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TPR Education > Stock Market 101 > Flashcards

Stock Market 101 Flashcards

1
Q

How many major stock exchanges are there around the world?

A

60

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2
Q

How many exchanges are in the exclusive “$1 Trillion Club?”

A

16

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3
Q

List

All the stock exchanges in the exclusive $1 Trillion Club

A
  1. Austrailian Securities Exchange
  2. BSE India Limited
  3. Deutsche Boerse
  4. Euronext
  5. Hong Kong Stock Exchange and Clearing
  6. Japan Exchange Group
  7. Korea Exchange Group
  8. London Stock Exchange
  9. NASDAQ
  10. NASDAQ OMX (Nordic Exchange)
  11. New York Stock Exchange
  12. Shanghai Stock Exchange
  13. Shenzhen Stock Exchange
  14. SIX Swiss Exchange
  15. Stock Exchange of India
  16. TMX Group Japan Exchange Group
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4
Q

How many exchanges does Asia have?

A

17

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5
Q

How many exchanges does Austrailia have?

A

2

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6
Q

How many exchanges does Europe have?

A

17

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7
Q

How many exchanges does Africa have?

A

5

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8
Q

How many exchanges does North America have?

A

5

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9
Q

How many exchanges does South America have?

A

5

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10
Q

What does the acronomy NYSE stand for?

A

New York Stock Exchange

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11
Q

List

Three unique features about the NYSE

A
  1. Includes +3300 stocks of multiple companies
  2. Daily trading volume ranges from 2 - 4 billion per day
  3. Stock symbols are mostly composed of three letters (DIS, HES, JPM, WMT)
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12
Q

What is the S&P 500?

A

It is a “broader market” index of the 500 largest companies in the United States.

It can be found in the NYSE.

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13
Q

Why do people watch the S&P 500?

A

Because the United States stock exchanges account for more than 60% of global market capitalization. And these companies represent the broader market.

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14
Q

What type of buyers use the S&P 500 as an indicator?

A

Institutional buyers

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15
Q

Why is the nickname for the S&P 500?

A

SPY

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16
Q

Who is considered an institutional buyer?

A
  1. Hedge fund managers
  2. Retirement fund managers
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17
Q

Why is the S&P 500 an important indicator for institutional buyers?

A

Because they like to buy stocks when they see the broader market going in a certain direction.

They like to sell stocks when they see the broader market going in a certain direction.

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18
Q

Define

What is the NASDAQ?

A

It is another “broader market” index.

It can be found in the NYSE.

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19
Q

List

Three unique features about the NASDAQ

A
  1. Includes +3100 stocks: mostly high tech
  2. Daily trading volume ranges between 1 - 2 billion shares
  3. Stock symbols are mostly composed of four or five letters (AAPL, NFLX, AMZN, EBAY)
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20
Q

Define

Dow Jones (DJIA: Down Jones Industrial Average)

A

It is a “broader market” index that consists of thirty large-cap, blue-chip companies that are, for the most part, household names.

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21
Q

List

What are the DJIA sector allocation categories?

A
  1. Industrials
  2. Consumer services
  3. Technology
  4. Healthcare
  5. Financials
  6. Oil & gas
  7. Consumer goods
  8. Telecommunications
  9. Basic materials
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22
Q

What are the Pre-Market trading hours?

A

7:00 AM to 9:30 EST

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23
Q

Who trades during the Pre-Market trading hours?

A

Institutional investors

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24
Q

What are the regular stock market trading hours?

A

9:30 to 16:00 EST

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25
Q

What are the After-Hours trading times?

A

16:00 to 17:00 EST

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26
Q

Who trades during the After-Hours trading hours?

A

Institutional investors

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27
Q

Define:

Long

A

Trading with the assumption that the price will increase.

Once the price increases, you sell the shares at a higher price to turn a profit.

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28
Q

Define:

Short

A

Trading with the assumption that the price will decrease.

You sell shares at a higher price so you can buy them back at a later date for a lower price.

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29
Q

List

What are the types of trade entries?

A
  1. Buy stock long
  2. Sell stock short
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30
Q

Define:

What are the type of trade exits?

A
  1. Sell stock that you have purchased.
  2. Buy stock that you shorted.
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31
Q

Define:

What’s another phrase for trade exit?

