal imprinted in the Tesla tape. To show how the stock price has changed over time, a chart is made based on the prices of the trades and when they were made. At its core, a chart is a demonstration of how the stock tape has changed over time. Knowing how to read a price chart is a basic skill that you will use as you invest. I will tell you how to read charts at our next meeting.
NASDAQ:AAPLEducation
by Be_Capy
Bid/Offer: The Yin and Yang of Stock PricesRead the first part of this post at the link: How is the share price formed on the stock exchange? We do it So at what price and what volume will the deal eventually be made? To understand this, let's go back to the "price" parameter of the order. When a buyer placed an order "to buy 25 lots at $115 a share", the exchange takes it as "to buy 25 lots at a price not more than $115 a share". That is the purchase price can be less than the price stated in the order, but not more. And when the seller earlier submitted an order "to sell 20 lots at $110 a share", the exchange takes it as "to sell 20 lots at a price not less than $110 a share". That is, it is possible to sell at a price higher than that specified in the order, but not less. Once again: buyers always put orders "buy at no more than such-and-such a price", and sellers always put orders "sell at no less than such-and-such a price". So, we return to the situation with the crossing of prices. When the exchange detects a crossover, it begins to execute the order that has caused this crossover. In our case, it is an order for 25 lots at $115 per share. This order kind of "eats up" all sell orders that are on the way to the price of $115 (that is, everything cheaper than $115), until it reaches 25 lots. Which orders were "eaten up" in our case? One single order to sell is 20 lots at $110 per share. What was "eaten" is recorded as a buy and sell trade in what's called a tape. It's similar to the way a cash register punches a check with a price. The record looks like this: FB $110 20 lots However, we have a remainder after the trade is 5 lots, the remainder of those 25 at a price of $115. Since at this price (or lower) nothing can be "eaten", the order remains in the left page of the book until a suitable offer. Let's see how the FB order book looks now, after the deal is done: Let me note again that all orders in the book are sorted in descending order from top to bottom. The concept of "book" is very useful for understanding how the exchange price is formed. In the past, when there were no electronic trading systems, there were so-called floor brokers, who used to collect and record prices and volumes of orders in a real book. Nowadays you may encounter alternative terms like Depth of Market (DOM), Level II, but they are all identical to the notion of an " order book ". The orders to buy that we see in the order book are called " bids ", and the orders to sell are called " offers ". So, in our order book there are two bids and no offers. All bids and offers are called " limit orders " because they have a price limit. But there's also a type of order that we will never see in the book. Why? I'll tell you in the next post.
NASDAQ:AMZNEducation
by Be_Capy
How is the share price formed on the stock exchange? We do itYou already know that the stock exchange is a one-stop place to buy or sell stocks, whether you are a novice investor or a seasoned professional. But even if you don't trade stocks, you will still "come" to the stock exchange to find out stock prices. Let's find out how the exchange price of a stock is formed. Regardless of what country the stock exchange is in, the rules for determining the price are similar for everyone. Let us understand how it works, as always, with the help of our imagination. Imagine a large rack of books. Each book has a name on the cover: Apple, Facebook, Amazon, etc. Let's take one of the books, let's say Facebook, and open it. We will see only two pages, and they are both blank. On the left page we will record buyers' orders to buy shares, and on the right page we will record sellers' orders, respectively, to sell shares. So, every day the exchange, when it opens trading, essentially opens such a "book" and records every bid it receives. What should be written in the order? First of all, there must be an abbreviated name of the stock, or, in professional slang, the "ticker," to understand which book to get off the shelf. For example, Facebook shares have a ticker consisting of two letters FB, while Apple shares have four letters - AAPL. Second, the order must indicate the direction of the transaction, i.e. "buy" or "sell". This is how the exchange understands whether to record the incoming information on the left or on the right page of the book. Third, the order must indicate the price per share, so that the exchange can sort the orders in descending order of price from top to bottom. Fourth, the order must specify the volume in lots, that is, how many lots of shares we want to buy or sell. To clarify: Shares on the exchange are not traded by the piece, but by the lot. The lot size is set by the exchange. One lot may be equal to one share, or a hundred, a thousand, or even ten thousand shares (depending on the specific share). This is really handy because the price of one share can be equal to, for example, the price of your computer (then 1 lot may be equal to 1 share), and sometimes 1 share may be worth as much as a box of matches (then 1 lot may be equal to a thousand shares). Why "may be"? The specific rules for determining the lot size depend on the laws of the country and the exchange itself. For example, on the New York Stock Exchange (NYSE), the usual size of 1 lot is equal to 100 shares. So, let's return to our example. Suppose we want to buy shares of FB at a price of $100 per share in the amount of 10 lots. Then the exchange will record the following on the left side of the FB book: 100$ 10 Then there is a seller who wants to sell FB stock at $110 per share in an amount of 20 lots. Then this is what the exchange will record in the right side of the book: 110$ 20 Then there is a buyer who wants to buy FB stocks at $115 per share in an amount of 25 lots. The entry on the left side of the FB book will look like this: 115$ 25 And now comes the interesting part. Did you notice that the $115 price in the last buy order is higher than the single sell order of $110? That means the buyer is willing to make a deal at a price even higher than what the seller is offering. So at what price and what volume will the deal end up being made? Please wait for the next post.
