Forwarded from Share Market & Trading
📊 How The Economy Affects The Stock Market ? 📊
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There are many factors that affect how the stock market is doing, and whether it’s moving up or down: the political climate, social factors, interest rates, trends and shifts in what investors prefer.
So how does the economy affect the stock market?
If the general population feels as if the economy will soon be taking a turn for the worse, they tend to sell stock because bonds and treasuries offer a safer return. On the flip side, when people are feeling confident and optimistic about the economy, they tend to buy stock, taking more risk for greater reward.
From a high-level approach, when people feel good about the economy, they tend to buy more stock. When things are happening in the world make them feel unsure, they will be more conservative, and might gravitate toward lower-risk investments such as bonds and Treasury bills.
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📉 @Market_Share 📈
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There are many factors that affect how the stock market is doing, and whether it’s moving up or down: the political climate, social factors, interest rates, trends and shifts in what investors prefer.
So how does the economy affect the stock market?
If the general population feels as if the economy will soon be taking a turn for the worse, they tend to sell stock because bonds and treasuries offer a safer return. On the flip side, when people are feeling confident and optimistic about the economy, they tend to buy stock, taking more risk for greater reward.
From a high-level approach, when people feel good about the economy, they tend to buy more stock. When things are happening in the world make them feel unsure, they will be more conservative, and might gravitate toward lower-risk investments such as bonds and Treasury bills.
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📉 @Market_Share 📈
Forwarded from Share Market & Trading
📊 How Does A Call Option Work? 📊
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A call option gives you the right, but not the requirement, to purchase a stock at a specific price (known as the strike price) by a specific date, at the option’s expiration. For this right, the call buyer will pay an amount of money called a premium, which the call seller will receive. Unlike stocks, which can live in perpetuity, an option will cease to exist after expiration, ending up either worthless or with some value.
The following components comprise the major traits of an option:
🔵 Strike price: The price at which you can buy the underlying stock.
🔵 Premium: The price of the option, for either buyer or seller.
🔵 Expiration: When the option expires and is settled.
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📉 @Market_Share 📈
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A call option gives you the right, but not the requirement, to purchase a stock at a specific price (known as the strike price) by a specific date, at the option’s expiration. For this right, the call buyer will pay an amount of money called a premium, which the call seller will receive. Unlike stocks, which can live in perpetuity, an option will cease to exist after expiration, ending up either worthless or with some value.
The following components comprise the major traits of an option:
🔵 Strike price: The price at which you can buy the underlying stock.
🔵 Premium: The price of the option, for either buyer or seller.
🔵 Expiration: When the option expires and is settled.
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📉 @Market_Share 📈
Forwarded from Share Market & Trading
📊 Understanding The Role Of A Stockbroker 📊
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Stockbrokers research how companies are doing financially so that they can advise clients as to whether or not they should invest in a particular company. Stockbrokers work for individuals or companies and with other financial dealers. They need to be able to handle stressful situations and have strong communication skills.
➡️ Duties & Tasks Of A Stockbroker
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🔴Buys, trades and sells orders based on research.
🔴Daily studies and interprets data from a variety of resources to determine how a company is doing financially.
🔴Maintains strong communication with clients regarding transactions and potential investment opportunities.
🔴Manages peoples shares and makes financial decisions on their behalf.
🔴Meets with clients to find out specifically their investment interest.
🔴Promotes services to attract new customers.
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📉 @Market_Share 📈
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Stockbrokers research how companies are doing financially so that they can advise clients as to whether or not they should invest in a particular company. Stockbrokers work for individuals or companies and with other financial dealers. They need to be able to handle stressful situations and have strong communication skills.
➡️ Duties & Tasks Of A Stockbroker
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🔴Buys, trades and sells orders based on research.
🔴Daily studies and interprets data from a variety of resources to determine how a company is doing financially.
🔴Maintains strong communication with clients regarding transactions and potential investment opportunities.
🔴Manages peoples shares and makes financial decisions on their behalf.
🔴Meets with clients to find out specifically their investment interest.
🔴Promotes services to attract new customers.
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📉 @Market_Share 📈
📊 Benefits of Long Term Investment 📊
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Reduces Transaction Fees (Cost)
Every time you invest, there is a transaction fee incurred. If you invest for a long-term and avoid repeated investments, you save multiple fees.
