NationMaster - Encyclopedia: Day trading

Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions will usually (not necessarily always) be closed before the market close of the trading day. This is the opposite of After-hours trading. Traders that participate in day trading are called day traders. Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ... After-hours trading or late trading refers to stock trading outside the traditional trading hours of the major exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market. ... In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. ... Day trading most commonly refers to the practice of either buying and then selling or selling and then buying a stock within the same day. ...

Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures. Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ... For other uses, see Stock (disambiguation). ... Main article: Option A stock option is a specific type of option that uses the stock itself as an underlying instrument to determine the options pay-off (and therefore its value). ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... For other uses, see Stock (disambiguation). ... An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring his consumption, by lending to the borrower. ...

Day trading used to be the preserve of financial firms and professional investors and speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, day trading has become increasingly popular among casual traders due to advances in technology, changes in legislation, and the popularity of the Internet. Investment is a term with several closely related meanings in finance and economics. ... Speculation is the buying, holding, and selling of stocks, commodities, futures, currencies, collectibles, real estate, or any valuable thing to profit from fluctuations in its price as opposed to buying it for use or for income - dividends, rent etc. ... A Day trader is a very active trader who holds positions for a very short time and makes several trades each day. ... For other uses, see Bank (disambiguation). ... Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises. ... Institutional fund management is fund management conducted by large financial firms such as banks, insurance companies and major investment organisations (e. ... In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. ...

Image File history File links Cisco_Oct_30. ... Image File history File links Cisco_Oct_30. ... Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ... For other uses, see Stock (disambiguation). ...

Characteristics

Trade Frequency

Although collectively called day trading, there are many sub-trading styles within day trading. A day trader is not necessarily very active. Depending on one's trading strategy, the number of trades made in a day may vary from one, to dozens or more.

Some day traders focus on very short or short-term trading, in which a trade may last seconds to a few minutes. They buy and sell many times in a day, trading very high volumes daily and therefore receiving big discounts from the brokerage. A Stock broker sells or buys stock on behalf of a customer. ...

Some day traders focus only on momentum or trends. They are more patient and wait for a ride on the strong move which may occur on that day. They make far fewer trades than the aforementioned traders.

Many day traders sell their positions before the market close of the trading day to avoid the risk of price gaps (differences between the previous day's close and the next day's open price) at the open. Some day traders consider this to be a golden rule to be obeyed at all times. Other traders believe they should let the profits run, so it is acceptable to stay with a position after the market closes.^[1]

Day traders often borrow money to trade. Since margin interests are typically only charged on overnight balances, the extra costs discourage them from holding positions overnight.

Profit and Risks

Because of the nature of financial leverage and the rapid returns that are possible, day trading can be either extremely profitable or extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Some day traders manage to earn millions per year solely by day trading.^[2] In finance, leverage (or gearing) is using given resources in such a way that the potential positive or negative outcome is magnified. ... In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. ...

Because of the high profits (and losses) that day trading makes possible, these traders are sometimes portrayed as "bandits" or "gamblers" by other investors. Some individuals, however, make a consistent living day trading.^[3] Butch Cassidy, a famous outlaw An outlaw, a person living the lifestyle of outlawry, is most familiar to contemporary readers as a stock character in Western movies. ... Gambling (or betting) is any behavior involving the risk of money or valuables on the outcome of a game, contest, or other event in which the outcome of that activity is partially or totally dependent upon chance. ...

Nevertheless day trading can become very risky, especially if one has poor discipline, risk or money management.^[4] The common use of buying on margin (using borrowed funds) amplifies gains and losses, such that substantial losses or gains can occur in a very short period of time. In addition, brokers usually allow bigger margins for daytraders. Where overnight margins required to hold a stock position are normally 50% of the stock's value, many brokers allow pattern day trader accounts to use levels as low as 25% for intraday purchases. This means a day trader with the legal minimum $25,000 in his account can buy $100,000 worth of stock during the day, as long as half of those positions are exited before the market close. Because of the high risk of margin use, and of other day trading practices, a day trader will often have to exit a losing position very quickly, in order to prevent a greater, unacceptable loss, or even a disastrous loss, much larger than his original investment, or even larger than his total assets. In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ... In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ... In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ...

