Learn The Stock Market And How to Trade

This is a continuation from yesterday’s post Stock Market 101. However, the info isn’t in any order so feel free to read this post first if you weren’t here yesterday.

Now Stock Market Tidbits you need to know 51 – 101 (though listed 1 – 51 for my convenience):

1. Short selling isn’t just betting a price will go lower, but you’re actually borrowing someone else’s   stock to sell it, then buying back stock for them when you cover your short
2. A short squeeze occurs when demand pushes prices up enough that the short sellers must get out to save capital, having short sellers getting out drives the price higher potentially forcing more shorts out of the market.
3. You must have a margin account to short sell
4. Usually a stock must be over $5 a share to be valid for short selling.
5. Long squeezes are the opposite of short squeezes.  As the price drops people’s stop losses hit, causing them to sell, dropping the price lower.
6. DRIPs are when you receive your dividend in shares of the same company usually without commission.  Also you can often purchase into drips with minimal or no commission.
7. A falling knife is stock that is falling quickly.  The metaphor is buying falling stocks to get cheap prices can be like catching a following knife – you may end up getting hurt.
8. Back up the Truck (BUTT) – is a term to tell someone you are buying what you can afford to throw at it.
9. Initial Public Offering – The IPO is when a stock is first offered to the public to purchase stock.  Often done in an auction format before being traded on an exchange.
10. A limit order tells the broker at what price you’d be willing to purchase shares.  A good tool that is sadly not used enough.
11. The P/E is the price / earning (per share) ratio.  Good for comparing one company to another.
12. The PEG is the Price / (Earning*Earning Growth) – this is really good if you (or anyone) could accurately predict earning growth.  I like PEG less than 1.0 – but this varies from sector to sector.
13. EPS – is the earnings per share.  You can put about anything in the financial reports on a per share basis to think about what you are purchasing for the price.
14. I love when I find cash per share greater than the price of the stock! (Yes it happens)
15. An unrealized gain or loss if the loss or gain you feel when your investments go up or down, but you haven’t sold them yet.
16. A realized gain / loss is the gain or loss you get when you do sell your investment.  This you have to pay taxes on.   (Or get to write off taxes.)
17. A long term gain or loss is a realized gain/loss that you held the investment for at least 1 year. (Often taxed at a lower rate)
18. There is a settlement period when you’re trading different investments.  There is a time lag of a couple of days between when you pay for a stock and you “technically” recieve the stock.  Check with your broker for guidelines/ fines for selling again within that window. 
19. Shareholder Equity (SE) = Assets – Liabilities
20. Remember just because something is listed on the books as an asset or a liability doesn’t mean it is for the company – try to use common sense.
21. Inventory is listed as an asset, but it ties up money that could be used for something else other than sitting on a shelf
22. Accounts Payable is counted as a liability, but it’s still money sitting in the companies pocket rather than in a supplier’s. 
23. Think about financials, don’t just follow them.
24. Markets go up – and down – if you put small amounts of money in the market consistently you will dollar cost average.
25. Dollar Cost Averaging is buys you more shares for your money when the price is low and less when the price is high.
26. Another style made famous by the quote “buy from the scared sell to the greedy” has you sell a small piece of your investment continuously as the price rises and buy a little consistently as the price falls.

Ok, I guess I’m just a tease, because I still have 25 to go, but anticipation makes everything better

See you tomorrow.

Related posts:

1. Stock Market 101
2. Best Tax Savings Tip For A Down Market
3. Buy Stock Market Or Just Wait?
4. Stock Market 101 Part 3
5. How to Buy Penny Stocks