Tax Benefits (Tax)
Long-term investments are taxed at rates lower than your income tax bracket.
Stability (⚖)
Long-term investments exhibit lower volatility compared to short-term investments.
Best Saving Option (🧰)
Long-term investments serve as a good savings option for post-retirement, future home, or college, education, etc.
Compounding (📈)
Long-term investments grow at a compound rate of interest. Hence, the gain in this type of interest is substantial.
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📉 @Market_Share 📈
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Reduces Transaction Fees (Cost)
Every time you invest, there is a transaction fee incurred. If you invest for a long-term and avoid repeated investments, you save multiple fees.
Tax Benefits (Tax)
Long-term investments are taxed at rates lower than your income tax bracket.
Stability (⚖)
Long-term investments exhibit lower volatility compared to short-term investments.
Best Saving Option (🧰)
Long-term investments serve as a good savings option for post-retirement, future home, or college, education, etc.
Compounding (📈)
Long-term investments grow at a compound rate of interest. Hence, the gain in this type of interest is substantial.
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📉 @Market_Share 📈
📊 Benefits of Short Term Investment 📊
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🔴 Short-term investing offers flexibility to the investor as they do not need to wait for the security to mature in order to get cash. On the other hand, long-term investments can be liquidated by selling in the secondary market, but the investor earns lower profits.
🔴 Investors can make substantial profits in a very short amount of time.
🔴 It is less risky as money invested per transaction is substantially lower.
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📉 @Market_Share 📈
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🔴 Short-term investing offers flexibility to the investor as they do not need to wait for the security to mature in order to get cash. On the other hand, long-term investments can be liquidated by selling in the secondary market, but the investor earns lower profits.
🔴 Investors can make substantial profits in a very short amount of time.
🔴 It is less risky as money invested per transaction is substantially lower.
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📉 @Market_Share 📈
📊 What Is Day Trading ? 📊
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Day trading usually refers to the practice of purchasing and selling a security within a single trading day. While it can occur in any marketplace, it is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies. Day traders are attuned to events that cause short-term market moves. Trading based on the news is a popular technique. Scheduled announcements such as economic statistics, corporate earnings, or interest rates are subject to market expectations and market psychology. Markets react when those expectations are not met or are exceeded–usually with sudden, significant moves–which can greatly benefit day traders.
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📉 @Market_Share 📈
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Day trading usually refers to the practice of purchasing and selling a security within a single trading day. While it can occur in any marketplace, it is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies. Day traders are attuned to events that cause short-term market moves. Trading based on the news is a popular technique. Scheduled announcements such as economic statistics, corporate earnings, or interest rates are subject to market expectations and market psychology. Markets react when those expectations are not met or are exceeded–usually with sudden, significant moves–which can greatly benefit day traders.
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📉 @Market_Share 📈
📊 Day Trading Strategies 📊
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Day traders use numerous intraday strategies. These strategies include:
🛑 Scalping: This strategy attempts to make numerous small profits on small prices changes throughout the day.
🛑 Range trading: This strategy primarily uses support and resistance levels to determine buy and sell decisions.
🛑 News-based trading: This strategy typically seizes trading opportunities from the heightened volatility around news events.
🛑 High-frequency trading (HFT): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.
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📉 @Market_Share 📈
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Day traders use numerous intraday strategies. These strategies include:
🛑 Scalping: This strategy attempts to make numerous small profits on small prices changes throughout the day.
🛑 Range trading: This strategy primarily uses support and resistance levels to determine buy and sell decisions.
🛑 News-based trading: This strategy typically seizes trading opportunities from the heightened volatility around news events.
🛑 High-frequency trading (HFT): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.
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📉 @Market_Share 📈
📊 *What Is Swing Trading*? 📊
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Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. These traders may utilize fundamental analysis in addition to analyzing price trends and patterns.
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📉 @Market_Share 📈
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Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. These traders may utilize fundamental analysis in addition to analyzing price trends and patterns.
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📉 @Market_Share 📈
📊 *Advantages of Swing Trading* 📊
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🔴 It allows you to take advantage of the natural ebb and flow of markets. Financial markets never go in one direction forever, and by being able to take advantage of that, you can increase your returns as you in theory are going to be making money when the market rises over the next few days, and then make some when the market pulls back, as it will certainly do sooner or later.
