Basic Stock Information - Going Back To The Basics

Basic Stock Information - Going Back To The Basics
The first step to understanding the stock market is to understand basic stock information. By knowing what a share of stock is, it is easier to understand the workings of the entire stock market. Before you begin investing in the stock market, it’s time to get your basic stock information.
Among the stock market basics, the share is the smallest unit of ownership in a company. The size of a share varies from company to company. It can even vary within one company as it issues more shares or buys back shares that were previously issued. If you own a share of stock in a company, you are a part-owner of that company. The sum total of all your stock holdings is called your stock portfolio. If a company issues dividends, or profits, to the shareholders, you will likely receive money based on the number of shares you own. Each year, companies issues corporate results and basic stock information for their shareholders to review.
One of the stock investing basics of stock ownership is the concept of limited liability. If Ford loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. This is basic stock information, but important to know; creditors can’t come after your personal assets. Whether as the result of a lawsuit or creditors, the worst losses you will experience investing in companies are losses on struggling stocks.
In the terms of basic stock information, the two types of stocks are:
• Common stock – This is the type of stock held by most individuals. Those holding common stock have voting rights as well as the right to receive dividends. Whenever you hear that a stock is going up or down, the reference is being made to common stock. While not all publicly traded companies have preferred stocks, all publicly traded companies have common stocks.
• Preferred stock – In spite its name, preferred stock has fewer rights than common stock, except with regards to dividends. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Investors buy preferred stock for its current income from dividends, so look for companies that make big profits to use preferred stock to return some of those profits via dividends.
Liquidity
Another piece of basic stock information is that common stocks can easily be bought or sold, or they are highly liquid. Not all companies are traded daily but most of the larger companies appear daily on the stock market, giving investors the opportunity to buy or sell shares.
Conclusion
Learning how to invest in stocks is really a product of learning basic stock information and learning to understand to dynamics of a fascinating market. After learning basic stock information, forming a stock trading plan, and understanding technical analysis, a trader can begin to enjoy the hectic world of the stock market.
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Market Direction: What is the market telling us now? Stochastics for both the Dow and the NASDAQ are in the overbought condition. The Dow formed a Doji. The NASDAQ saw a gap down in price on the open. This was done after a small Spinning Top formation yesterday. What does all this imply? Witnessing indecisive trading in the overbought condition creates a high probability of a short-term sell off. Is this a major reversal? Not necessarily! The indecisive signals are being formed with very slow profit taking indications.
DOW

The trend channel remains a predominate factor. Prices moving toward the top end of the trading channel in the Dow makes the analysis more compelling. The indecisive trading at these levels now requires watching. Weakness from these levels in the Dow would be confirming the weakness illustrated in the NASDAQ. Short-term traders should be prepared to close out long positions that are starting to show potential sell signals.
NAS

The Wynn resorts Ltd. chart is a clear illustration of when to buy and when to sell. A Doji followed by a Bullish Engulfing signal in late December made for the opportune buy situation. The stochastics were confirming also. A gap up in price following a Bullish Engulfing signal conveys some important information. Not only has a reversal occurred, but the new buying is being done with enthusiasm. This is the exact scenario for an investor to be looking for. Don't we all want to find the price move that is going to produce strong profits? The candlestick buy signal in oversold condition, followed by exuberant buying, is exactly the scenario to be placing funds. Does this guarantee a strong price trend? No, but it is the set up that has been witnessed for hundreds of years that creates the 'probabilities' of being in a high profit trend potential.
WYNN

Buying a price trend on an opportune signal allows an investor to utilize stock positioning or option strategies. What was the upside potential of this trade? That was not a clear answer. When utilizing options, the price move, as well as the time to expiration, become primary factors. The January 95 calls were bought at $4.70 on the day the Candlestick Forum recommended the stock. Many times a price target can be established if trend lines or moving averages produce the upside potential target. The WYNN chart did not demonstrate an upside target. In that case, a candlestick sell signal becomes the criteria for taking profits.
Upon the purchase of calls, the time remaining until expiration becomes one of the factors. If a reasonable price target can be established during the time frame until the option expiration, straddle strategies can be put in place. When no upside target is visible, a candlestick 'sell' signal occurring before expiration is a logical profit taking point. This strategy is illustrated in the WYNN chart.
The stochastics are in the overbought condition. This should make the candlestick investor more diligent in watching for a candlestick 'sell' signal. Where do most investors buy? Exuberantly at the top! Witnessing a large bullish candle in the overbought condition becomes more stimulus for watching for a candlestick sell signal. A Bearish Harami becomes the signal to indicate that it is time to take profits. A Bearish Harami tells us that the buying has stopped. This signal, occurring two days before option expiration, becomes the probable place to take profits.
Buying the stock at $93 and selling three weeks later $106 makes for a good 15% profit. Buying the January 95 calls at $4.70 and selling at $11 produces a 135% profit. Would this be considered a home run for option trade? Not necessarily, but producing these type of returns on a consistent basis utilizing candlestick buy and sell signals creates a tremendous compounding effect. The major advantage of candlestick signals is providing high probability areas to buy and the high probability areas to sell.