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Information about Stock Trader

A stock trader or a stock investor is an individual or firm who buys and sells stocks or bonds (and possibly other financial assets) in the financial markets.

Stock trader versus stock investor

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Charting is the use of graphical and analytical patterns and data to attempt to predict future prices.
Individuals or firms trading equity (stock) markets as their principal capacity are called stock traders. Stock traders usually try to profit from short-term price volatility with trades lasting anywhere from several seconds to several weeks. The stock trader is usually a professional. A person can call himself a full or part-time stock trader/investor while maintaining other professions. When a stock trader/investor has clients, and acts as a money manager or adviser with the intention of adding value to his clients finances, he is also called a financial adviser or manager. In this case, the financial manager could be an independent professional or a large bank corporation employee. This may include managers dealing with investment funds, hedge funds, mutual funds, and pension funds, or other professionals in equity investment, fund management, and wealth management. Several different types of stock trading exist including day trading, swing trading, market making, scalping (trading), momentum trading, trading the news, and arbitrage.

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Stock traders in the trading floor of the New York Stock Exchange.
On the other hand, stock investors purchase stocks with the intention of holding for an extended period of time, usually several months to years. They rely primarily on fundamental analysis for their investment decisions and fully recognize stock shares as part-ownership in the company. Many investors believe in the buy and hold strategy, which as the name suggests, implies that investors will hold stocks for the very long term, generally measured in years. This strategy was made popular in the equity bull market of the 1980s and 90s where buy-and-hold investors rode out short-term market declines and continued to hold as the market returned to its previous highs and beyond. However, during the 2001-2003 equity bear market, the buy-and-hold strategy lost some followers as broader market indexes like the NASDAQ saw their values decline by over 60%.

Methodology

Stock traders/investors usually need a stock broker such as a bank or a brokerage firm to access the stock market. Since the advent of Internet banking, an Internet connection is commonly used to manage positions. Using the Internet, specialized software, and a personal computer, stock traders/investors make use of technical analysis and fundamental analysis to help them in the decision-making process. They may use several information resources.

Information Resources

Expenses, costs and risk

Trading activities are not free. They have a considerably high level of risk, uncertainty and complexity, especially for unwise and inexperienced stock traders/investors seeking for an easy way to make money quickly. In addition, stock traders/investors face several costs such as commissions, taxes and fees to be paid for the brokerage and other services, like the buying/selling orders placed at the stock exchange. According to each National or State legislation, a large array of fiscal obligations must be respected, and taxes are charged by the State over the transactions and earnings. Beyond these costs, the opportunity costs of money and time, the currency risk, the financial risk, and all the Internet Service Provider, data and news agency services and electricity consumption expenses must be added.

Stock Picking

Although many companies offer courses in stock picking, and numerous experts report success through Technical Analysis and Fundamental Analysis, many economists and academics state that because of Efficient market theory it is unlikely that any amount of analysis can help an investor make any gains above the stock market itself. In a normal distribution of investors, many academics believe that the richest are simply outliers in such a distribution (i.e. in a game of chance, they have flipped heads twenty years in a row).

For this reason most academics and economists recommend that investors invest in funds that follow an index in the market, i.e. long-term and well-diversified investments.

Dart Board Method

Financial journals and newspapers such as the Wall Street Journal have done articles on stock picking in the past. One famous article involved a stock picking contest between a panel of Wall Street experts, the public and a dart board. One member was elected to throw darts at the Journal's stock page in order to select a portfolio. At the end of the experiment, the public and the dart board both beat the board of Wall Street experts. Was the dart board more savvy? The dart board's triumph over the Wall Street experts can be attributed to chance (one could also attribute the dart board losing to the experts to chance as well).