Even when a position has made a profit, the trader has to offset the transaction costs and the interest on the margin. It is commonly stated that 80-90% of day traders lose money. An analysis of the Taiwanese stock market suggests that "less than 20% of day traders earn profits net of transaction costs".^[5]

History

Originally, the most important U.S. stocks were traded on the New York Stock Exchange. A trader would contact a stockbroker, who would relay the order to a specialist on the floor of the NYSE. These specialists would each make markets in only a handful of stocks. The specialist would match the purchaser with another broker's seller; write up physical tickets that, once processed, would effectively transfer the stock; and relay the information back to both brokers. Brokerage commissions were fixed at 1% of the amount of the trade, i.e. to purchase $10,000 worth of stock cost the buyer $100 in commissions. The New York Stock Exchange (NYSE), nicknamed the Big Board, is a New York City-based stock exchange. ...

One of the first steps to make day trading of shares potentially profitable was the change in the commission scheme. In 1975, the United States Securities and Exchange Commission (SEC) made fixed commission rates illegal, giving rise to discount brokers offering much reduced commission rates. SEC redirects here. ...

Financial Settlement

Financial settlement periods used to be much longer: Before the early 1990s at the London Stock Exchange, for example, stock could be paid for up to 10 working days after it was bought, allowing traders to buy (or sell) shares at the beginning of a settlement period only to sell (or buy) them before the end of the period hoping for a rise (or fall) in price. This activity was identical to modern day trading, but for the longer duration of the settlement period. But today, to reduce market risk, the settlement period is typically three working days. Reducing the settlement period reduces the likelihood of default, but was impossible before the advent of electronic ownership transfer. Settlement (of securities) is the process whereby securities or interests in securities are delivered, usually against payment, to fulfill contractual obligations, such as those arising under securities trades. ... The Source by Greyworld, in the new LSE building Paternoster Square. ... In finance, default occurs when a debtor has not met its legal obligations according to the debt contract, e. ...

Electronic Communication Networks

The systems by which stocks are traded have also evolved, the second half of the twentieth century having seen the advent of Electronic Communication Networks (ECNs). These are essentially large proprietary computer networks on which brokers could list a certain amount of securities to sell at a certain price (the asking price or "ask") or offer to buy a certain amount of securities at a certain price (the "bid"). The first of these was Instinet. Instinet or "inet" (ECNs and exchanges are usually known to traders by a three- or four-letter designators, which identify the ECN or exchange on Level II stock screens) was founded in 1969 as a way for major institutions to bypass the increasingly cumbersome and expensive NYSE, also allowing them to trade during hours when the exchanges were closed. Early ECNs such as Instinet were very unfriendly to small investors, because they tended to give large institutions better prices than were available to the public. This resulted in a fragmented and sometimes illiquid market. This article describes the term electronic communication network as used by financial exchanges, stockbrokers and the financial industry. ...

The next important step in facilitating day trading was the founding in 1971 of NASDAQ -- a virtual stock exchange on which orders were transmitted electronically. Moving from paper share certificates and written share registers to "dematerialized" shares, computerized trading and registration required not only extensive changes to legislation but also the development of the necessary technology: online and real time systems rather than batch; electronic communications rather than the postal service, telex or the physical shipment of computer tapes, and the development of secure cryptographic algorithms. NASDAQ in Times Square, New York City. ...

These developments heralded the appearance of "market makers": the NASDAQ equivalent of a NYSE specialist. A market maker has an inventory of stocks to buy and sell, and simultaneously offers to buy and sell the same stock. Obviously, it will offer to sell stock at a higher price than the price at which it offers to buy. This difference is known as the "spread". It is of no importance to the market-maker whether the price of a stock goes up or down, as it has enough stock and capital to constantly buy for less than it sells. Today there are about 500 firms who participate as market-makers on ECNs, each generally making a market in four to forty different stocks. Without any legal obligations, market-makers were free to offer smaller spreads on ECNs than on the NASDAQ. A small investor might have to pay a $0.25 spread (e.g. he might have to pay $10.50 to buy a share of stock but could only get $10.25 for selling it), while an institution would only pay a $0.05 spread (buying at $10.40 and selling at $10.35). ECN may refer to: Eastern Counties Newspapers, now Archant Eastman Color Negative, a photographic processing system for color negative motion-picture films [[Electroni ... NASDAQ in Times Square, New York City. ...

