Posts by "stockstr"

What Are Stock Markets?
Stock markets are regulated venues where investors buy and sell ownership stakes in companies. These exchanges offer a structured environment that ensures fairness, transparency, and efficiency in the trading of securities.

Key Functions of Stock Markets
Capital Formation:

Companies raise funds by issuing shares through Initial Public Offerings (IPOs).
This capital supports expansion, research, debt reduction, and other business initiatives.
Liquidity:

Stock markets allow investors to quickly convert their investments into cash by buying and selling shares.
Price Discovery:

Stock prices emerge from the interplay of supply and demand, reflecting the market’s collective view on a company’s current value and future prospects.
Investment Opportunities:

Markets provide access to a diverse array of companies, sectors, and asset classes for both individual and institutional investors.
Economic Indicators:

The performance of the stock market often mirrors the overall health of the economy—with rising markets suggesting growth and declining markets hinting at economic challenges.
How Stock Markets Work

supply and demand

Prices move because of supply and demand. When demand is greater than supply, prices rise. When supply is greater than demand, prices fall. Sometimes, prices will move sideways as both supply and demand are in equilibrium.

Market psychology plays a major role as traders and investors remember the past and react to changing conditions to anticipate future market movement.

In the financial markets, prices are driven by supply (down) and demand (up) excesses. Supply is synonymous with bearish, bears, and selling. Demand is synonymous with bullish, bulls, and buying.

As demand increases, prices advance, and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out to gain control.

Support is the price level at which demand is considered strong enough to prevent the price from declining further.

Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.

If a support or resistance level is broken, the relationship between supply and demand has changed. A resistance breakout signals that the bulls (demand) have gained the upper hand, and a support break signals that the bears (supply) have won the battle.


Equilibrium and Stock Strategy


Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand.

The balancing effect of supply and demand results in a state of equilibrium.

A market is said to have reached equilibrium price when the supply of goods matches demand.
In reality, markets are never in perfect equilibrium, although prices do tend toward it.


What Happens During Market Equilibrium?
Stock Strategy

When a market is in equilibrium, prices reflect an exact balance between buyers (demand) and sellers (supply). While elegant in theory, markets are rarely in equilibrium at a given moment. Rather, equilibrium should be thought of as a long-term average level.


At each price, the sellers decide how many units they want to offer or supply at this price, and the buyers decide how many units they want to buy or demand. The quantity supplied will be higher, the higher the market price of the good, whereas the quantity demanded will be lower, and the higher the market price of the good.


supply and demand determine the pricing of stocks and other securities.
Economic data, interest rates, and corporate results influence the demand for stocks.
Market dynamics, economic conditions, and changes to economic policy tend to impact the overall supply of stocks.
Both the supply and demand for stocks tend to amp up in response to initial public offerings, spinoffs, or the issuing of new shares.


The law of demand posits that demand declines when prices rise for a given resource, product, or commodity. Demand increases as prices fall. On the supply side, the law posits that producers supply more of a resource, product, or commodity as prices rise. Supply falls as prices fall.

The price at which demand matches supply is the equilibrium, the point at which the market clears. The law of supply and demand is critical in helping all players within a market understand and forecast future conditions.

The Right Stocks for Swing Trading
The first key to successful swing trading is picking the right stocks. There are two key variables to consider when choosing the stocks to swing trade: liquidity and volatility.

The best candidates are large-cap stocks, which are among the most actively traded stocks on the major exchanges. In an active market, these stocks will have a high transaction volume. If a stock has poor liquidity or doesn't have deep action in a broker's trade book, it may be difficult to sell or may require substantial price discounts to relinquish the shares.

In addition, volatility can be a swing trader's best friend. Without price movement, there are no opportunities to make a profit. While volatility is often thought of negatively, swing trading relies on volatility to create an opportunity to capitalize on the appreciation of a stock's price. The stocks that have the highest volatility may be the most ideal for swing trading as there are the most opportunities for profit.


The Right Market
Stock trading Strategy


Financial markets typically have three prevailing long-term trends: the bear market, the bull market, or somewhere in between. Swing trading strategy is different under each environment.

