New answers tagged

1

It depends on how you define alpha. Because benchmarks generally take some time to include newly issued securities, it is theoretically possible for active managers in aggregate to beat their benchmarks. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2849071 However, you are correct that for every $1 an investor is overweight a security relative to a ...


0

You mentioned beating the market by $200 in returns. If you cash out then that $200 gain comes from someone else (or whatever your profit is based on your cost basis). OTOH, if you have a paper gain in account value, that's not actual money. For example, a stock IPOs at $20. When it opens for trading, the first trade is $25. No one makes $5 of real money ...


1

Computers don't trade, because they don't own money. They are being programmed to execute trades for a person or company. Regarding 'after hours trading': There is no difference in who trades 'after hours' versus 'within hours' - you too can sign up with a broker to trade 'after hours'. Maybe not your broker, because he doesn't offer it, so try another one. ...


2

Will the stock then rationally be worth $102? No. If there's no change in revenue, it means the purchasing power of the revenue is decreased, its nominal value being the same. The stock will be worth $100. However, most companies see increased revenue in an environment having inflation. Even if the real value of the revenue is the same, its nominal value ...


3

Why are computers allowed to make trades in a stock market regime that's regulated to be operated by humans? Where does it say that people can't use computers to trade? Looking at a stock price chart (TSLA) I can see there is a so called "after market" in which trading is not possible but where the price does fluctuate. "Stock price ...


1

There is zero direct connection between inflation in your country and a generic stock. There are some companies that have portions of their business that operate well in a high inflation environment, and those that operate better in a low inflation environment. But that doesn't mean that all stocks do this. The cause of the inflation can even influence how a ...


1

The value if a company is the present value of all future cash flow. So if all else is equal, then there would be no change in share price. It's possible that an unexpected change in inflation could change the discount rate, but since inflation is typically priced into stocks anyway, there would be no change in stock price just because inflation occurred. ...


1

Some market makers do probably have positive overall exposure to the market, but they can do a lot to avoid this situation. They make markets in many different assets at the same time, so they don't have too much concentrated risk in any one asset. That is, their inventory becomes a large, diversified basket similar to the overall market. They actively ...


0

Greed, scam, overvaluation and Gordon Gekko. No one knows what is correct value of a stock and no one can explain what drives prices. In its most basic form it's good old gambling.


4

This is called front running. Whether it is legal or not depends on whether it is based on public or private information. If a broker does it on the basis of a client's order, it's unethical, illegal, and subject to all sorts of sanctions, though certainly not impossible. If a a high frequency trader (HFT) pays for fast computer access to multiple exchanges, ...


0

I'm surprised that no one has recommended that you read "The Intelligent Investor" by Graham. That suggestion usually makes me laugh because it's not for noobs. Be that as it may, opinions on how to invest and what to invest in are as plentiful as the day is long and what suits one person may not suit another. The simplest advice that I can ...


1

I'm going to limit the answer to Mutual Funds, since ETF shares are not bought from the fund but are exchanged between investors, so the money going to the fund itself follows a different mechanism (a single "authorized participant" handles the inflows to the ETF). In other words, when you buy an ETF, you're likely buying it from someone else, not ...


0

Mutual funds and ETFs follow an investment objective or benchmark. If they didn't rebalance or buy/sell shares shares regularly, their NAV (net asset value) would stray too far from the market price and the tracking error would increase. These funds make money through the fees they charge on assets under management, not the performance of their portfolio.


4

It is two slightly different ways of specifying how much you want to buy when placing a market order (i.e. one that is satisfied at whatever the current price is). For simplicity, I'm assuming there's no commission or other costs associated with dealing. Suppose you were interested in a stock that is currently priced at $30 (offer price), and you've got &...


3

It looks like the share price has hit the "Upper Circuit Limit", so trading is suspended for the day (or, possibly, there can be no sellers, only buyers). The BSE page for Alok is currently (14:21 GMT, 26th June 2020) showing 18 notifications, the latest of which is "Touched Upper Circuit Rs. 48.20: A circuit limit (upper or lower) is a limit ...


3

As other answers points out: if this exists - it's not shared. The more widely used they are, the less valuable they become. Additionally, nobody really knows what's going to happen with any given stock - and if they did (and acted on that information) there are other problems. Oh, and because people like Elon Musk can tweet that Tesla is over priced and ...