Technology Bubble (1997–2000)

In 1997, the SEC adopted "Order Handling Rules" which required market-makers to publish their best bid and ask on the NASDAQ. Another reform made during this period was the "Small Order Execution System", or "SOES", which required market makers to buy or sell, immediately, small orders (up to 1000 shares) at the MM's listed bid or ask. A defect in the system gave rise to arbitrage by a small group of traders known as the "SOES bandits", who made fortunes buying and selling small orders to market makers. The existing ECNs began to offer their services to small investors. New brokerage firms which specialized in serving online traders who wanted to trade on the ECNs emerged. New ECNs also arose, most importantly Archipelago (arca) and Island (isld). Archipelago eventually became a stock exchange and in 2005 was purchased by the NYSE (At this time, the NYSE has proposed merging Archipelago with itself, although some resistance has arisen from NYSE members). Commissions plummeted: in an extreme example (1000 shares of Google), in 2005 an online trader might buy $300,000 of stock at a commission of about $10, as opposed to the $3,000 commission he would have paid in 1974. Moreover, the trader would be able to buy the stock almost instantly and would get it at a cheaper price. For the band, see 1997 (band). ... Electronic Trading: Small Order Execution System (SOES) The lack of liquidity after the 1987 market crash lead the Nasdaq to implement a mandatory system to provide automatic order execution for individual traders with orders less than or equal to 1000 shares. ...

ECNs are in constant flux. New ones are formed, while existing ones are bought or merge. As of the end of 2006, the most important ECNs to the individual trader are Instinet (which bought Island in 2005), Archipelago (although technically it is now an exchange rather than an ECN), and The Brass Utility ("brut"), as well as the SuperDot electronic system now used by the NYSE.

This combination of factors has made day trading in stocks and stock derivatives (such as ETFs) possible. The low commission rates allow an individual or small firm to make a large numbers of trades during a single day. The liquidity and small spreads provided by ECNs allow an individual to make near-instantaneous trades and to get favorable pricing. High-volume issues such as Intel or Microsoft generally have a spread of only $0.01, so the price only needs to move a few pennies for the trader to cover his commission costs and show a profit. Small rendering of Image:NASDAQ IXIC - dot-com bubble. ... Small rendering of Image:NASDAQ IXIC - dot-com bubble. ... Exchange-traded funds (or ETFs) are open-ended investment companies that can be traded at any time throughout the course of the day. ...

The ability for individuals to day trade coincided with the extreme bull market in technical issues from 1997 to early 2000, known as the Dot-com bubble. From 1997 to 2000, the NASDAQ rose from 1200 to 5000. Many naive investors with little market experience made huge profits buying these stocks in the morning and selling them in the afternoon, at 400% margin rates. A bull market is a prolonged period of time when prices are rising in a financial market faster than their historical average. ... The dot-com bubble was a speculative bubble covering roughly 1995â€“2001 during which stock markets in Western nations saw their value increase rapidly from growth in the new Internet sector and related fields. ... In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. ...

Adding to the day-trading frenzy were the enormous profits made by the "SOES bandits". (Unlike the new day traders, these individuals were highly-experienced professional traders able to exploit the arbitrage opportunity created by SOES.) In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. ... Electronic Trading: Small Order Execution System (SOES) The lack of liquidity after the 1987 market crash lead the Nasdaq to implement a mandatory system to provide automatic order execution for individual traders with orders less than or equal to 1000 shares. ...

In March, 2000, this bubble burst, and a large number of less-experienced day traders began to lose money as fast, or faster, than they had made during the buying frenzy. The NASDAQ crashed from 5000 back to 1200; many of the less-experienced traders went broke, although a small minority of traders made fortunes shorting the market all the way down^{[citation needed]}.

Techniques

The following are several basic strategies by which day traders attempt to make profits. Besides these, some day traders also use contrarian (reverse) strategies (more commonly seen in algorithmic trading) to trade specifically against irrational behavior from day traders using these approaches. In electronic financial markets, algorithmic trading, also known as algo, automated, black-box, or robo trading, is the use of computer programs for entering trading orders with the computer algorithm deciding on certain aspects of the order such as the timing, price, or even the final quantity of the order. ...

Some of these approaches require shorting stocks instead of buying them normally: the trader borrows stock from his broker and sells the borrowed stock, hoping that the price will fall and he will be able to purchase the shares at a lower price. There are several technical problems with short sales - the broker may not have shares to lend in a specific issue, some short sales can only be made if the stock price or bid has just risen (known as an "uptick"), and the broker can call for the return of its shares at any time. Some of these restrictions (in particular the uptick rule) don't apply to trades of stocks that are actually shares of an exchange-traded fund (ETF). It has been suggested that Short (finance) be merged into this article or section. ... Exchange-traded funds (or ETFs) are open-ended investment companies that can be traded at any time throughout the course of the day. ...