NASDAQ:TSLAEducation
by Be_Capy
Picking rules - the Lynch methodBack in 1977, the still famous investment company Fidelity Investments entrusted the management of a small fund of $18 million to this very man. The next 13 years were impressive for the Magellan fund and its manager - the famous Peter Lynch. The fund's assets grew to $14 billion, more than doubling the average annual growth of the S&P500 stock index. When he stopped actively managing assets, Peter shared his approach with the rest of us. Some of his thoughts inspired me to create my approach and may be useful to you as well. 1. The private investor has an objective advantage over institutional investors (e.g., funds) because he is more agile. He is not burdened by the need to coordinate his actions with the management of the company, and his purchase requests are easily satisfied by the market. Agreed, it's easier to buy for $1,000 than it is to buy for $1 billion. Thus, the private investor can catch prices that the big "players" will have a hard time getting. 2. Don't spend everything you have under your belt on stock investments. The trades will not be able to close "in the plus" just by your own volition. So first provide yourself with a financial safety cushion, a stable job and a place to live, and then start investing. 3. Admit to yourself: are you a patient person who is capable of making independent decisions, diving deep into analysis and soberly reacting to plus and minus changes? If not, practice, but on small volumes. 4. Never buy a company's stock if you can't explain what it does and can't talk about its financial performance. The stock market is no place for gambling. There are slot machines, etc., for that. 5. The company works for profit and grows because of it. So keep an eye on everything that affects profits. Evaluate the company not in monetary units, but in the number of profits. 6. Watch where the company invests its profits. If it's mostly capital investments that will probably make a profit someday, in the distant future - think about it. After all, the beautiful future as conceived may not come. If, on the other hand, the company is allocating its profits to buying its own stock, it means that management thinks the current stock price is attractive enough. 7. The success of the stock may be unrelated to the company's financial success. Beware of such investments. 8. A company's financial success may not be reflected in its stock price for a long time. However, the longer the period in question, the more direct the relationship. So if you select companies based on an analysis of financial performance, be prepared to make a long-term investment. To this day, these thoughts help me look at assets consciously and not give in to spontaneous decisions. What do you think of this approach?