Famous stock traders or stock investors

References

1. ^ The Damn'd South Sea, Harvard Magazine (1999), accessed January 2007
2. ^ South Sea Bubble, Stock Market Crash! (2006), accessed January 2007
3. ^ FAMOUS FIRST BUBBLES? The South Sea Bubble, Erasmus School of Economics - Erasmus University Rotterdam (2006), accessed January 2007
4. ^ The South Sea Bubble, History House Inc. (2006), accessed January 2007

See also


Stock Market
Types of Stocks
Stock | Common stock | Preferred stock | Outstanding stock | Treasury stock
Trading Stock
Participants:Market maker
Exchanges:Stock exchange | List of stock exchanges | New York Stock Exchange | NASDAQ
colspan="4" align="left"| Toronto Stock Exchange | London Stock Exchange | Euronext | Frankfurt Stock Exchange
colspan="4" align="left"| Tokyo Stock Exchange | Hong Kong Stock Exchange | Australian Securities Exchange
colspan="4" align="left"| Warsaw Stock Exchange | Botswana Stock Exchange | Zimbabwe Stock Exchange
colspan="4" align="left"| Palestine Securities Exchange | Kyrgyz Stock Exchange | Chittagong Stock Exchange Nairobi Stock Exchange | Uganda Securities Exchange
Stock Valuation
Trading Theories:Dow Theory | Elliott Wave Theory | Fundamental analysis | Technical analysis
colspan="4" align="left"| Mark Twain effect | January effect | Efficient market hypothesis Arbitrage_pricing_theory
Stock Pricing:Dividend yield | Gordon model | Income per share | Book value | Earnings yield | Beta coefficient
Ratios:Financial ratio | P/CF ratio | PE ratio | PEG ratio | Price/sales ratio | P/B ratio
Stock Related Terms
Dividend | Stock split | Growth stock | Investment | Speculation | Trade | Day trading
As commonly used, individual refers to a person or to any specific object in a collection. In the 15th century and earlier, and also today within the fields of statistics and metaphysics, individual
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A company is a form of business organization.

Types

There are various types of company that can be formed in different jurisdictions, but the most common forms of company are:
  • a company limited by shares.

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Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services.
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In financial markets, the stock capital of a corporation or a joint-stock company is the capital raised through the issuance, sale and distribution of shares. A person or organization that holds at least a partial share of stock is called a shareholder.
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bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity.
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asset is meant probable future economic benefits controlled by an entity as a result of past transactions or events and from which future economic benefits may be obtained.
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In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices
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In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives. Traders are professionals, casual investors or speculators in financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the
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professional can be either a person in a profession (certain types of skilled work requiring formal training/education) or in sports (a sportsman/sportwoman doing sports for payment).
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A financial adviser is a professional who renders investment advice and financial planning services to individuals and businesses. Ideally, the financial adviser helps the client maximize their net worth by proper asset allocation.
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A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so.
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A hedge fund is an investment fund structured to avoid direct regulation and taxation in major host countries and which charges a performance fee based on the increase of the value of the fund's assets.
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mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.
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A Pension fund is a pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of
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Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises.
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Investment management is the professional management of various securities (shares, bonds etc) assets (e.g. real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.
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Definition



Wealth Management is a term that originated in the 1990s in the US with the Broker Dealers, Banks, and Insurance Companies. Wealth Management has generally evolved from high net worth financial consulting for persons who are top clients of any firm.
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Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions will usually (not necessarily always) be closed before the market close of the trading day. This is the opposite of After-hours trading.
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A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.
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Scalping, when used in reference to trading in securities and commodities, may refer either to a fraudulent form of market manipulation or to a legitimate method of arbitrage of small price gaps created by the bid-ask spread.
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This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.
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In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices.
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Fundamental analysis of a business involves analyzing its income statement, financial statements and health, its management and competitive advantages, and its competitors and markets.
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Buy and hold is a long term investment strategy based on the concept that in the long run financial markets give a good rate of return despite periods of volatility or decline. This viewpoint also holds that market timing, i.e.
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The NASDAQ (acronym for National Association of Securities Dealers Automated Quotations system) is an American stock market.
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worldwide view of the subject.
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A stock broker is a qualified and regulated professional who buys and sells shares and other securities through market makers on behalf of investors.
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bank is a commercial or state institution that provides financial services , including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit.
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Online banking (or Internet banking) is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website.
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Internetworking involves connecting two or more distinct computer networks or network segments together to form an internetwork (often shortened to internet), using devices which operate at layer 3 (Network layer) of the OSI Basic Reference Model (such as routers or
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