Stock Market Crashes For as long as there has been trade, there have been lulls and downturns in that trade. The stock market is no stranger to crashes – the global stock market sees a crash roughly once every 10 years, and there have been four historic market crashes in the past century. While many traders always have the threat of a stock market crash in the back of their minds, it’s important for traders to understand the history of these crashes so that the causes and consequences of a crash are clear. What is a Stock Market Crash? A stock market crash is considered to have occurred when ..read more

Stocks and bonds are constantly competing for investors’ dollars, and the stock and bond markets can impact each other in complex ways. Understanding the difference between stocks and bonds, and recognizing whether they are likely to move in tandem or in opposite directions, is important for traders who are looking to maximize their profits under the widest possible variety of market conditions. What is the Bond Market? A bond is essentially a receipt for a loan made by an investor to a company or government, indicating that the loan is to be repaid in the future. Companies and governments typ ..read more

Introduction To ETFs Exchange-traded funds (ETFs) are similar to mutual funds in that they represent a portfolio of stocks and other securities. ETFs have become popular because unlike mutual funds, they can be traded on an exchange just like individual stocks and have commensurately lower commissions and fees. There are a number of different types of ETFs available to trade and traders should be aware of the factors that can affect the price of any ETFs they hold. What is an ETF? An ETF, or exchange-traded fund, is a basket of individual securities – such as stocks, bonds, or even options – s ..read more

While it often doesn’t come up in determining whether or not to buy shares of a company, not all shares are made the same. A company’s share structure describes not only how many shares a company is divided into, but also the various types of shares that the company is divided into. For example, a company’s share structure may state the total number of shares that can ever be issued. However, those shares may be divided such that only 20% of the shares are available to the public for active trading, while another 20% are held by company insiders and cannot be traded until certain restrictions ..read more

An offering occurs when a company makes a public sale of stocks, bonds, or another security. While the term offering is typically used in reference to initial public offerings (IPOs), companies can also make secondary offerings after their IPOs in order to raise additional capital. In general, secondary offerings are made to the public to raise money for acquisitions and corporate growth, although they can also be used to counter short-term cash-flow issues. Secondary offerings are important to traders because they can dramatically affect the price of a stock and present significant risks. Wha ..read more

Pair Trading Pair trading is a strategy for hedging risk by opening opposing positions in two related stocks, commodities, or other derivatives. This can be a way to profit no matter what conditions the market is in since profit is determined not by the overall market, but by the relationship between the two positions. While pair trading was originally developed and used by long-term investors, it can also be applied by day traders on shorter timescales. What is Pair Trading? In a pair trade, traders identify two stocks or other financial instruments that are correlated in price. That means th ..read more

Time Decay As an option approaches its expiration date, there is less time to realize a profit – or additional profit – before the option expires. As a result, options lose value as they get closer to their expiration dates. This is known as time decay. Time decay can be observed in the price of an option for which the underlying asset is constant in price. For example, if the underlying stock or other asset remains at a price just below the strike price, the price of the option will not remain constant as well. Rather, the option will decline in value as the expiration date approaches, with t ..read more

The types of brokers that cater to day traders are very different than the types of brokers that many retail traders normally think of. Whereas retail investors are normally making long-term investments, day traders are starting and ending the day with no open positions – and placing a large volume of trades in the meantime. As a result, day traders need to be able to place trades that execute more quickly than classic discount brokers can offer and need the ability to place trades through charting or other technical analysis software. In addition, day traders need real-time margin and buying ..read more

Dividends add value to a stock by offering investors a cash or stock payout simply for holding shares. Dividends are especially popular among long-term value investors since they provide a relatively stable income source, but they can also increase the value of stocks for day traders. Importantly, dividends are not free and can play an important role in the price of a stock in both the short-term and the long-term. Thus, it is important for day traders and long-term investors alike to understand where dividends come from and how they can affect stock prices. How are Dividends Paid? Not every c ..read more

Broad economic factors routinely have a jolting influence on the stock market, forcing traders to react both quickly and over time to adjust to new market conditions. Understanding the types of economic factors that affect the market and how they influence it can go a long way toward improving your profitability as a trader. Why Traders Should Care While some traders might find economic announcements and global news inherently interesting, there are a variety of reasons why every trader – from day traders to long-term investors – should pay attention to the economic factors that impact the sto ..read more