The Securities and Exchange Commission removed the uptick requirement for short sales on July 6, 2007.^[6] The Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ...

Trend following

Trend following, a strategy used in all trading time frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa with falling. The trend follower buys an instrument which has been rising, or short-sells a falling one, in the expectation that the trend will continue. Trend following is an investment strategy that takes advantage of long-term moves that play out in various markets. ... Trend following is an investment strategy that takes advantage of long-term moves that play out in various markets. ... Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ...

Contrarian

Contrarian , a market timing strategy used in all trading time frames, assumes that financial instruments which have been rising steadily will reverse and start to fall, and vice versa with falling. The contrarian trader buys an instrument which has been falling, or short-sells a rising one, in the expectation that the trend will change. In finance, a contrarian takes the view that widespread pessimism tends to lead to market rallies and that widespread optimism tends to lead to market slumps. ... In finance, a contrarian takes the view that widespread pessimism tends to lead to market rallies and that widespread optimism tends to lead to market slumps. ... Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ...

Range trading

A range trader watches a stock that has been rising off a support price and falling off a resistance price. That is, every time the stock hits a high, it falls back to the low, and vice versa. Such a stock is said to be "trading in a range", which is the opposite of trending. The range trader therefore buys the stock at or near the low price, and sells (and possibly short sells) at the high. A related approach to range trading is looking for moves outside of an established range, called a breakout (price moves up) or a breakdown (price moves down), and assume that once the range has been broken prices will continue in that direction for some time.

Scalping

Scalping originally referred to spread trading. Scalping is a trading style where small price gaps created by the bid-ask spread are exploited. It normally involves establishing and liquidating a position quickly, usually within minutes or even seconds. This article is about trading in securities or commodities. ... This article is about trading in securities or commodities. ...

Scalping highly liquid instruments for off the floor daytraders involves taking quick profits while minimizing risk (loss exposure). It applies technical analysis concepts such as over/under-bought, support and resistance zones as well as trendline, trading channel to enter the market at key points and take quick profits from small moves. The basic idea of scalping is to exploit the inefficiency of the market when volatility increases and the trading range expands.

Rebate Trading

Rebate Trading is an equity trading style that uses ECN rebates as a primary source of profit and revenue, considering the payment structure of ECN paying per share. Traders maximize their returns by trading low priced, high volume stocks. This enables them to trade more shares and have more liquidity with a set amount of capital. The introduction to this article provides insufficient context for those unfamiliar with the subject matter. ...

News Playing

Playing news is primarily the realm of the day trader. The basic strategy is to buy a stock which has just announced good news, or short sell on bad news. Such events provide enormous volatility in a stock and therefore the greatest chance for quick profits (or losses). Determining whether news is "good" or "bad" must be determined by the price action of the stock, because the market reaction may not match the tone of the news itself. The most common cause for this is when rumors or estimates of the event (like those issued by market and industry analysts) were already circulated before the official release, and prices have already moved in anticipation. The news is said to be already in the stock price. In finance, short selling is selling something that one does not (yet) own. ...

Cost

Trading Equipment

Some day trading strategies (including scalping and arbitrage) require relatively sophisticated trading systems and software.This software can cost up to $45,000 dollars or more. Many day traders use multiple monitors or even multiple computers to execute their orders. Some use real time filtering software which is programmed to send stock symbols to a screen which meet specific criteria during the day, such as displaying stocks that are turning from positive to negative. This article is about trading in securities or commodities. ... In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. ...

A fast Internet connection, such as broadband, is essential for day trading. Broadband in telecommunications is a term that refers to a signaling method that includes or handles a relatively wide range of frequencies, which may be divided into channels or frequency bins. ...

Brokerage

Day traders do not use retail brokers, because they are slower to execute trades and charge higher commissions than direct access brokers, who allow the trader to send their orders directly to the ECNs. Direct access trading offers substantial improvements in transaction speed and will usually result in better trade execution prices (reducing the costs of trading). A retail broker is a brokerage firm that caters to the average investor or, in other words, the retail sector of investors - as opposed to the institutional sector of investors. ... This article or section does not cite any references or sources. ... An Electronic Communication Network (ECN) is a computer system that facilitates trading of financial products outside of stock exchanges. ...

