Analy High School

Stock Market Trading #3! MARGIN ACCOUNTS AND TYPES OF STOCK ANALYSIS

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• published: 28 Oct 2016
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When you trade a stock, you will have a drawdown selling or buying. Because of a drawdown, you automatically start off in the hole when entering a position. Your drawdown when buying a stock is the price you pay per share (including any slippage) plus the broker commission. Your drawdown when selling a stock is the price you pay per share (again, accounting for slippage) minus the broker commission. It is important to consider drawdown when trading small amounts of money. For example, if you are investing $100 you will pay about $7 (or more!) in broker commission when buying AND selling. So the total broker commission for the round trip is $14, or 14% of your investment! That means the stock has to increase by at least 14% before you break even on it, not accounting for slippage when selling. When you set up a trading account, you may be given the option to open a margin account. For most beginning traders, the answer is a big NO! Margin accounts are for experienced traders that want to leverage their cash. With a margin account, your broker matches your deposit dollar for dollar as a loan on which you pay interest. If you don’t tie the money up in stocks, you don’t pay interest. Traders use this as a way to increase buying power but this also increases risk. Let’s say you make a bad investment, a really bad investment. You have a margin account with $10,000 ($5,000 as a loan) and your stock plummets, drops 62% because the biggest client backed out of the deal that initially gave the stock value. You just lost $6,200 but you only had $5,000. Now you are in debt $1,200 to your broker! Remember: “Buy the rumor, sell the news” There are two types of stock analysis; fundamental and technical. Fundamental stock analysis is the financial fitness of a company. This includes reports, summaries, profit loss statements etc. When studying company fundamentals you are usually interested in a long position on the stock and aren’t concerned with day to day swings. Technical stock analysis is based on patterns, repetition and probability. Technical stock analysis focuses on charts. For example: weekly price, daily price, candlestick charts, RSI, volume. Technical stock analysis is used for short term trading. Fundamental Analysis = Company Strength Technical Analysis = Stock Personality (Volatility) Good News/Price Plummet of a Stock: 1. Company releases positive financial news 2. Stock takes off, price rises due to increase in demand 3. Price plummets shortly after, positive earnings were already factored into the stock price Website http://www.ryanoscribner.com Follow me on Twitter! https://twitter.com/RyanOScribner Personal Fitness Coaching http://www.ryanoscribner.com/shop If this video brought value to you, please leave a like! If you are looking to find out more about anything I discussed, drop me a comment or contact me on Twitter. Subscribe to be updated on my journey through life! About Me: My name is Ryan Scribner. I am a nutrition and fitness crusader and I consider myself to be a life student of personal development. I am also an investor. I went from being an overweight college student to living at 8% body fat. About two years ago when I started weight lifting, I was completely clueless. I never played sports in high school and I had no base level of fitness established. I made many mistakes, but over time I developed an understanding. I want to help others develop the body, spirit and mind they deserve. In making mistakes along the way and learning from scratch, I have a lot of value to bring to the table. I recommend my content to those interested in the accumulation of wealth, fitness and nutrition as well as personal growth and development. Recently, I made my own happiness a priority after living with depression for over a year. I want to share with you exactly what I did to get to a state of perpetual lasting happiness. I have also spent a great deal of time learning about investment and wealth accumulation. While money alone doesn't bring happiness, it allows you to experience many things which do bring happiness. Start the journey. Involve the right mentors and coaches. Learn.