A

Closing position

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32
Q

List:

Three basic trading orders

A
  1. Market order
  2. Limit order
  3. Stop order
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33
Q

Define:

Market order

A

A buy or sell order to be executed immediately at current market price.

As long as there are willing sellers and buyers, market orders are filled.

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34
Q

When is it appropriate to execute a market order?

A

When you are seeking certainty of execution rather than price of exectuion.

The certainty of execution is the top priority.

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35
Q

What is the simplest of all order types?

A

A market order

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36
Q

Define:

Limit order

A

An order to buy or sell at a specified price or better.

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37
Q

Define

Buy limit order

A

An order to buy that can only be executed at the specified limit price or lower.

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38
Q

Define:

Sell limit order

A

An order to sell that can only be executed at the specified price or higher.

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39
Q

What is another phrase for Stop Order?

A

Stop-loss Order

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40
Q

Define:

Stop order

A

An order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price.

41
Q

How does a stop order work?

A

When a stock reaches the stop price, the stop order becomes a market order.

42
Q

List:

What are the types of charts?

A
  1. Line charts
  2. Bar charts
  3. Candlesticks
43
Q

On bar charts, what side of the bar do the openings happen on?

A

The left side

44
Q

On bar charts, what side of the bar do the closings happen on?

A

The right side

45
Q

Why are candlesticks preferred for chart analysis?

A

Because they have colors. They allow the trader to visually see the trends of the market.

46
Q

What are the thin lines on the top and the bottom of the candlesticks called?

A

Wicks

47
Q

True or False:

Candlesticks show the emotions of the investors behind that particular stock?

A

True

48
Q

Define:

What’s another phrase for the collective emotions of investors?

A

Market sentiment

49
Q

What does a green candlestick represent?

A

Uptrend

50
Q

What does a red candlestick represent?

A

Downtrend

51
Q

What does the length of a candlestick bar tell a trader?

A

The intensity of the buying or selling pressure.

52
Q

What do small candle bars tell you about the market?

A

It’s normal. It tells you that the stock has controlled movement. It is incrementally increasing or decreasing.

53
Q

What do consecutive red bars tell you about market sentiment?

A

It tells you that people are scared. So, there is selling pressure.

54
Q

What do long, red consecutive bars tell you about market sentiment?

A

It tells you that people are panicking.

55
Q

List:

The six most important candles on a technical analysis chart.

A
  1. Engulfing bar
  2. Hammer/ Hanging man
  3. Harami
  4. Shooting star
  5. Spinning top
  6. Doji
56
Q

Identify:

What is the name of this candlestick?

A

Engulfing bar

57
Q

Identify:

What is the name of this candlestick?

A

Hammer/Hanging man

58
Q

Identify:

What is the name of this candlestick?

A

Harami

59
Q

Identify:

What is the name of this candlestick?

A

Shooting star

60
Q

Identify:

What is the name of this candlestick?

A

Spinning top

61
Q

Identify:

What is the name of this candlestick?

A

Doji

62
Q

What is the difference between a hammer and a hangman?

A

A hammer does not have a wick on the top of a candle bar whereas the hangman has a small wick on the top of the candle bar and a significantly longer wick on the bottom.

63
Q

List:

What are the four components to compounding wealth?

A
  1. Influence
  2. Income (legal tax reduction & cost of living savings)
  3. Insurance
  4. Investment
64
Q

What does technical analysis tell a trader that fundamental analysis does not?

A

It tells the trader the motions, movement, and emotions in a particular stock or broader market.

65
Q

Why is pattern recognition important?

A

Pattern recognition tells you what is happening with a particular stock or broader market so you can accurately predict a movement to earn a profit.

66
Q

What does pattern recognition empower you to do?

A

It empowers you to manage and control your own finances.

67
Q

What does a Doji Star indicate?

A

A reversal.

68
Q

Define:

What is Forex?

A

Forex is short for Foreign Exchange. It is the marketplace where currencies are traded.

69
Q

True or False:

Forex is the largest, most liquid financial market in the world.

A

True

70
Q

What is unique about Forex trading?

A

There is no central marketplace for foreign exchange because it is international.

71
Q

How is currency traded in Forex?

A

Over the counter (OTC) electronically

72
Q

Define:

What is over-the-counter (OTC) trading?

A

All transactions occur via computer networks between traders around the world rather than one centralized exchange.