SP:SPXEducation
by Be_Capy
2
I dream of entering the stock market. The question is: What for?Read the previous part of the post here . Having received only denials, the owner of the workshop decides the following: it would be great if shares were sold and bought not in the offices of banks, but in one single place - the stock exchange. Then those who want to vote would be able to buy as many shares as they need votes. Those who want a discount will wait until the price on the stock exchange falls to an acceptable level for them. And those who bought one share would be able to sell it at any time at the exchange price. The owner likes this idea and decides to list his shares on the stock exchange. Another term to remember is listing. Listing is the service of the stock exchange to allow the shares to be traded on the stock exchange. Now the shares can be bought or sold in one place, simply by connecting to the stock exchange trading through brokerage companies. The banks, which have brokerage licenses, also liked it. The main thing is that now they do not have to convince clients to buy shares for dubious rights, you can just say that the price at the exchange is constantly changing, and if you buy shares at $ 1000 now (in the bank office), then a month later at the exchange you can sell them already at a higher price. This created a real stir around the company's shares, and they were bought up from banks at the IPO price - that is, at the original price of $1,000 per share. A significant advantage for any investor is the ability to buy or sell shares quickly and easily. That is exactly the kind of opportunity stock exchanges provide. If there were no stock exchange, the owners of shares would have to look for buyers on their own. But now they have the opportunity to connect to the exchange and make a deal at any time. As soon as the stock exchange started trading, the share price of the workshop came to life. This attracted new investors who tried to buy cheaper shares and sell at a higher price. Such investors include you and me. So what we know so far: - A company needs stock to sell a share of its business and get real money. - Shares can only be issued by a public company. - Shares give its owner rights: to vote, to receive agreed dividends, and to receive a share from a bankrupt company. - The initial sale of shares to the public is called an IPO (initial public offering). - During an IPO, shares are sold not on the stock exchange, but through brokers or banks. - The first day of stock trading on the stock exchange is the completion of the IPO process. - In order for the shares to be traded on the stock exchange, the company has to go through the listing procedure. - It is only possible to buy shares on the stock exchange through a licensed broker. - The exchange price is constantly changing during trading. The workshop story may give the impression that we small investors are only being used to get money from us in exchange for unnecessary rights. However, it is important to understand that we are more interested in the opportunity to profit from the growth of the shares than in gaining formal rights. It is this desire that unites all shareholders of a company, whether you have one share or a million. A joint-stock company can be compared to a hotel with many identical rooms. One share is one room. If the hotel is doing great and making a profit, investors will want to buy more rooms, and sellers will want to sell more rooms at a higher price. If the hotel performs poorly and makes a loss, then room owners will get rid of them (i.e. sell even at an unprofitable price to get money and find another hotel that is more attractive for investment). The strategy I will share will be to find, figuratively, great hotels (in fact, joint stock companies) during a room sale (i.e., a period of declining stock). We'll figure out how stock prices are formed on the stock market soon. See you next time!
AMEX:SPYEducation
by Be_Capy
Stock Company. Selling something that no one will buy piecemealSo, here we go. Start of the story here . What next? How will he sell something that no one will buy in pieces? He turns his company into a joint-stock company, which is a form of company organization that allows it to be split into shares. Our owner issues 1 million shares, that is, he sort of divides the company into 1 million pieces. Then he calculates how much his whole business is worth - let's say $1 billion. And if $1 billion divided by 1 million shares, you get $1,000. That's how he calculated the value of 1 share. Recall that our owner has decided to put only 25% of his business up for sale, that is, 250,000 shares. And if we multiply 250 thousand shares by the price of $1 thousand, we get $250 million in total - this is the value of the share of the company he plans to sell. Now he has to decide: will he sell 25% of the shares to one or more buyers, or even an unlimited number of people. First, he was approached by one large investor who has $250 million to buy all 25% shares. But the investor shared with the owner a plan to grow the company and asked him to place his managers in high positions. The owner of the company didn't like it because he didn't want to lose control of the company, so the deal didn't go through. Then he was approached by several investors who promised him they would stay out of the company's business, but were willing to buy a 25% stake not for $250 million, but for only $200 million. That option did not suit the owner either. Then he decided this way: instead of negotiating with big buyers, I will offer my shares to anyone who is willing to pay 1 thousand dollars for 1 share. This offer is called IPO (initial public offering) . Remember this term, because you'll come across it quite often. Our owner had agreed with the banks from which he borrowed money, that for a small commission they would sell his shares at $1,000 apiece to absolutely any buyer. But the first buyer asked the bank the question, "What's in it for me to own one share?" Through this question, we come to the point where we find out what owning stock gets us . The bank answers the prospective buyer that: - You will be able to manage the stock company by voting on matters of the general meeting of shareholders. The weight of your vote will be one in a million votes. - You will be able to receive dividends if a majority of the general meeting of shareholders votes "yes" to pay dividends. - If the company goes bankrupt, you will receive one millionth of its assets left over after all of the company's debts to banks have been paid. The buyer decided he was being mocked and rejected the offer. After all, why should he have the right to vote if 1 his vote means little in the overall background. Why does he need dividends if they may not be assigned. Why would he need property that would be impossible to sell after bankruptcy. But more about that in the next post.
