THE BASICS

The glossary and basic information below will assist you in understanding various terms and strategies when starting your trading journey.

GLOSSARY

  • Arbitrage:

    Simultaneous buying and selling of securities, currency, or commodities in different markets or derivative forms to take advantage of price differences.

  • Bear Market:

    A market characterized by a prolonged period of declining prices.

    Bull Market:

    A market characterized by a prolonged period of rising prices.

  • Candlestick Chart:

    A type of financial chart used to represent the price movements in a security, derivative, or currency.

    Commission:

    A fee paid to a broker for executing a trade.

  • Day Trading:

    Buying and selling financial instruments within the same trading day.

    Dividend:

    Payment made by a corporation to its shareholders in the form of cash or additional shares of stock.

    Diversification:

    Spreading investments across different assets to reduce risk.

  • Exchange:

    A marketplace where securities, commodities, derivatives, and other financial instruments are traded.

    ETF (Exchange-Traded Fund):

    An investment fund traded on stock exchanges, similar to stocks.

    Earnings Per Share (EPS):

    A company's profit divided by its number of outstanding shares.

    Equity:

    Ownership interest in a company in the form of common or preferred shares.

  • Futures:

    Financial contracts obligating the buyer to purchase or the seller to sell an asset or a financial instrument at a predetermined future date and price.

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  • Index:

    A statistical measure of the changes in a portfolio of stocks, representing a portion of the overall market.

    Initial Public Offering (IPO):

    The first sale of stock by a company to the public.

    Intraday:

    Within the same trading day.

    Investment:

    The act of allocating money to an asset or committing capital to an endeavor with the expectation of generating income or profit.

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  • Liquidity:

    The ability to buy or sell an asset in the market without causing a significant price change.

    Long Position:

    Buying a security with the expectation that its price will rise.

  • Margin:

    Borrowed money used to purchase securities.

    Market Order:

    An order to buy or sell a security immediately at the current market price.

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  • Portfolio:

    A collection of financial investments owned by an investor.

    P/E Ratio (Price-to-Earnings Ratio):

    A valuation ratio calculated by dividing the market price per share by earnings per share.

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  • Risk Management:

    Strategies employed to limit or control the potential losses of an investment.

    Return on Investment (ROI):

    A measure of the profitability of an investment, calculated as a percentage.

  • Short Position:

    Selling a security with the expectation that its price will fall.

    Stock:

    A share in the ownership of a company, representing a claim on part of the company's assets and earnings.

    Stock Broker:

    An individual or firm that is licensed to buy and sell stocks on exchanges.

  • Ticker Symbol:

    A unique series of letters assigned to a security for trading purposes.

    Trading Volume:

    The number of shares or contracts traded in a security or market during a given period of time.

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  • Volatility:

    A statistical measure of the dispersion of returns for a given security or market index.

  • Warrants:

    Financial instruments that give the holder the right to purchase securities at a specific price within a certain time frame.

    Understanding these terms is crucial for anyone involved in stock market trading. Familiarity with this vocabulary can enhance communication and decision-making in the complex world of financial markets.

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Technical analysis BASICS.

Use the drop-down menu to learn more about basic terminology used when doing technical analysis.

  • Price Discounts Everything:

    Technical analysis assumes that all information, whether public or private, is already reflected in the stock price.

    Price Moves in Trends:

    Stock prices tend to move in trends, either upward (bullish) or downward (bearish), which can persist over time.

    History Tends to Repeat Itself:

    Patterns that occurred in the past often repeat and can be used to predict future price movements.

    Volume Confirms Price Trends:

    Changes in trading volume can confirm the strength of a price trend. Rising prices with high volume often indicate strong market interest.

    Support and Resistance Levels:

    Support levels (price where a stock tends to stop falling) and resistance levels (price where a stock tends to stop rising) are important indicators used in technical analysis.

    Moving Averages:

    Moving averages smooth out price data to identify trends over a specified time period. They are used to confirm trends and reversal points.