2

Imagine the stock market is a big chess tournament, and every time you win a chess match, you win money, and every time you lose a match, you lose money. Many humans are playing in the tournament, but some people are using software to play instead, and those with software are winning against those without. Once the software is shared, eventually everyone ...


-3

Predicting the stock market is easy If you have the right information, it's not hard to see where a stock is going to go. And the information isn't even that hard to find. Just watch the news and monitor the markets. The trick is getting that information before somebody else sees where the market is heading and makes a trade before you. Stock information ...


0

There's not a lot that you can infer from a partial snapshot of the order book. It appears that the market is .375 x .385 and that there are 22 orders that were placed ahead of you. How much volume is ahead of you is unknown since you only displayed lines 18 to 27 of the sell side. Orders go on the order book based on price and time, sort of first come, ...


7

It's the Fed (singular), short for the Federal Reserve, the US central bank. The Fed has unlimited ability to lend money and buy and sell securities. It electronically creates the dollars to do this. Normally it uses this power to control the short-term interest rate (which determines how cheaply businesses and consumers can borrow). But especially in a ...


2

These tools simply don't exist. Many will try to sell you them, but in reality they don't work in real life. I worked in a hedge fund that spent years making these and the reality is that the vast majority of tools simply don't make money in real life. They don't take into account multiple risk factors, trading costs, legal issues, etc etc.


24

They exist, but it's not for you to buy. Here is a story about Ke Xu, quantitative analyst. Basically, the algorithms exist, but they are closely guarded secrets. Someone tried to steal them and got sued into the ground, along with travel bans, extradition, repeat jail time, private detectives tracking their parents in CHINA (Company was in UK). The legal ...


54

These tools exist (see Nelson's answer), but they aren't available for purchase because once they become publicly available, they cease to work. The logic goes something like this. Suppose the stock of company A is currently trading at $100 each. The software predicts that it will go up to $120. Therefore you buy. Once you buy, you move the market. You can ...


3

However, I don't see many such commercially available online tools that people could use to predict upcoming values regardless of the liability of the results given. Is there any reason for this ? Because every stock investor has a simple, free tool to predict upcoming values of stocks. It's called compound interest and the formula is: P = P0 * k^t Where P ...


95

If one could build a model for accurately predicting future stock prices then: Why would anyone share it? Wouldn't there be some individuals cornering the market, making people like Peter Lynch, Warren Buffet and a host of very successful hedge fund managers look like amateurs? There are many commercially available tools such as you describe. They are ...


3

Neither. If Person A, B, and C all transacted on the same trading day, the volume is 1 share + 1 share = 2 shares. Volume is not in $. Volume resets to 0 after each trading day.


0

Forex is like trading two stocks against each other in a way. Where stocks have a companies financial reports, forex has a countries report. But stocks can also be affected by a countries economical health (Apple for example since it is a large part of the SP500 index) There is a US Dollar Index (58% is EURUSD) which can be traded as "the USD". ...


1

It means that insiders (directors, senior officers) have significantly divested in their Zoom shares. See on this website, which appears to aggregate filings to the SEC on insider trading and which shows significant insider selling activity in the past few months. As for the stock being worth buying or not, that is your call. Insiders may have information we ...


0

It is probably freely invented, because it sounds good and gives clicks. Here is a recent articel from FORBES, where they write about Barclay research that looked into exactly that: "are retail Robinhood investors moving the markets?": https://www.forbes.com/sites/sergeiklebnikov/2020/06/12/no-the-market-is-not-rallying-because-of-robinhood-traders-...


1

In the past 20 years I have traded odd and mixed lots many, many times and I have never not had an order filled in toto if NBBO size was larger than my order. It may be because my broker offers Smart Routing but I can't state that this is true across the board. Here's the information that they provide for traders: An odd lot is a number of shares less ...


0

It shouldn't matter, your order will get executed at the national best bid/offer What is the National Best Bid and Offer (NBBO)? The National Best Bid and Offer (NBBO) is a Securities Exchange Commission (SEC) regulation requiring brokers to trade at the best available (lowest) ask price and the best available (highest) bid price when buying and selling ...


1

I believe all orders are ECN, not only those that are <100 shares. You should not have any problems when trading US stocks that have high liquidity. ie : Apple, Google, etc. You might get below average prices if you are selling or buying stocks that have a wide spread between the bid/ask price. In order to reduce this risk you can do a limit order on your ...