🔴 By being in and out of the markets, you can identify more opportunities. If you look at any financial chart, you can see that there is almost always a definite long-term trend, but the market might not always be at a support or resistance area. By being in and out of the market in a matter of a few days, (typically) you can collect profits, and identify other markets that are setting up for other trades. This allows you to spread the risk around, and ties up a lot less capital instead of constantly having to come up with margin for new positions as you find new trades. By closing your first position, you will not have to deposit more money in your account to cover the second one.
🔴 Stop losses are typically smaller than longer term trades. The stop losses on a swing trade might be 100 pips based upon a 4 hour chart, while a stop loss on a weekly chart that is based upon the overall trend might have to be 400 pips. This allows for you to place larger sized positions instead of extremely low leveraged ones via the longer-term trends.
🔴 You have clear boundaries. The swing trader is a more technical based trader, and as such will normally have a specific area that they deem as being a sign the trade is working against them. Because of this, you know exactly when the trade isn’t working and can limit the damage a bad trade can do. Longer-term traders normally have to give a wide berth for the markets as they wait for them to “go with the fundamentals”.
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📉 @Market_Share 📈
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🔴 It allows you to take advantage of the natural ebb and flow of markets. Financial markets never go in one direction forever, and by being able to take advantage of that, you can increase your returns as you in theory are going to be making money when the market rises over the next few days, and then make some when the market pulls back, as it will certainly do sooner or later.
🔴 By being in and out of the markets, you can identify more opportunities. If you look at any financial chart, you can see that there is almost always a definite long-term trend, but the market might not always be at a support or resistance area. By being in and out of the market in a matter of a few days, (typically) you can collect profits, and identify other markets that are setting up for other trades. This allows you to spread the risk around, and ties up a lot less capital instead of constantly having to come up with margin for new positions as you find new trades. By closing your first position, you will not have to deposit more money in your account to cover the second one.
🔴 Stop losses are typically smaller than longer term trades. The stop losses on a swing trade might be 100 pips based upon a 4 hour chart, while a stop loss on a weekly chart that is based upon the overall trend might have to be 400 pips. This allows for you to place larger sized positions instead of extremely low leveraged ones via the longer-term trends.
🔴 You have clear boundaries. The swing trader is a more technical based trader, and as such will normally have a specific area that they deem as being a sign the trade is working against them. Because of this, you know exactly when the trade isn’t working and can limit the damage a bad trade can do. Longer-term traders normally have to give a wide berth for the markets as they wait for them to “go with the fundamentals”.
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📉 @Market_Share 📈
📊 Disadvantages of Swing Trading 📊
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🔴 You can get whipsawed often. Just because the market shows support or resistance at a specific area, doesn’t mean they will be respecting it today. Also, anytime you place a trade, you are risking money. Because of this, as a swing trader, you are risking it more often. Odds are you will have losses from time to time, no matter how good you are.
🔴 You have to be well-versed in technical analysis. While not necessarily a “disadvantage”, it means extra work. Almost anyone can tell the trend on a chart that is going from the lower left to the upper right over time, but someone trying to swing trade that chart needs to identify entry and exit points. This is something technical analysis can do, but you need to learn it first. This takes time.
🔴 It takes a different mindset than long term trading, and more nerves. While it isn’t necessarily scalping, the swing trader does run the risk of being “spooked out of the markets” as pullbacks in these smaller ranges appear to be more violent than to someone looking at a weekly chart. This is a psychological issue, and one that most traders will eventually have to deal with during their career.
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📉 @Market_Share 📈
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🔴 You can get whipsawed often. Just because the market shows support or resistance at a specific area, doesn’t mean they will be respecting it today. Also, anytime you place a trade, you are risking money. Because of this, as a swing trader, you are risking it more often. Odds are you will have losses from time to time, no matter how good you are.
🔴 You have to be well-versed in technical analysis. While not necessarily a “disadvantage”, it means extra work. Almost anyone can tell the trend on a chart that is going from the lower left to the upper right over time, but someone trying to swing trade that chart needs to identify entry and exit points. This is something technical analysis can do, but you need to learn it first. This takes time.
🔴 It takes a different mindset than long term trading, and more nerves. While it isn’t necessarily scalping, the swing trader does run the risk of being “spooked out of the markets” as pullbacks in these smaller ranges appear to be more violent than to someone looking at a weekly chart. This is a psychological issue, and one that most traders will eventually have to deal with during their career.
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📉 @Market_Share 📈