    Common Technical Indicators

    Relative Strength Index (RSI):

    Measures the speed and change of price movements. RSI values above 70 indicate overbought conditions, while below 30 indicate oversold conditions.

    Moving Averages (MA):

    Averages of past prices, which smooth out price data to identify trends. Golden Cross (short-term MA crossing above long-term MA) and Death Cross (short-term MA crossing below long-term MA) are significant events.

    Bollinger Bands:

    Volatility bands placed above and below a moving average. Prices near the upper band are considered overbought, and prices near the lower band are considered oversold.

    MACD (Moving Average Convergence Divergence):

    Compares short-term and long-term moving averages to indicate potential buy or sell signals. Crossovers and divergence from price movements are key signals.

    Candlestick Patterns:

    Patterns formed by the high, low, open, and close prices of a security. Patterns like Doji, Hammer, and Engulfing provide insights into market sentiment.

    Technical Trading Strategies

    Trend Following:

    Buying when the stock is in an uptrend and selling or shorting when it’s in a downtrend. Moving averages and trendlines are often used to identify trends.

    Swing Trading:

    Capturing short- to medium-term price movements within an established trend. Traders aim to enter and exit trades before or after a specific price swing.

    Contrarian Investing:

    Contrarians go against the prevailing market sentiment. They buy when the market is bearish and sell when it’s bullish, relying on indicators like RSI for overbought or oversold conditions.

    Breakout Trading:

    Buying a stock when its price moves above a certain resistance level or selling when it moves below a support level. This strategy aims to capitalize on strong price movements.

    Day Trading:

    Opening and closing trades within the same trading day, taking advantage of intraday price movements. Day traders often use technical analysis for quick decision-making.

    Pattern Recognition:

    Identifying chart patterns like Head and Shoulders, Double Tops, and Triangles, which indicate potential trend reversals or continuations.

    Remember, while technical analysis can be a powerful tool, it’s not foolproof. It should be used in conjunction with other forms of analysis and proper risk management for effective trading decisions.

FUNDAMENTAL ANALYSIS BASICS.

Use the drop-down menu to learn more about basic terminology used when doing fundamental analysis.

  • Earnings:

    Examines a company's earnings growth over time. Consistent and increasing earnings often indicate a healthy company.

    Revenue:

    Studies the company's total revenue. Growing revenue typically suggests a company is expanding its market and customer base.

    Dividends:

    Analyzes dividends paid to shareholders. Companies with a history of regular dividends often indicate stability and profitability.

    Assets and Liabilities:

    Assesses a company’s assets (what it owns) and liabilities (what it owes). Healthy companies have more assets than liabilities.

    PE Ratio (Price-to-Earnings Ratio):

    Compares a company's stock price to its earnings per share. Lower PE ratios can suggest undervaluation, while higher ratios may indicate overvaluation.

    PEG Ratio (Price/Earnings to Growth Ratio):

    Measures a stock's valuation while also considering the company's earnings growth. A PEG ratio less than 1 can suggest undervaluation.

    Book Value:

    The total value of a company's assets that shareholders would theoretically receive if a company were liquidated.

    Market Capitalization:

    Total value of all outstanding shares. Small-cap, mid-cap, and large-cap companies have different risk and growth profiles.

    Common Fundamental Indicators

    Revenue Growth:

    Increasing revenue year-over-year indicates a growing business.

    Profit Margin:

    Measures how much profit a company keeps out of its total revenue.

    Debt-to-Equity Ratio:

    Indicates how much debt a company is using to finance its assets relative to shareholders’ equity. Lower ratios are generally better.

    Cash Flow:

    Examines how much cash a company generates from its core operating activities. Positive cash flow is essential for sustainability.

    Return on Equity (ROE):

    Measures a company's profitability by revealing how much profit it generates with shareholders' money.

    Fundamental Trading Strategies

    Value Investing:

    Seeks undervalued stocks based on fundamental analysis. Investors believe the market has temporarily undervalued the company.