NASDAQ:AAPLEducation
by Be_Capy
What is a stock? Let me tell you a storyNow let's talk about what a stock is, why companies issue them, and why they attract investors. To do this, imagine a story. Imagine a small shoe workshop with a single owner. Suppose he makes boots out of crocodile leather. His product is unique to the city and in demand, because these boots are very durable and comfortable. At this point, he can only produce one pair of boots a day, and the number of orders for boots is 2 pairs a day. To meet the demand of his customers, he hires an employee and buys twice as much crocodile leather and other necessary materials for the job. With what money? With all the profits previously accumulated. The workshop now meets the demand of two pairs of boots a day. Later, the workshop receives a corporate order for 90 pairs of boots per month. In order to meet the new order, three more pairs of boots must be produced in addition to those two. But with what money to buy so many materials and hire three more employees? After all, even all of the previously accumulated profit is not enough for such a batch. In order not to miss out on a major customer, the workshop owner goes to the bank for a loan. The bank is happy to give him a loan secured by the workshop (which means that if the owner will not repay the loan, his workshop will be taken away). But all goes well, the owner hires three more workers, buys materials, and puts out five pairs of boots a day. With the proceeds, he pays the loan and interest. Now, let's go back to that beautiful day when the shop received an order for 90 pairs. The owner could have declined the loan and waited for the accumulated profit, but to do so he would have had to negotiate with a potential buyer for a longer lead time for the entire batch, and that could have resulted in the loss of the order. What it turns out: he needed the credit in order to ramp up production quickly, and thus the size of the business. Taking advantage of the credit and constant demand, our workshop owner goes nationwide and becomes the most famous manufacturer of crocodile leather boots with many workshops all over the country. And a lot of people around him want to buy the successful business. Then he starts thinking: on the one hand, he has a huge business that is profitable, and on the other hand, he has an opportunity to get money in exchange for workshops, stock of materials, employees' labor, business connections and reputation. In short, in exchange for everything he has created with his own hands and head, which is very difficult to sell individually. He likes the idea, but in order to keep part of his business, he decides that he will sell only a share of his company - 25%. He did the math and realized that this money is enough for the rest of his life (and even to live another life). What next? How does he sell something that no one will buy in pieces? Let’s continue next time.
NASDAQ:AMZNEducation
by Be_Capy
Raising initial capital: 4 approaches, of which one is not goodLet's break down the thought from the previous post in more detail. Obviously, to buy stocks, you have to have money, and if you are determined to become an investor, get ready to open your piggy bank. If you don't have savings, however, don't despair, there are other options. I suggest you look at the following 4 options for acquiring the finances to buy stocks : - Reduce your current expenses - Sell unnecessary assets - Increase your regular income - And the option I don't recommend using at the start is to borrow. I immediately stipulate that it is your, and only your responsibility how to apply the knowledge gained - to use something of the proposed or to go another way. I do not insist on anything. Rather, I am sharing information, but the decision is up to you in any case. My opinion - always start with reducing your current costs, because the funds you save now give you a chance to increase your wealth in the future through investing. Make it a rule to plan your purchases in advance and buy only what is on your list. Don't go to the store without a list, otherwise you will buy more than you really need. Next. Look at your possessions. Make a list of what you can sell without compromising your financial and mental well-being. Let what you don't need now serve to increase your wealth in the future. Increasing your regular income is probably the most time-consuming but feasible way to accumulate funds for investment. Many people are often faced with the problem of choosing between a job they love where they don't earn enough and a job they hate with a higher income or, even worse, a job they hate with a paltry income. In the latter two cases, I recommend becoming an active user of services that will help you find the job you want (but don't act in haste, don't quit a job you don't like right away). Remember our goal is to keep and increase our income, not lose it altogether. In the case of a job you love and don't make much money, think about how you can increase your income in your current job. Sometimes all you have to do is make up your mind and ask your employer for it. Even a small increase will help you start saving. And if you have both a job you love and a desired level of income, I congratulate you, you are truly lucky. Moving on. Borrowing for investments is the riskiest option. I highly do not recommend it, especially at the beginning of your investing journey. You definitely should not take a loan from a bank or other financial institutions. The credit rate will only increase your costs, and the need to repay the loan every month will break your entire investment strategy. If family, friends or acquaintances are willing to lend you money long-term and without interest, think about whether your lender is aware of the risks and whether you are aware of the risks associated with investing in stocks, and whether this person will demand the money back before the agreed upon deadline. Even if you have agreed on everything, write down all of the terms of such a private loan on paper, so it is easier to resolve any disputes. I always insist that the investment is conscious, that you understand and are ready to bear the responsibility and risks. So if you have even the slightest doubt about the borrowing option - don't take it! Consider another option. Ideally - work out a step-by-step plan and accumulate the necessary amount of money gradually.