73
Q

What are the trading hours for Forex?

A

24 hours per day

74
Q

In Forex, how many days per week are trading days?

A

5.5 days

75
Q

List:

The financial centers that trade worldwide currencies.

A
  1. London
  2. New York
  3. Tokyo
  4. Zurich
  5. Frankfurt
  6. Hong Kong
  7. Singapore
  8. Paris
  9. Sydney
76
Q

How many time zones are covered in Forex markets?

A

All time zones

77
Q

What is the daily trading volume of Forex?

A

$4.9 trillion per day

78
Q

Define:

What is the Futures market?

A

An auction marketplace in which participants buy and sell commodity and futures contracts for delivery on a specified future date.

79
Q

What is the purpose of a future’s market?

A

To avoid market volatility; producers and suppliers of commodities negotiate contracts with an investor who agrees to take on both the risk and reward of a volatile market.

80
Q

On the site Barchart.com, where can you find the exchange and the trading hours of a commodity?

A

Under the contract specifications section.

81
Q

How do you calculate your risk/reward ratio for any system?

A

Divide the Take Profit Distance by the Stop Loss Distance.

82
Q

List:

The features of swing trading.

A
  1. Minimal time commitment
  2. Larger profit targets
  3. Low-stress alternative to fast-paced trading associated with day trading
  4. Reduce number of trades and increase your wealth
83
Q

List:

The features of day trading.

A
  1. No holding positions overnight reduce risk)
  2. Ability to capitalize on smaller market movements more often
  3. Complete control of your trading positions
  4. Smaller stop loss
84
Q

List:

What are the three components of a trading plan?

A
  1. Risk management
  2. Money management
  3. Monthly goals
85
Q

What does risk management allow you to identify?

A

How much money you are risking per trade.

86
Q

What does knowing how much money you are risking per trade allow you to know?

A
  1. How many times you can lose on a trade.
  2. What ratio of reward it takes for you to break even.
  3. What ratio of reward it takes for you to make a profit.
87
Q

What does money management include?

A
  1. Analysis of whether or not you are meeting your per-trade goal.
  2. Knowing when to stop trading after you have met (and exceeded) your per-trade goal.
  3. What to do with excess per-trade profits.
88
Q

What does monthly goal management include?

A
  1. Analysis of whether or not you are meeting your monthly income goal.
  2. Knowing when to stop trading after you have met (and exceeded) your monthly income goal.
  3. What to do with excess monthly income.
89
Q

What are the trading hours for the Futures market?

A

There is no set trading hours. Each commodity has its own exchange with respective trading hours.

90
Q

Define:

Short selling

A

A trading strategy that traders use when they believe that a stock, commodity, or forex pair is overpriced or is hitting a form of resistance. So, their anticipation is for the stock, commodity, or forex pair to go lower than its listed price.

91
Q

Define:

Covering

A

Short selling term where the trader bought shares of a stock, commodity, or forex pair from a broker at one price and bought it back at a lower price when the stock downtrends in the trader’s favor. Then the trader gives the remaining shares back to the broker and capitalized on the profit in between.

92
Q

How does the short selling process work?

A

The broker has shares of stocks and the trader needs to borrow shares to short sell.

  1. Step one: Short seller borrows a stock from the broker.
  2. Step two: Short seller immediately sells the stock on the stock market.
  3. Step three: Short seller buys back the stock from the stock market.
  4. Step four: Short seller returns the borrowed stock to the broker.
93
Q

What type of account do you need in order to short sell?

A

A margin account

94
Q

What steps happen simultaneously in the short-selling process?

A
  1. Step one: Short seller borrows a stock from the broker.
  2. Step two: Short seller immediately sells the stock on the stock market.
95
Q

What is the only step that the trader has control over in the short-selling process?

A

Step three: Short seller buys back the stock from the stock market.

96
Q

What step happens automatically in the short-selling process?

A

Step four: Short seller returns the borrowed stock to the broker.

97
Q

Explain the following diagram.

A

This diagram explains the process of short-selling. Step one and two demonstrates what happens when the trader hits the “short” button or “sell” button on their trading platform. Steps three and four demonstrates what happens when the trader hits the “buy” button on their trading platform as part of the short-selling process.

98
Q

What is the core function of a broker?

A

To hold stocks for traders and investors to buy and sell.

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