Bear Market Swing Trading
Bear market swing trading is among the more difficult for natural buy-and-sell trades. In a downtrend environment, equity market prices are decreasing in the long term. Therefore, it is not advantageous to buy a security and hold it with expectations of price appreciation. There are several strategies to circumnavigate this:

Shorten your trade period. Instead of holding for weeks, be prepared to have a quicker turnaround on the securities you are holding.
Hold more cash. Plan on holding back some capital you may otherwise be trading in the event that securities you are holding do suffer material price declines.
Convert to options (by buying puts). Instead of buying now and selling later, the ideal position to hold if you believe prices are declining is to sell a security first, then buy it back later.
Bull Market Swing Trading
Alternatively, to bear markets, bull market trading may be easier. As prices tend to appreciate during these market conditions, it's easier to buy a security and experience a profit a short while later. However, there are a few things to keep in mind when swing trading during bullet markets:

Entry points are higher. After liquidating your position and capturing profits, chances are greater that general market securities are now more expensive if broad markets have appreciated. Be prepared to pay higher prices for securities.
Bad habits are formed. It's often said that bad trading habits are formed during bull markets. Continue to do due diligence and market research on the best securities to hold; while it may seem like every security is a winner, this won't always be the case.
Consider leverage. Leverage trading is not for everyone, and consider your risk appetite prior to leveraging. However, if you are confident in continual appreciation of the markets, you may be able to multiply your position through leverage.
In-Between Market Conditions
The best swing trading conditions occur when financial markets are trading sideways. When the market is transitioning between bear and bull markets or when the market is facing broad uncertainty, the best positions often present themselves for swing trading. Several items to consider include:
Stock Strategy



Volatility is good. When markets are volatile in both directions, the best swing trades are to be had. When volatility is strictly in one direction (like in bull or bear markets), it is often more difficult to pull off trades.
Conditions are safest. Not all swing trades work out. In the event you're stuck holding securities, chances are that neutral market conditions will minimize your losses. Instead of being stuck with securities during strong downtrend conditions, there is often more likelihood of prices rebounding.
The time frames that you should use for swing trading are an hour, four hours, daily, and weekly.
Using the Exponential Moving Average
Simple moving averages (SMAs) provide support and resistance levels, as well as bullish and bearish patterns. Support and resistance levels are often useful information when determining a course of action. Bullish and bearish crossover patterns signal price points where you should enter and exit stocks.

The exponential moving average (EMA) is a variation of the SMA that places more emphasis on the latest data points. The EMA gives traders clear trend signals and entry and exit points faster than a simple moving average. The EMA crossover can be used in swing trading to time entry and exit points.

A basic EMA crossover system can be used by focusing on the nine-, 13- and 50-period EMAs. A bullish crossover occurs when the price crosses above these moving averages after being below. This signifies that a reversal may be in the cards and that an uptrend may be beginning.

Read more on: Https://stockstrategy.net

Top Companies by Stock Price
The most expensive publicly traded share of all time is Warren Buffett’s Berkshire Hathaway (BRK.A), which was trading at $458,675 per share, as of January 2022. Berkshire hit an all-time high on Jan. 18, 2022, at $487,255.
1
Thanks to spectacular shareholder gains and the idiosyncrasies of its founder, this share value is unlikely to be matched by anything other than continued gains in Berkshire’s share price.

The next company behind Berkshire, in terms of nominal share price, is NVR (NVR) at $5,154.98 per share as of January 2022. Then there is the Seaboard Corporation (SEB), which was trading at $3,731.02, and Amazon.com (AMZN) at $2,852.86, followed by Alphabet, Inc (GOOG) at $2,607.03 a share.
2


Top Companies by Market Cap
By market capitalization, as of January 2022, Apple (AAPL) is the biggest company at $2.652 trillion, followed by Microsoft (MSFT) at $2.222 trillion, Google (GOOGL) at $1.725 trillion, Amazon.com (AMZN) at $1.446 trillion, Tesla (TSLA) at $947.92 billion, and Meta (META), formerly Facebook, at $843.34 billion.
2

Back in 2007, Chinese energy giant PetroChina (PTR) reached an estimated market value of around $1 trillion. However, this valuation didn't stick. As of January 2022, PTR's market capitalization stood at just $146.95 billion.
3 https://stockstrategy.net/
Stock Strategy


Stock trading Strategy


Top Companies by Revenue
In terms of the biggest global companies by revenue, Walmart (WMT) comes in as number one—according to the Fortune 500 list. Walmart's revenues were $523,964 billion in 2021. Behind Walmart was State Grid with $383,906 billion in revenues, followed by Amazon with $280,522 billion, and China National Petroleum at $379,130 billion.
4


Sinopec Group ranks fifth with $407,009 billion in annual revenues, and the sixth and seventh spots are covered by Apple and CVS Health with $260,174 billion and $256,776 billion in yearly revenues, respectively.
4

Based on only U.S.-headquartered companies' 2020 performance, Walmart still has the top spot, while Amazon comes in second. Exxon Mobil ranks third and Apple ranks fourth. Healthcare companies take up the fifth, seventh, and eighth spots: CVS, UnitedHealth Group, and McKesson, generating $256.78 billion, $242.15 billion, and $231.05 billion, respectively.
5

Berkshire Hathaway ranks sixth with $254.62 billion in annual revenues, and the ninth and tenth spots are covered by AT&T and AmerisourceBergen at $181.19 billion and $179.59 billion in yearly revenues, respectively.
5