SP:SPXEducation
by Be_Capy
Investing is the ability to say "no" so that you can say "yes"Have a wonderful day, my dear friends! Let's get acquainted. My name is Capy. Someday I will tell you my stunning life story, and how fate has tied me to investing. I can't quite believe it myself sometimes... But that's not what today is about. Today I'm starting a series of posts to introduce you to my vision and strategy in the very multifaceted and insanely interesting topic of stock investing. Let's start by figuring out why you should be an investor? Many people think that investors are some kind of Wall Street wolves who trade stocks of companies and make unimaginable amounts of money on it. I'm sure there are those too. But, in fact, investing has long ceased to be the monopoly of the employees of banks, brokerage companies or big businessmen. Investing is available to absolutely everyone who plans their wealth and has the basic knowledge obtained at university. Or aspires to learn this indomitable beast. This is the reason I started this blog: to help everyone who wants to understand and share my ready-made strategy that you can apply in the process of investing. It's worth saying that every one of us has done the act of investing at least once in our lives, perhaps without even realizing it. For example, when placing money on a bank deposit (the well-known bank deposit), renting out real estate, opening a business or just learning. All these actions have one common formula: you give something away now in order to get it back in the future and, in addition, to make a profit. When you rent out an apartment, you cannot live in it because you have given it to other people to use. But when the lease expires, you'll get your apartment back, plus a profit in the form of the rent you've been receiving all that time. When you start a business, you put money into it so you can pay it back later through the proceeds. And, of course, you expect the returns to exceed the costs invested. When you invest in education, you plan to use what you have learned to achieve something, whether it's getting a job or enriching your inner world. It is the expectation of profit that is the main motivating factor for the investor and the main purpose of the investment. If you give someone an apple and they give it back to you after a while, that's not an investment. And if you give someone an apple, and after some time you get two apples back - you are already an investor, because you made a profit in the form of an additional apple. The upcoming series of posts will focus on one of the investment options - namely, investing in stocks of companies. I plan to teach you how to approach each trade wisely and in a measured way to keep you from engaging in short-term speculation that looks like a casino game. Going back to our formula, a stock investment is a transfer of your money to a particular company in exchange for a stake in its business. The purpose of these actions is to make a profit in the future from the sale of the shares (in the case of buying cheaper and selling higher), or the second option - to receive dividends. Dividends are when the company shares with you a portion of the profits in proportion to your share in the business. But we will focus on the first option to make a profit, that is "buy cheaper - sell more expensive". And the dividends to consider as a nice bonus to this strategy. I will publish a new post soon. Let's talk about approaches that will allow you to find funds for investment.
NASDAQ:AAPLEducation
by Be_Capy
$SPY - Double Top - Great Reset - Stock Crash Ending 2030$SPY is going for a double top before crashing down to low 200's in the "Great Reset" lasting to 2030. Much like China's "Great Leap Forward" which was one of the largest disasters in history, after which a huge economic advancement was made for several decades. Following the "Great Reset" the United States will enter a period of massive prosperity where conservatism will reign. During this period, the United States will maintain supremacy of the global economy till the year 2100.
AMEX:SPYShort
by motionrelative
Don't you miss the NEXT BULL RUN!We are at the very good zone for accumulation if you still believe in the future of BTC, considering upside vs downside that is 1:3 at least. I did a rough cycle count here in 2 cases: 1st is the most likely for now: 60k might be the significant top that will last very long and BTC will go into a sideway asset in the next decade. Yet it is still very volatile 300% + volatility. 2nd is the super bullish. It is that we shoot up and trending above 60k with conviction to finish a very large cycle. BOTH CASES INDICATE THAT IT IS TESTING AT LEAST ATH. I am pretty bullish on this and as aforementioned 1:3 RR is considered very good setup if you don't factor in a time-exposure. For mid-term, I find it does not done correcting yet. We might side way around this area for a while with some false break. I am thinking it is doing 4th (just done a of A for the 4th and is currently heading down for b of A.) If this is the case I am not expecting the new swing low soon and we are going for a sideway market for a while.
by OatSuk
1