Trading types

There are four basic trading types from the viewpoint of duration of positions deduction:

- Day trading is trading in great amount of securities with fixing of small price changes;

- Intraday is day trading that presupposes opening and closing of most trading positions within the trading day;

- Short-term trade is trading lasting for a few days;

- Long-term trade is tradings at which the opened positions hold more than a month.

The choice of trading type to a large extent depends on player character, available free time and size of account.

If you choose a qu arterly game,

you can consider oneself an investor.

A long-term purpose of investor is profit gaining. He carefully chooses stocks for his portfolio, diversifies risks, studies financial statements and indices

of companies.

The evaluation of stocks by an investor has rather fundamental, than technical character.

An investor listens to analysts' opinion.

Trader prefers different types of short-term trading, he watches prices' fluctuations during a day and earns by conducting large volume of transactions. At decision making he often follows t he signals of technical analysis systems and information from hot news.

Trader, according to the defining dictionary, is the worker of broker company, bank or other financial structure directly participating in exchange trade. However, most traders in the real life are people, working for themselves and risking only their capital. Traders take special pleasure in the process of trade and profit gaining "from air".

   Stocks: types of prices, positions, marginal crediting

Stocks during trades are presented by three prices:
• by bid price – price a buyer wishes to pay for a stock;
• by ask price – price a stockholder wishes to sell it;
• by last trade price.
In trades on an exchange take part great number of sellers and buyers at once, each of them announces own supply and demand price.

Thus, the bid price is considered the best at the moment offer from a buyer, and the ask price

is the best offer from a seller.

The difference between bid and ask prices creates the so-called spread. Spread of high liquidity securities, as a rule, is small; at low liquidity it can be very substantial.

Conducting business with securities, in most cases, you can use not only your funds, but borrowed also – broker facilities.

You borrow some funds from a broker, necessary for stocks purchase, the same increasing the sum of your investments and profit possibility. When you make transactions using borrowed funds, it is called the short trade, or marginal trade. Loan that you repay during a day is usually floated by a broker free of charge. At loan transfer for the next day, you pay a percent until the loan will not be fully floated.

Short sale of stocks or short sale

Trading in stocks, you can open one of two positions:
• "long", that means

purchase of securities;
• "short", that means that you sell securities in anticipation that their price drops.

There is a question: how to sell what you do not have ? The rules of exchange trading assume a sale of what does not belong to you. Such operation is called "short sale". As if you take securities out a loan at a broker, obligating to repay them by the fixed date and pay a bank percent for a loan and brokerage fee. As security are funds on your account.

   Stock market indices

Stock m arket index is

a number reflecting the condition of certain group of stocks. Thus, not index value itself is of interest but its change in time. This change allows to judge about general direction of market movement, averaging dynamics of separate stocks.

As there can be many methods of averaging and criteria for the choice of the evaluated stocks, there are also a great number of stock indices on each market. Many brokerage offices and news agencies estimate their own indices.

As index is estimated by some selection of stocks, it is accepted to cite their amount at the end of index name: S&P 500, DJIA 30.

Stock indices of one market are always strongly correlated regardless

of selections and methods. Almost all indices increase on the growing market, but their speed of change is different. These differences of indices can be used for forecasting.

For example, if a new index maximum of "blue chips" is not confirmed by a new maximum of the wider index, so drop on the market is possible.

Most known stock indices of the USA: DJIA, S&P, NASDAQ.
DJIA index (Dow Jones Industrial Average) appeared in 1897. In the present view is calculated since 1928 as weighted arithmetic average of stocks' price of 30 largest corporations.

Among the professionals of stock market the most popular are indices, calculated by Standard & Poor's agency. These are indices, weighed by market capitalizations.

S&P 500 and S&P 100 are the most popular, and are calculated by stock prices of the USA largest corporations.

Also there is family of NASDAQ stock indices. If NASDAQ name is given without extension – NASDAQ Composite index

is meant, including the overwhelming majority of stocks traded in this system. Mainly, these are companies, specializing in high-technologies: in production of computers and software, in telecommunications, biotechnologies etc. Beginning of indices calculation – on February 5, 1971, initial value – 100. NASDAQ 100 index includes 100 largest companies.