The stocks of almost every major U.S. corporation and many major foreign corporations are traded on a stock exchange in the United States each day. Today numerous domestic and international stock exchanges trade stocks in publicly held corporations; moreover, the only major corporations not traded are those held privately — usually by families or original founding partners that choose not to sell shares on the public market. Forbes magazine’s top privately held corporations are Cargill, Koch Industries, Mars, Price Waterhouse Coopers, and Bechtel. Many of the large private corporations that are not traded publicly do have provisions for employee ownership of stock and must report earnings to the SEC, so they straddle the line between public and private corporations.
A share of stock is actually a portion of ownership in a given company. Few stockholders own large enough stakes in a company to play a major decision making role. Instead, stockholders purchase stocks hoping that their investments rise in price so that those stocks can be sold at a profit to someone else interested in owning a share of the company sometime in the future. Investors may hold the stock to earn dividends, as well. Traders rarely hold the stock long enough for dividends to be a primary decision factor in whether to buy a stock. Therefore, after the company’s initial sale of stock when it goes public, none of the money involved in stock trades goes directly into that company.
We focus on the two top stock exchanges in the United States: the New York Stock Exchange Euronext (NYSE) and NASDAQ (the National Association of Securities Dealers Automated Quotation system). We also introduce you to the evolving world of electronic communication networks (ECNs) on which you can trade stocks directly, thus bypassing brokers.
When you sell a stock short, you sell something you don’t have first and buy it later with a goal of profiting from a falling stock price. To sell a stock short, you borrow shares of a stock from your broker so you can sell them in the open market. Your broker gets those shares either from its own inventory, or more likely, from other clients. The proceeds of that sale go into your account. To close that position, you must buy the shares on the open market and return them to the broker. If the price you pay for the stock, or the buy-to cover price, is less than your selling price, you’ve earned a profit on the short sale. Conversely, if the buy-to-cover price is higher, you’ve suffered a loss.
Planning your trades carefully by identifying entry and exit points
Minimizing losses by ruthlessly adhering to your stop-loss points
Protecting your profits with trailing stops
Exiting your position when the trend ends
Part I: Getting Started with Trading
Chapter 1: The Ups and Downs of Trading Stocks
Chapter 2: Exploring Markets and Stock Exchanges
Chapter 3: Going for Broke(r): Discovering Brokerage Options
Chapter 4: Putting Your Key Business Tool to Work: The Computer
Part II: Reading the Fundamentals:
Chapter 5: Fundamentals 101: Observing Market Behavior
Chapter 6: Digging Into Fundamental Analysis
Chapter 7: Listening to Analyst Calls
Part III: Reading the Charts: Technical Analysis
Chapter 8: Reading the Tea Leaves: Does Technical Analysis Work?
Chapter 9: Reading Bar Charts Is Easy (Really)
Chapter 10: Following Trends for Fun and Profit
Chapter 11: Calculating Indicators and Oscillators
Part IV: Developing Strategies for When to Buy and Sell Stocks
Chapter 12: Money Management Techniques: When to Hold ’em, When to Fold ’em
Chapter 13: Using Fundamental and Technical Analyses for Optimum Strategy
Chapter 14: Minimizing Trading Risks Using Exchange-Traded Funds
Chapter 15: Executing Your Trades
Chapter 16: Developing Your Own Powerful Trading System
Part V: Risk-Taker’s Paradise
Chapter 17: The Basics of Swing Trading
Chapter 18: The Basics of Day Trading
Chapter 19: Doing It by Derivatives
Chapter 20: Going Foreign (Forex)
Chapter 21: Trading for Others: Obtaining Trading Licenses and Certifications
Part VI: The Part of Tens
Chapter 22: More Than Ten Huge Trading Mistakes
Chapter 23: Ten Trading Survival Techniques
Trading For Dummies