Commission

Commissions for direct-access brokers are calculated based on volume. The more one trades, the cheaper the commission is. While a retail broker might charge $10 or more per trade regardless of the trade size, a typical direct-access broker may charge as little as $0.004 per share traded, or $0.25 per futures contract. A scalper can cover such costs with even a minimal gain. The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. ... Direct access trading is a technology in which a client can trade directly to the special people at the exchange, without any brokerage interference with your orders. ... A direct-access broker typically offers a trading platform to retail investors, allowing an investor to bypass the traditional investor-middleman-marketplace trade structure. ...

As for the calculation method, some use pro-rata to calculate commissions and charges, where each tier of volumes charge different commissions. Other brokers use a flat-rate, where all commissions charges are based on which volume threshold one reaches.

Spread

The numerical difference between the bid and ask prices is referred to as the bid-ask spread. Most worldwide markets operate on a bid-ask-based system. A price mechanism or market-based method is any of a wide variety of ways to match up offers and requests that market players bid and ask: a bid is an offer to pay a fixed amount that is held open for a period of time an ask is an... A price mechanism or market-based mechanism is any of a wide variety ways to match up buyers and sellers. ...

The ask prices are immediate execution (market) prices for quick buyers (ask takers) while bid prices are for quick sellers (bid takers). If a trade is executed at quoted prices, closing the trade immediately without queuing would not cause a loss because the bid price is always less than the ask price at any point in time.

The bid-ask spread is two sides of the same coin. The spread can be viewed as trading bonuses or costs according to different parties and different strategies. On one hand, traders who do NOT wish to queue their order, instead paying the market price, pay the spreads (costs). On the other hand, traders who wish to queue and wait for execution receive the spreads (bonuses). Some day trading strategies attempt to capture the spread as additional, or even the only, profits for successful trades.

Market Data

Real-time market data is necessary for day traders, rather than using the delayed (by anything from 10 to 60 minutes, per exchange rules^[7]) market data that is available for free. A real-time data feed requires paying fees to the respective stock exchanges, usually combined with the broker's charges; these fees are usually very low compared to the other costs of trading. The fees may be waived for promotional purposes or for customers meeting a minimum monthly volume of trades. Even a moderately active day trader can expect to meet these requirements, making the basic data feed essentially "free". Example of a stock chart, the stock shown is VA Software Ticker tape was used by ticker tape machines, stock ticker machines, or just stock tickers. ... Example of a stock chart, the stock shown is VA Software Ticker tape was used by ticker tape machines, stock ticker machines, or just stock tickers. ...

In addition to the raw market data, some traders purchase more advanced data feeds that include historical data and features such as scanning large numbers of stocks in the live market for unusual activity. Complicated analysis and charting software are other popular additions. These types of systems can cost from tens to hundreds of dollars per month to access.

Regulations and restrictions

Day trading is considered a risky trading style, and regulations require brokerage firms to ask whether the clients understand the risks of day trading and whether they have prior trading experience before entering the market.

Pattern day trader

In addition, NASD and SEC further restrict the entry by means of "pattern day trader" amendments. Pattern day trader is a term defined by the SEC to describe any trader who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period. A pattern day trader is subject to special rules. The main rule being that in order to engage in pattern day trading the trader must maintain an equity balance of at least $25,000 in a margin account.^[8] Pattern day trader is a term defined by Securities and Exchange Commission to describe a trader who is associated with frequent day trading in an account. ... NASD executive office on K Street in downtown Washington, D.C. NASD, Inc. ... Pattern day trader is a term defined by Securities and Exchange Commission to describe a trader who is associated with frequent day trading in an account. ... In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. ... Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions will usually (not necessarily always) be closed before the market close of the trading day. ...

See also

Other Trading Styles and Methods

After-hours trading or late trading refers to stock trading outside the traditional trading hours of the major exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market. ... This article or section does not adequately cite its references or sources. ... This article is about trading in securities or commodities. ... Swing trading sit in the middle of the continuum between day trading to trend trading. ... Trend following is an investment strategy that takes advantage of long-term moves that play out in various markets. ...

Trading Analysis

Fundamental analysis of a business involves analyzing its income statement, financial statements and health, its management and competitive advantages, and its competitors and markets. ... Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. ...

