Trading Up-Close: How to Buy Stock

upbeat music throughout .
Onscreen text : trading Up-Close
Onscreen text : How to Buy Stock
middle-aged man speaks to the television camera.

Onscreen textbook : Kevin Horner, Senior Manager, Trading Services Education
KEVIN : character of a disciplined and taxonomic overture to trade is analyzing the stream value of any malcolm stock before you buy it. Traders do this in two ways …
Onscreen text :
fundamental psychoanalysis
technical analysis
KEVIN : … with cardinal analysis and technical psychoanalysis .
technical Analysis text disappears, and a graphic of a five-story build appears. Magnifying glass comes into frame and hovers over the build, revealing a dollar sign in its lens .
KEVIN : cardinal analysis is a way to assess a company, using factors such as gross and earnings growth to see if conditions at a caller are improving, stable, or deteriorating .
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Onscreen text :
fundamental psychoanalysis

  • Longer hold times
  • Avoid weak companies
  • Focus on financial strength
  • Determine price value

KEVIN : When traders are planning a longer hold time, they often use fundamental psychoanalysis to eliminate potentially weak companies and focus on those that show better fiscal strength. They besides use it to determine if the lineage ’ mho price may be a effective measure at the moment …
Onscreen fastball points disappear and shift sol that only “ Determine price value ” is left with fastball points underneath it .
Onscreen text :
cardinal analysis

  • Determine price value
    • Price to earnings
    • Price to sales
    • Price to book value
    • Price to earnings growth

KEVIN : … by looking at measures such as the price to earnings, price to sales, price to book value, and price to earnings growth. For short-run trades, it ’ s all about price .
Onscreen text : technical analysis
Drawing of a cake graph and a person peeling back a column from the bar graph and looking into it with a telescope .
This drawing become bigger, and onscreen text appears in bullet points .
Onscreen text :
technical analysis
Assumes information is baked into price
Insight into possible moves
Removes emotion from decisions
Trade based on perceived gamble and reward
KEVIN : And traders use technical psychoanalysis to track price and volume over clock to try to determine which way the neckcloth might move and where they want to enter and exit a trade. technical analysis assumes that all the available information is already baked into the price. It can provide an estimate of where a price move may stop or break to a modern floor. rather of being emotionally swayed by the news program, they can stay focused on price data and make trades based on perceive risk versus honor .
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Onscreen textbook :
technical analysis
hazard
Amount volition to lose
Reward
Amount hoping to gain
KEVIN : The risk being how much you ’ re bequeath to lose on a finical trade, and the reward being how much you ’ re hoping to gain. Your deal expressive style will determine whether you use fundamental or technical analysis, or a combination of the two. technical psychoanalysis can help you decide what to buy and when, based on price. But what about how a lot to buy ?

Blue square appears and the draw of a valet at a desk looking at a calculator monitor. There is a big white question scar above him .
KEVIN : You can calculate that with two significant numbers :
little blue circle on the leave with textbook in the center .
Onscreen text : $ at risk per contribution
small purple circle on the right with text in the middle .
Onscreen textbook : Max $ personnel casualty per trade .
KEVIN : … how many dollars are at risk for each share, determined by your risk-reward ratio, and the maximum loss per deal you set in your plan .
purple circle shifts so that it is above the little blue circle and a white line draw on to separate them .
KEVIN : Divide the maximum loss by the dollars at risk per share to see how many shares you can purchase without risking more than you can stand to lose .
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order types

  • Market
  • Limit
  • Stop
  • Stop-limit

KEVIN : When you are ready to buy, you can use one of four park order types : market, restrict, stop, and stop-limit .
Onscreen text shifts so that “ Market ” stays at the top and the other bullet train points reduce in size and be active to the bottom .
Onscreen textbook :

  • Market

execute order at adjacent available price
KEVIN : market orders execute about immediately during normal marketplace hours, at the current price. however, depending on how firm the market is moving, that price could be higher or lower than the last price you saw. basically, this order says, “ I want these shares now―the price is not crucial. ”
Onscreen text shifts so that “ Market ” and its fastball point below motion improving and get smaller. “ Limit ” moves from the penetrate .
Onscreen textbook :

  • Limit
    • Set a max price you will pay
    • Day order or good-till-cancelled (GTC)

KEVIN : If price is crucial, use a limit orderliness to set a maximal price you will pay. If your order is filled, it will be at your limit or better. But there is no guarantee your rate will be filled. Depending on how long you think it might take to get the monetary value you specify, you can set this as a day ordain, which stays in consequence throughout the regular grocery store hours, or you can place a good-till-canceled order, which can remain active for weeks or months, depending on your agent .
Onscreen text shifts so that “ Limit ” and its fastball points shift astir and get smaller. “ Stop ” moves up from the bed and gets bigger .
Onscreen textbook :

  • Stop
    • Set a min trigger price

KEVIN : A buy blockage order is an order to buy a stock at the commercialize monetary value once the banal trades at or above a pin down price—known as the gun trigger price. Traders use the buy barricade order when they believe that if a stock breaks through a certain price, it will continue to rise. Remember that there ’ s no guarantee that a stop order will be executed anywhere near the end price .
Onscreen text shifts therefore that “ Stop ” and its bullet train point move up and get smaller. “ Stop-limit ” moves up and gets bigger .
Onscreen text :

  • Stop-limit
    • Set a min trigger price and max limit price

KEVIN : A bribe stop-limit order combines a stop order and a limit order and works to keep traders from overspending. Both a trigger price and a specify price are set. That way, the trade is executed once the gun trigger monetary value is met, but lone up to the limit price. This is another case where trade execution is not guaranteed, but it does ensure that if executed, the price is at or better than the restrict price .
KEVIN : One thing that can ’ metric ton be stressed besides a lot is the importance of knowing your exit strategy before entering a trade. Watch the next television in our series to learn how to sell .
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Important Disclosures
The information provided here is for general informational purposes only and should not be considered an personalize recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment scheme for his or her own particular situation before making any investment decision.

All expressions of opinion are topic to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered authentic sources. however, its accuracy, completeness or dependability can not be guaranteed .
Examples provided are for demonstrative purposes only and not intended to be reflective of results you can expect to achieve .
©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. ( 1021-1DWD )

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Category : Finance

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