Online Stock Market Investing

date Sep 14, 2007
authors Alexander Davidson
reading time 2 mins
  • Book Title: The Complete Guide to Online Stock Market Investing - The Definitive 20-Day guide
  • Author: Alexander Davidson
  • Year written/published: 2002
  • My Comments: This is a UK-based book on stock and investing online. It’s clearly sub-divided into days for easy learning.
  • Some extracts:

Some links…

choosing an online broker…

  1. Image
  2. Range of services
  3. Dealing Cost
  4. Price of Trade
  5. Research and News
  6. Level I and Level II data
  7. Smooth running and security
  8. Limit orders and stop losses
  9. Trading hours
  10. Paper Trading
  11. New equity issues

Weinberg’s way…

  1. Before you invest, have enough liquidity to sleep at nights and more
  2. Spread and diversify risks, which brings security
  3. Invest for long term. That way you won’t have to worry about what happened in the last 24 hours
  4. If you use money managers, use the best ones.

Financial Statements…

Income Statement records the company’s profits and losses, and how they were reached. Balance Sheet is another key financial statement and it is best described as a snapshot of the company’s positions at a given time. Cash Flow statement shows movements in cash and cash equivalents.

Some key terms…

  • Earnings per Share (EPS)
  • Price/earnings ratio
  • price/earnings growth ratio (PEG)
  • net asset value (NAV)
  • Gross yield
  • Dividend cover
  • Depreciation
  • Return on Capital Employed (ROCE)
  • Price/Sales Ratio (P/E)
  • Discounted Cash FLow (DCF)

Different kinds of Charts..

  • Line Chart
  • Bar CHart
  • Candlesticks
  • Point and Figure Chart

Using charts…

Resistance Level is the high point on a chart where the stock price has stopped rising, becasue investors will not buy further and sellers have emerged. At the other extreme, the Support level is where the investors have stopped selling. The more a aupport or resistance line is tested, the more effective it is considered. .. … Support and resistance often arise at around numnbers which, in the case of stocks are often 90p, 100p, 200p.

some continuation patterns…

  1. Flag
  2. Gap
  3. Pennant
  4. Rectangle
  5. Triangle
  6. Wedge

Reversal Patterns…

  1. Broadening formation
  2. double top or bottom
  3. head and sholders
  4. saucer or bottom

some technical indicators…

  1. Price - moving averages, moving average convergence divergence (MACD), Envelopes, Stop and Reversal Points (SARs)
  2. Volume - Accumulation/Distribution line
  3. **Momentum **- Relative Strength Index, Stochastics

Share trading…

  1. day trader - you close out your positions everyday, and so avoid the risk of holding shares overnight. You will make your profits form intraday market volatility
  2. swing trader - you hold shares for between 2 to 5 days which gives more times for success and for failure
  3. position trader - you hold shares for between 1 and 2 months, which gives you even more flexibility

general trading principles…

  • use limit orders
  • develop your own system
  • self-discipline and proportion
  • protect your trading capital
  • review your mistakes
  • be professional