Successful Trader's Cheat Sheet
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How much money should I invest in stocks? If you’re investing through funds — have we mentioned this is our preference? — you can allocate a fairly large portion of your portfolio toward stock funds, especially if you have a long time horizon. A 30-year-old investing for retirement might have 80% of his or her portfolio in stock funds; the rest would be in bond funds. Individual stocks are another story. We’d recommend keeping these to 10% or less of your investment portfolio.
Articles are a fantastic resource for education. My most popular posts are listed on my stock education page. The most popular website for investment education is investopedia.com. I also highly recommend reading the memos of billionaire Howard Marks (Oaktree Capital), which are absolutely terrific. Naturally, searching with Google search is another great way to find educational material to read. Stock Market Volatility
“I know stocks can be a great investment, but I’d like someone to manage the process for me.” You may be a good candidate for a robo-advisor, a service that offers low-cost investment management. Virtually all of the major brokerage firms offer these services, which invest your money for you based on your specific goals. See our top picks for robo-advisors.
Shouldn’t I just choose the cheapest broker? Trading costs definitely matter to active and high-volume traders. If you’re a high-volume trader — buying bundles of 100 to 500 shares at a time, for example — Interactive Brokers and TradeStation are cost-effective options. Ally Invest offers $3.95 trades ($1 off full price) for investors who place more than 30 trades a quarter.  Commissions are less of a factor for buy-and-hold investors, a strategy we recommend for the majority of people. Most online brokers charge from $5 to $7 per trade. But other factors — access to a range of investments or training tools — may be more valuable than saving a few bucks when you purchase shares. How Do Day Traders Pay Taxes?
Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).
Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1,[62] source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty-year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low."[62]
A few decades ago, most buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions).
E*TRADE credits and offers may be subject to U.S. withholding taxes and reporting at retail value. Taxes related to these credits and offers are the customer’s responsibility. Offer valid for one new E*TRADE Securities non-retirement brokerage account opened by 12/31/2019 and funded within 60 days of account opening with $10,000 or more. Cash credits for eligible deposits or transfers of new funds or securities from accounts outside of E*TRADE will be made as follows: $1,000,000 or more will receive $2,500; $500,000–$999,999 will receive $1,200; $250,000–$499,999 will receive $600; $100,000–$249,999 will receive $300; $25,000–$99,999 will receive $200. New funds or securities must: be deposited or transferred within 60 days of enrollment in offer, be from accounts outside of E*TRADE, and remain in the account (minus any trading losses) for a minimum of six months or the credit may be surrendered. The credit will appear in your account within one week of the close of the 60-day window. Multiple deposits made to eligible accounts will be aggregated and will receive a credit on a pro-rata basis once the new account has been funded with at least $10,000. An account funded within 60 days of account open, with a minimum deposit of $10,000 will receive up to 500 commission-free stock and options trades executed within 60 days of the deposited funds being made available for investment in the new account (excluding options contract fees). You will pay $6.95 for your first 29 stock or options trades (plus 75¢ per options contract) and $4.95 thereafter up to 500 stock or options trades (plus 50¢ per options contract). Your account will be credited for trades within a week of the executed trade, after paying the applicable commission charge. You will not receive cash compensation for any unused free trade commissions. Excludes current E*TRADE Financial Corporation associates, non-U.S. residents, and any jurisdiction where this offer is not valid. This offer is not valid for retirement or E*TRADE Bank accounts. One promotion per customer. E*TRADE Securities reserves the right to terminate this offer at any time. Must be enrolled by December 31, 2019, the offer expiration date. Does Circle K Hire Felons?
NerdWallet's ratings for brokers and robo-advisors are weighted averages of several categories, including investment selection, customer support, account fees, account minimum, trading costs and more. Our survey of brokers and robo-advisors includes the largest U.S. providers by assets under management, plus notable and/or emerging players in the industry. Factors we consider, depending on the category, include advisory fees, branch access, user-facing technology, customer service and mobile features. The stars represent ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star. Is Stock Trading Easy?
After the basic inputs have been made, the “Place Trade” button will appear to complete the order. By default, a summary screen always appears once this button is clicked to summarize the order and confirm we have enough funds in our account. Once investors have experience and are comfortable with the trade ticket, this confirmation page can be disabled.
In the stock market, for every buyer, there is a seller. When you buy 100 shares of stock, someone is selling 100 shares to you. Similarly, when you go to sell your shares of stock, someone has to buy them. If there are more buyers than sellers (demand), then the stock price will go up. Conversely, if there are more sellers than buyers (too much supply), the price will fall.
There are many fees an investor will incur when investing in mutual funds. One of the most important fees to focus on is the management expense ratio (MER), which is charged by the management team each year based on the amount of assets in the fund. The higher the MER, the worse it is for the fund's investors. It doesn't end there: you'll also see a number of sales charges called "loads" when you buy mutual funds. What Happened with the Dot Com Bubble?
With the advent of online trading, there are a number of discount brokers with no (or very low) minimum deposit restrictions. One of the most popular online trading sites is ShareBuilder. You will, however, be faced with other restrictions and see higher fees for certain types of trades. This is something an investor with a $1,000 starting balance should take into account if he or she wants to invest in stocks. How Do U Find Net Income?
Different investors are going to prioritize different things. A day trader, for example, requires speed and flexibility. A first-time trader may value educational resources and reliable customer support. But one thing every trader should care about is cost. Not paying attention to investment expenses is like revving your car engine while filling it with gas. That's why we spent a lot of time balancing price with what each site offered. What Is Stock Market Capitalization?
Like Fidelity and Vanguard, Charles Schwab is one of the older brick-and-mortar investment brokers that successfully modernized its trading platform for the Internet Age. Of all our picks, Charles Schwab is the best option for advanced traders who want a full buffet of options (stocks, ETFs, options, bonds, mutual funds, futures) and an impressive suite of research tools. Best of all, even with all the perks Charles Schwab offers, it’s still one of the lowest-cost trading platforms, with cheaper fees than E*TRADE or TD Ameritrade on most trades.
A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales.)
NerdWallet's ratings for brokers and robo-advisors are weighted averages of several categories, including investment selection, customer support, account fees, account minimum, trading costs and more. Our survey of brokers and robo-advisors includes the largest U.S. providers by assets under management, plus notable and/or emerging players in the industry. Factors we consider, depending on the category, include advisory fees, branch access, user-facing technology, customer service and mobile features. The stars represent ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star.
If you’re an active, high-volume trader who dabbles in all kinds of assets, Interactive Brokers is a great option, since you can trade just about anything without losing $5 to $7 on every transaction. The platform interface isn’t nearly as user-friendly as Robinhood’s, nor as intuitive as TD Ameritrade’s; however, if you’re the kind of investor who’d benefit the most from Interactive Brokers (i.e., an experienced one), you’ll know your way around a candlestick chart already.
Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are distinct from stock exchanges—their history traces back to commodity futures exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market.
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