    Dividend Investing:

    Focuses on stocks with a history of regular dividends. Investors seek stable income and potential long-term capital appreciation.

    Growth Investing:

    Targets stocks of companies with high growth potential. Investors expect the company's earnings and revenue to grow at an above-average rate.

    Quality Investing:

    Invests in financially stable, high-quality companies with strong fundamentals, low debt, and consistent earnings.

    Income Investing:

    Prioritizes investments generating regular income, often through dividends and interest payments. Typically involves bonds and dividend-paying stocks.

    Contrarian Investing:

    Opposes prevailing market trends. Contrarians invest against popular opinion, buying undervalued assets that the market has overlooked.

    Remember, fundamental analysis provides a long-term perspective on a company's health and potential. It's essential to combine it with other forms of analysis and consider broader economic and market factors for comprehensive decision-making.

TECHNO-FUNDAMENTAL ANALYSIS BASICS.

Use the drop-down menu to learn the terminology used when combining technical and fundamental analysis.

  • Combination of Technical and Fundamental Analysis

    Techno-fundamental analysis integrates technical analysis (chart patterns, indicators) with fundamental analysis (company financials, industry trends).

    Identifying Synergies:

    Seeks to find synergies between technical and fundamental indicators. For example, a stock showing bullish technical patterns combined with strong earnings growth could be a strong buy signal.

    Analyzing Market Sentiment:

    Considers market sentiment and investor behavior alongside fundamental data. This holistic approach provides a comprehensive view of a stock's potential.

    Quantitative Models:

    Utilizes quantitative models that combine mathematical algorithms, technical patterns, and fundamental data to predict stock movements.

    Common Techno-Fundamental Indicators

    Price-to-Earnings-to-Growth (PEG) Ratio with Technical Patterns:

    Combines PEG ratio (fundamental) with technical patterns to identify undervalued stocks with strong growth potential.

    Moving Average Convergence Divergence (MACD) with Earnings Growth:

    Uses MACD (technical) to confirm trends and combines it with earnings growth (fundamental) to identify stocks with both technical momentum and strong financial performance.

    Relative Strength Index (RSI) with Revenue Growth:

    Matches RSI (technical) with revenue growth (fundamental) to spot stocks showing strong price momentum while also experiencing increasing sales.

    Techno-Fundamental Trading Strategies

    Event-Based Trading:

    Capitalizes on significant events (earnings reports, product launches) by combining technical entry/exit points with fundamental analysis of the event’s impact on the company.

    Pattern Breakout Confirmation:

    Validates breakout patterns using fundamental analysis. For example, if a stock breaks out of a technical resistance level and is supported by strong earnings, it could signal a strong buying opportunity.

    Volume Analysis with News Sentiment:

    Analyzes trading volumes (technical) alongside sentiment analysis of news and social media (fundamental) to confirm the strength of a price movement or reversal.

    Fundamental Screening with Technical Confirmation:

    Starts with fundamental screening criteria (e.g., low debt, high ROE) and confirms selections using technical indicators to ensure the stocks are in favorable technical positions.

    Economic Data Impact Analysis:

    Examines the impact of economic indicators (fundamental) on sectors and combines it with technical analysis to trade sector-specific ETFs or stocks.

    Important Considerations

    Data Integration:

    Requires seamless integration of technical and fundamental data, often utilizing advanced software and tools for analysis.

    Market Volatility Awareness:

    Techno-fundamental strategies should be adaptable to market volatility, as both technical and fundamental indicators can be influenced by market sentiment changes.

    Continuous Monitoring:

    Both technical and fundamental factors change over time. Regular monitoring and adjustment of techno-fundamental strategies are essential for adapting to market conditions.

    Techno-fundamental analysis provides a nuanced approach, considering both short-term technical movements and long-term fundamental factors. Successful implementation often involves a deep understanding of both technical and fundamental analysis techniques.