Other Occupations

In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. ... A Stock broker sells or buys stock on behalf of a customer. ... A stock trader or a stock investor is an individual or firm who buys and sells stocks or bonds (and possibly other financial assets) in the financial markets. ...

Items and Places

Financial instruments package financial capital in readily tradeable forms - they do not exist outside the context of the financial markets. ... A futures contract is a form of forward contract, a contract to buy or sell an asset of any kind at a pre-agreed future point in time, that has been standardised for a wide range of uses. ... A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately. ... Technical Analysis Software is used to analyze quantitative data in several securities and financial markets, especially price data, volume data and sentiment data. ...

External links

Notes and references

Categories: All articles with unsourced statements | Articles with unsourced statements since March 2007 | Finance | Stock market | Dot-com A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately. ... For other uses, see Stock (disambiguation). ... Common stock, also referred to as common shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. ... Preferred stock, also called preferred shares or preference shares, is typically a higher ranking stock than common stock, and its terms are negotiated between the corporation and the investor. ... Outstanding stock is common stock that has been authorized and issued by a corporation and purchased by investors. ... A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market (open market including insiders holdings). ... A market maker is a person or a firm which quotes a buy and sell price in a financial instrument or commodity hoping to make a profit on the turn or the bid/offer spread. ... A Floor Trader checking market prices A Floor Trader is a member of a stock or commodities exchange who trades on the floor of that exchange for his or her own account. ... A Floor Broker is a member of an exchange who is an employee of a member firm and executes orders, as agent, on the floor of the exchange for clients. ... This is a list of stock exchanges. ... There are several methods used to value companies and their stocks. ... Gordon growth model is a variant of the discounted dividend model, a method for valuing a stock or business. ... The dividend yield on a company stock is the companys annual dividend payments divided by its market cap, or the dividend per share divided by the price per share. ... Income per share is the bottom line net income divided by the number of shares outstanding. ... The book value of an asset or group of assets is sometimes the price at which they were originally acquired (historic cost), in many cases equal to purchase price. ... Earnings yield is the quotient of earnings per share divided by the share price. ... The Beta coefficient, in terms of finance and investing, is a measure of a stock (or portfolio)â€™s volatility in relation to the rest of the market. ... In finance, a financial ratio is a ratio of selected values on a enterprises financial statements. ... The price/cash flow ratio (also called price-to-cash flow ratio or P/CF), is a ratio used to compare a companys market value to its cash flow. ... In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is used to measure how cheap or expensive share prices are. ... The PEG ratio is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the companys expected future growth. ... Price-to-sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. ... Price-to-book ratio or P/B ratio, is a ratio used to compare a stocks market value to its book value. ... The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion of equity and debt used to finance a companys assets. ... Return on capital, also known as Return On Invested Capital (ROIC) is defined as NOPLAT / Invested Capital usually expressed as a percentage. ... Return on Equity (ROE, Return on average common equity) measures the rate of return on the ownership interest (shareholders equity) of the common stock owners. ... Dow Theory is a theory on stock price movements that provides a basis for technical analysis. ... It has been suggested that some of the information in this articles Criticism or Controversy section(s) be merged into other sections to achieve a more neutral presentation. ... Fundamental analysis of a business involves analyzing its income statement, financial statements and health, its management and competitive advantages, and its competitors and markets. ... Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. ... In some stock markets, the Mark Twain effect is the phenomenon of stock returns in October being lower than in other months. ... The January effect (sometimes called year-end effect) is an unexplained financial phenomenon of most stock markets having significantly higher returns in January than in other months of the year. ... In finance, the efficient market hypothesis (EMH) asserts that financial markets are informationally efficient, or that prices on traded assets, e. ... Arbitrage pricing theory (APT), in Finance, is a general theory of asset pricing, that has become influential in the pricing of shares. ... It has been suggested that ex-dividend date be merged into this article or section. ... Stock split refers to a corporate action that increases the number of shares in a public company. ... Growth Stocks in finance, are stocks that appreciate in value and yield a high return on equity (ROE). ... Invest redirects here. ... Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ... A Trade involves the buying, holding, selling, and short-selling of stocks, bonds, commodities, currencies, derivatives or any valuable financial instrument to profit from fluctuations in its price as opposed to buying it for use or for income via methods such as dividends or interest. ... A stock trader or a stock investor is an individual or firm who buys and sells stocks or bonds (and possibly other financial assets) in the financial markets. ...

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