-1

The efficient market hypothesis implies that the key driver of stock price changes is not trading volume but predictive information. A stock price will move whenever there is news in any relevant scope affecting the value of the company, from news about the specific company to news about the global economy. For example, if a US company has customers or ...


-1

One word. Liquidity. You can see the same effect during normal trading hours if you look at illiquid stocks (e.g. the so-called "penny stocks"). The fact of the matter is that pretty much all the big boys (the institutions) only play during normal hours, and indeed the same applies for the vast majority of retail investors (retail = private individuals, Jo ...


1

As the end of the day approaches, traders head home. They pull their orders which results in fewer participants in the auction. With fewer open orders, the order book thins out, resulting in less liquidity and depending on the stock, possibly increasing the price distance between orders. Any surge in buying volume, albeit small as compared to regular ...


-1

You are missing a very important detail about leverage. Leverage requires you not just to get the direction right but also the timing. Let's try some math: Some asset goes down 10% one week then up 12% the next week. You have no leverage. You invested $1,000. You went down to $900 then up to $1,008. You made 0.8% in two weeks. Not too shabby. You do the ...


4

You appear to be severely underestimating the risk associated with (a) investing with leverage; and (b) shorting stock. As well, you defend your actions by saying you 'agreed with the specialists', but keep in mind that there is never unanimous agreement over what will happen in the market, and even if someone knew with 75% certainty that a stock will go ...


4

https://blog.mint.com/investing/the-dangers-of-leverage-and-some-solutions/ explains this pretty well. It's a lot like other risk calculations in that you can get bigger gains with leverage, but losses can also be larger. The other people whose money you're using are also going to want that money back whether you are operating at a gain or a loss. But ...


-1

My answer in four words: “Don’t fight the Fed”


1

An old stock market cliche' is that "A rising tide lifts all boats." Major market indexes capture the mood of the market and therefore historically, over long periods of time, they are highly correlated and generally have a similar return. During shorter time periods (day, week, month), the return may vary a bit. The NASDAQ and the S&P 500 contain ...


1

Your screenshot shows only one day. If you look over a period of several years, you should see bigger difference. There are certain periods of time where the correlation between individual stocks is high, which is why they move in lockstep. Also, if you look at the composition of the three indexes, you'll see that all of them include the tech stocks that ...


1

BATS and NYSE ARCA are considered MTFs (multilateral trading facility) under MiFID II. The "listed only" seems to refer to the type of order routing. I believe it means your order will only be re-routed to listed exchanges like NYSE and NASDAQ, as opposed to dark pools and other trading venues. For a definitive answer, I'd suggest calling your broker's ...


2

Because, and it's impossible to overstate this, the current price of the stock market contains all the public information from the entire world about what price it should be. If information dictated that the stock market was going to be 2% lower tomorrow, everyone would sell until it was at around that price. The stock market is almost impossible to ...


0

Because of day traders chasing short term gains First of all I agree with your premise that the stock markets are more bullish than common sense would dictate at the moment. Obviously there isn't necessarily a direct correlation between the health of the economy and the stock markets, but considering the likeliness of near future redundancies and small ...


0

The stock market's fall may have you on edge. But if your long-term goals didn't change today, your investments probably shouldn't either. Most People Should Sit Still. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent.


1

Total worth of a company itself is a debatable concept. If defined as its market capitalization, then it is typically calculated as number of shares outstanding * current market price of a single share. However, even this calculation is very flawed if you are thinking about it in terms of "what it would cost to purchase the company outright". There is ...


2

For instance if a company is listed on multiple exchanges, then the Mkt cap would indicate the total worth on that exchange. No, this is not true. Shares are shares - a company is not "split" into pieces on multiple exchanges. For instance, if a publicly traded company has a Market cap of about $2M, I would have assumed that if somebody was in the ...


1

Because there may be opportunities in the drop. Take the current pandemic. People have been staying home, which means stocks like Disney that rely on people going somewhere are tanking, while stocks like Amazon that don't need people to go anywhere are doing really well. That's a simplistic (and not entirely accurate) example, but there are usually two sides ...


5

Confidence OK, so you are 24. You know investing exists... you know you "ought to" do it, i.e. it beats the 1% the bank pays. But you don't know a darn thing about it or how to do it. What you do "know" is that investing is an extremely complex and byzantine world... with lots of dangers. You don't feel confident to try it on your own. You and most ...


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