Going up? The Bulls
Here’s the fun part – The bulls, betting the markets going up; the bear betting the market is going down. This is the battle that’s waged every day… And a lot of people profit while they fight it out! Time to get in the game.
Let’s talk about the positive guys – the Bulls
Not exactly the eternal optimists, these are the guys betting up the market. And when times are good, it seems like everyone’s a bull. When the markets on the way up it’s called a bull market. Recently the US (and most of the world) has been riding a nice wave of increased stock prices, this making it easy for those who be up to be right. Not always the case but when you learn how to read the charts most of the time you can hit at about 70% when you’re trading for the term. Some people like to ‘buy and hold’… there’s an inherent risk in this, and that is the market goes up, you’re happy, market goes down you’re sad. More on this later…
Back to reality | The bears – Party killers or reality check?
As we saw with the tech bubble burst, and with the GREAT recession of the later part of the last decade, the US (and most of the world) entered into a ‘bear market’, one in which the market took a down turn. For the knowledgeable trader, this doesn’t mean anything more than instead of trading for the stock price to go up, the trade is made for the stock to go down or ‘short selling’. This is how you make money in the market on the way down! Those who have 401ks would be wise to move their assets to ‘cash’ (meaning to get the money out of the market and sit on the sidelines until the drop bottoms out) instead of watching their net worth plummet! You are going to be smarter than that and capitalize on the downturn by learning the proper strategies.
The Other Animals on the Farm – Chickens and Pigs
Chickens are afraid to lose anything. Their fear overrides their need to make profits and so they turn only to money-market securities or get out of the markets entirely. While it’s true that you should never invest in something over which you lose sleep, you are also guaranteed never to see any return if you avoid the market completely and never take any risk,
The ‘stock’ (not shares)
There are two other types of folks on this farm, a couple of terms which I picked up off of Investopedia.com. Those are the chickens and the pigs; let’s talk about both of them here…
The Chickens
You can probably guess this, the chickens are the ones in the market who can’t stand to take any losses. Fear is their driver and they lose sleep every night waiting for the ‘inevitable’ downturn, take their money out of the market and severely limit their potential gains. While it makes sense to use good judgment (and get properly educated), making trades you aren’t comfortable with isn’t a good idea to begin with. Trading on fear will most likely end badly.
The Pigs
Ok, to be completely transparent… these are guys who ‘get slaughtered’ (hence the pig term). High risk trades into companies they don’t know much about, making decisions based on emotion and not doing their due diligence are the trademarks of this class. They get the hot stock tip, get greedy, have no patience, ‘bet the farm’ and don’t get the proper knowledge of what they’re doing before making investments. To the delight (and I mean this in the nicest possible way) of the Bulls and Bears, the pigs get slaughtered because they zig when they should zag and the knowledgeable ones on the street get paid off.
Time for you to decide… Who are you going to be?
This isn’t necessary a fair question as you can be playing bear and bull at the same time depending on what investment you’re looking at. However, there’s clearly one type of animal you don’t want to be and that’s the pig! The pigs do not win… As the old saying goes: “Bulls make money, bears make money, but pigs just get slaughtered!” Don’t be a pig. However, don’t be a chicken either! There’s risk in everything we do from the time we wake up in the morning and our feet hit the ground. The right answer here is be educated and actively track what you’re going to invest in.
If you haven’t done so already, get your brokerage account opened up. I’m not suggesting you go make a trade today, but if you don’t have a brokerage account, you can’t get in the game. I suggest again going to etrade, but you can use whoever you like.
Get some knowledge:
There are a couple of vehicles out there to get yourself on the right track, I recommend picking up a couple of things. One is a site for a penny stock trader, this has had a good track record and will allow you to start tracking some stocks which don’t require a lot of capital to start making trades with.
The other is a more advanced technology called Auto Binary Trading, a must have for you if you are ready and have some capital to start making trades.
Thanks again for reading!
Michael
How Does the Stock Market Work
Getting start with Exchanges
So, now you have a general idea of what a stock is, why companies issue them and some of the basics of trading. Let’s move on to where to go to start trading stocks and get going with your own brokerage account! Stocks can be found on ‘exchanges’. This is where traders, both buyers and sellers come together to determine what price shares will be traded at. Some exchanges, such as the NYSE (New York Stock Exchange) are at a physical location while others, such as the Nasdaq, are electronic (or virtual) based. As exciting as it would be to be on the floor of the NYSE, screaming prices and running around making deals, I prefer the electronic version while sitting comfortably in my office. The entire reason for a stock market to exist is to aid in the trading of stocks (securities) worked out by the buyers and sellers. This way there is a risk reduction of the trading of the securities (stocks) by consolidating them into one place. Realistically, a stock market – either the NYSE or the Nasdaq – are a common meeting place for buyers and sellers to hook up to trade stocks. Let’s take a closer look at the different types of markets – these being ‘primary’ and ‘secondary’ markets. What is meant by a primary market is one that handles the initial offering of a stock or IPO (this is covered another blog post). A secondary market handles stocks which are not newly issued, these are the stocks that are truly in the ‘stock market’. At this point it is important to note that when you are trading stocks, you are not trading specifically with the company you are buying or selling, simply that you are working within a marketplace.
A quick history of the major exchanges
NYSE | The New York Stock Exchange
This is probably the most famous of all exchanges, and has been around the longest in the professional sense. Sometimes called the ‘Big Board”, this exchange focuses only on a limited number of the most successful business in the United States. Companies such as 21st Century, Cigna, and Ford Motor Company. The NYSE is based on face-to-face trading, known as a listed exchange. This may seem like an old school way of doing things, but old habits are hard to break. They still employ ‘specialist’ who get the buyers and sellers together and place the orders at the trading posts. Now this is all great information, but not going to help you get started with your own trading because unless you want to fulfill a degree in financial management, we’ll stick online trading (you can still trade these stocks through your online broker… I recommend eTrade)
And in second place…. The Nasdaq
Really made famous by the fantastic technology boom of the late 90’s and early 2000’s, this is an ‘over-the-counter’ (OTC) market. This exists is a virtual market place (there are several others discussed later). All of the trading of securities is done electronically, congratulations on moving into the 21st century! Some of the stocks found on the Nasdaq include Kraft Foods, Intel, Sirius, Cisco, and Comcast. The difference in how stocks are traded on the Nasdaq (unregulated) as compared to the NYSE (regulated) is the Nasdaq depends on a ‘market maker’. This is a person who monitors and provides the ‘bid’ and ‘ask’ prices within a certain tolerance or ‘spread’ for the shares of companies they represent. This person gets the buyers and sellers together and keep a percentage of shares available in their market to ensure availability when traders come looking to make transaction.
And all the others:
There a bunch of other exchanges out there you can check out including a couple of the more notable ones being the the LSE (London Stock Exchange) or the HKSE (Hong Kong Stock Exchange) Now I don’t personally play in those markets, these would be considered FOREX (Foreign stock exchanges), but they can be extremely lucrative (more information on FOREX markets here) The stocks I mainly focus on are Penny Stocks… and why would I do that? Simple answer: a 30% gain is a 30% gain, whether the stock goes from .03 to .039 as it is if it goes from $30 to $39. The point: I can make a whole lot more trades for substantially less money and make the same gains! The risk: there is little to no regulation in these markets. The bottom line always comes down to getting trained and making educated decisions. Take away: Get your own etrade account set up here Highly suggested: Get up to date tips on penny stocks here For those of you ready to REALLY get serious check out Autobinary trading Thanks for reading and taking action!