Based on only U.S.-headquartered companies' 2019 performance, Walmart still has the top spot, while ExxonMobil (XOM) comes in second with $290.21 billion a year in revenues. Apple ranks third with $265.59 billion and Berkshire Hathaway fourth with $247.84 billion. Healthcare companies take up the sixth through eighth spots: UnitedHealth Group, McKesson, and CVS, generating $226.25 billion, $214.32 billion, and $194.58 billion, respectively.
5


Top Private Companies
In terms of private companies, Forbes ranks Minnesota-based Cargill as the largest private U.S. company with $134.4 billion in annual revenues. The company has 155,000 employees. Second is Koch Industries with $115 billion in revenues and 122,000 employees. Ranking third is the grocery chain Publix Super Markets, with $44.9 billion in annual revenue and 227,000 employees.
6


The fourth and fifth largest private companies are Mars and H-E-B, which generate $40 billion and $32.8 billion, respectively. Each employs over 100,000 employees.
6
Stock Strategy


Stock trading Strategy



The Bottom Line
On a pure market value measure, Apple has often been considered the most valuable, publicly traded company of all time. Although Microsoft did briefly hit the $2 trillion market cap mark in June 2021. It is certainly possible another company’s market cap will exceed these measures, and maybe—though less likely—another company will surpass Berkshire Hathaway as the highest priced single stock share.

What Are Soft Dollars?
Soft dollars are a means of paying brokerage firms for their services through commission revenue, as opposed to through hard-dollar direct payments.

The investing public tends to have a negative perception of soft-dollar arrangements. Many investors believe that buy-side firms should pay expenses out of their own profits. As a result, the use of hard-dollar compensation is becoming more common.

KEY TAKEAWAYS
Soft dollars are commission payments to a brokerage firm that are used, in part, to pay for other services such as research.
Soft-dollar transactions are frequently criticized for lacking transparency and hiding abuses.
Soft dollars are sometimes defended as providing access to a greater variety of research.
How a Soft-Dollar Transaction Works
Suppose that an institutional investor pays a brokerage firm six cents per share in commissions. However, it might only cost three cents per share to perform the trade. The other three cents are soft dollars used to pay for additional services provided by the brokerage. In exchange for paying these higher fees, the institutional investor might receive access to research. https://stockstrategy.net/
Stock Strategy


Stock trading Strategy


Under the right conditions, none of the above presents a problem for the Securities and Exchange Commission (SEC). The regulator is willing to permit soft-dollar transactions, provided that the investor gets good execution, and the commissions are reasonable.

Criticism of Soft Dollars
Mutual fund investors pay the costs of research and other bundled services provided in the soft-dollar transaction. Yet these costs are not disclosed by the fund. They are simply part of the costs of trades, and they impact the long-term performance of the fund.

Technically, the mutual fund would disclose the hard cost of research in its management fee. However, that charge is not paid from the management fee when it is paid for with soft dollars. The fund managers argue that institutional investors ultimately bear all of the costs. However, using soft dollars to pay for research doesn't allow investors to conduct an accurate cost analysis when selecting the fund.


Soft dollar values are not determinable, nor are they equal. What one investment manager receives in the form of services may differ from what another manager gets. That opens the door for conflicts and abuses. The mutual fund investors never know what portion of their transaction costs are applied to the soft services or their actual investment.

Although soft-dollar transactions are still widely used, there is a growing movement to eliminate them. That is especially true as financial reform and issues of transparency become more important in the industry.

Benefits of Soft Dollars
Soft dollars can provide some benefits to investors. One of the main arguments is that they offer access to a greater variety of research.

For instance, investment advisors can use all the research material obtained through soft dollars to benefit all of their clients. According to defenders of soft dollars, eliminating this practice could hinder research efforts by investment advisors and lower returns for their clients. https://stockstrategy.net/
Stock Strategy


Stock trading Strategy



Example of Soft Dollars
A mutual fund may offer to pay for research from a brokerage firm by executing trades at the brokerage.

Assume that a large-cap value fund wants to buy some research from XYZ Brokerage Firm. The fund may agree to spend at least $10,000 in commissions for brokerage services in return for the research, which would be a soft-dollar payment. If the fund simply wanted to buy the research, it might have to pay the brokerage firm $7,000 in hard dollars (cash) instead.

Real-World Example of Soft Dollars
In 2013, the SEC levied sanctions against New York brokerage firm Instinet, LLC. Instinet did not flag payments of more than $400,000 in soft dollars to San Diego-based advisor J.S. Oliver Capital Management. However, there were clear signs that the money was used for dubious purposes and not properly disclosed to clients.

The SEC found that associates at J.S. Oliver Capital had misused the soft-dollar payments. Ultimately, the SEC ruled that Instinet overlooked the misuse of the soft dollars and settled with the company for about $800,000.