Trading techniques
buy first = to be long → Bull
sell first = to be short → Bear
“STOCKTRAK”
at least 20 trades, how to organize the budget, trading strategies,
“INVESTOPEDIA”
BASIC
SECURITIES
Trade:
→ Stocks: a fraction of a company. The
→ exchange between two counterparts
(buyer and seller)
perception of the market on the present
and the future of the company makes
the prices change. Netflix case. Never
→ Asset: Securities (bonds, etc),
Commodities (non financial asset, with
a physical character), currencies
(FOREX)
→ Price agreement
Trading techniques
expire.
→ Bonds: is a credit from an issuer to
a company. Interests (cupon was a
piece of paper) - capital gain. bond will
be payied in its full amount. 100 means
1
→ quantity
100%. 98 means 98% of the cupon. we
can pay 103 % returning 100% just for
the interest. They usually expire.
→ Options: derivative of an other
assets (options, futures). core option is
to buy an option to have a chance to
buy an asset. Exercise the option can
be easier.
QUANTITY
liquidity is the chance to sell or buy something, it means that there can be or not
enough counterparts in the market. Big amounts can be better for the fees but
liquidity can be a problem.
PHASES OF A TRADE
1. NEGOTIATION: to find a deal with our counterparts. PROPOSAL of TRADE, is
an offer to the counterpart, if someone accepts with it it will deal.
2. AGREEMENT: the two part close the deal. It needs to specify the asset, the
quantity/dimension, the price.
3. SETTLEMENT: buyer has to pay, seller has to transfer the asset. The execution
of what is been agreed.
4. CUSTODY: stock doesn’t need mantainance activity. The way the asset is kept,
useful in investments but less in trade.
FINANCIAL MARKETS
EXCHANGES
The sum of the trades in a certain
timeframe.
How do they make profit?
it is involved in different businesses
1. Exchanges (regulated): everything
is settled with certain rules, certain
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timeframes, certain assets. Index of
performance of the market (DOW
JONES, NASDAQ)
2. OTC (over the counter): everthing
that happens outside the official
market. Counter is the desk, means
it’s not official.
1. Lisitng companies, that pay to be
listed
a. why should company want to
be listed → find investors
2. Trading → fees
3. Clearing → settle all the contracts.
Clear multiple transactions in the
simplest way, usually at the end of
the day. Services.
4. Settlement no much money
involved
5. Custody → Services
6. Information and Data selling, can
be up to 30% of the profit. data
about prices and similar.
NYSE
Only admitted trader can join the market, admission requires to be the broker of a
recognised company and pass an exam. buyer and seller won’t go to the market
directly but they operate using third parties (companies) who can go to the market.
a client can ask to a company that talks with another - a client can ask to the broker
company that ask the company that talks with another.
CLIENT: is not admitted to trade
BROKER: represents someone else,
receives the order and transmit that
order. Its profit come from the fees of
the operation.
DEALER: Trades in the market on its
MARKET MAKER: someone that plays
on the market as a central counterpart.
i.g. BDP that provides a liquidity
service, always buys and sells what
people want to. But it buys for lower
prices and sells at higher prices.
own account. Companies can operate
as both dealer and broker. Its profit is
the profit of the trade.
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TRADING DAYS
Opening time (9:00 am) - Closing time (5:00 pm)
Opening prices are set by rules, after that prices changes following the deal done
during the day untile the closing time.
Closign prices are the lasts prices of the day. They’re not the opening prices of the
day after, it’s just a reference.
PRACTICE
ORDER TYPE
What do I want to trade?
MARKET → We’re ok with the market
price
Amazon, Ineed the international code:
Amzn.
LIMIT → We declare the price we
BUY → I’m buying my stock
preferre
SELL → I’m selling my stocks
STOP LIMIT/STOP LOSS → We fix a
price that will stop my loss
SHORT → I’m selling not already
having the stock, we can do it thank
third parties, on the assumption that
we’re going to buy the stock later on.
We do that to buy then to a lower price.
It’s usually not free, it is a service of
borrowing from lenders, that wants a
fee. RISKY: I can lose both my money
and my fee payment.
BUY TO COVER → we are short on a
position and we buy the stock we sold
already.
TRAILING STOP → a dinamic stop limit
that can change following the market
prices
DURATION
DAY ONLY → my price will be valid the
day long, until closing time
GOOD UNTIL CANCELLED → if at the
end of the day the price hasn’t been
acceptes, it will be valid until we cancel
it
ONE SHOT → It’s valid for a few time
REMEMBER TO CALCULATE THE FEES IN THE TRANSACTIONS
TRENDS
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Depend a lot on the time horizon (day, week, month, year, etc. , they can change
shapes.
DRN → trading something that is not official traded in that exchange.
GRAPHS
Look at
VALUES → Confirmation that
something is changing
VOLUME → Big changes, something’s
up
Look as
LINES
AREAS
CANDLES: most common
CANDLES
They show: if the price in that period decreased (red) or increased (green), the
opening price and the closing price with the candles, the maximum and the minimum
of the period with the appendix.
candles with no appendix are called full body.
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