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Hey, this is Sasha Evdakov.
Today we'll go through getting started with trading, basics, resources, how the market works and how you make money from the market.
Live sessions: If you want to join me live in a live class, by all means, take a look at the bottom of the video in the description or at the end of the video.
There's a way to sign up to the newsletter list where you can get access and get the link to where you can register and attend a live class.
Things I've done recently: Before we get started, I do want to give you a quick news announcement. It's all about what I've been doing lately. If you take a look at my Facebook page or even the Twitter feed I've been putting on some quick videos. Usually less than five minutes on a few stocks.
If you want to join me there feel free to join me on those platforms (Facebook or Twitter) at critical charts.
What Will You Learn - Stock Market
If you're brand new to the stock market, this will give you an overview. Maybe you're more advanced. That way you might want to skip this post.
In either case, if you're new this will give you:
- some insight into some of the tools
- some of the resources that I use
- some of the different brokers
- some concepts about how the market works
We're going to take a look at what trading is all about. That's the goal to get your feet wet to move forward and progress in this business. If you're brand new, you're at the right place.
You might be a very brand new beginner who's completely new. Or you might be someone who's more intermediate. You might be someone who already has a brokerage account. But you're unsure of moving to another broker. You might be someone who's already been placing a few trades, but are struggling.
We're still at the getting started phase. There's still a lot of segments and components to getting started.
You'll need to do some additional research and some extra homework to continue on this progress.
When we go through this segment, we're going to cover:
- some primary resources (books, broker, tools internet, computer)
- how trading works
- how you make money
I want to make sure we cover a few of these things. At least that way you can go in more detail and do your due diligence and research.
The first thing that I want to do is keep in mind that all the things and recommendations here as we talk about any stocks or brokers are illustrative. You need to do your research and due diligence. I don't know you personally. I don't know your risk tolerance.
You have to do your research. Nothing here is recommendations to buy, sell or do anything without your study. Trading can have some severe consequences.
Before Getting Started With Stock Market
I highly recommend you take a look at the tradersfly.com and hit the Start Here button. That's what I recommend if you're brand new.
In here I've been building out an arsenal of videos especially for new traders that are getting started videos. They're not all fully complete at this exact moment, but we're getting there and slowly building this up.
I think having these videos will give you a massive insight into getting started in the stock market and evolving yourself. That's a good starting point.
There're also some recommended books and things that you should read. A few of these are my books. But there's a few also that I highly recommend that are not my books. I still believe they're good books to read.
These are good starting books. I will be building out a much more extensive book reading list that I think is good for traders in the future. That'll be additional reading that you should take on.
They're not all going to be about technical analysis or in-depth studies of indicators. However, it will give you a starting point to get your feet wet. That way you can move in one direction or another.
Then there are some books for practicing technical analysis. I've put these together simply because I think Encyclopedia chart patterns is probably one of the best books. But it's a $60 book, and that's about a thousand pages.
If you want there are a few of my books that you can look at technical analysis. I'm going to add more to this list here shortly. We already have it on the to-do list. It's not there yet, but we're going to add those in soon.
Then there're some video courses for the beginners, private coaching and some brokers to start with. When you're getting started in trading, there are a few things that you need.
One of them is a broker. Now you could direct feed into. I guess you know the trading network, but going through a broker is usually a lot less headache. 99% of the people are going to need a broker.
You do need to trade with a broker. Not to say that it's a broker that's going to do your trading for you. But it's a broker just like you need an internet service provider to access the Internet. There is the same thing here. You need a broker to be able to place trades.
Here're a few recommendations that I have and you can even go into the check the resources page. The reality is the brokers are constantly changing. They're constantly evolving. As you get into the brokers, some of them may change.
You can see there are:
I think trade King is a good one to get started with because their fees are relatively reasonable. They also have good software, panel, and platform. I think it's probably my number one general recommended broker.
All of them are different. It depends on the trading that you're going to do. If you're doing trading that's a little more active, you may want to cater towards a broker that caters more towards active traders — something like an interactive broker.
But if you're a general investor, you could go with like TradeKing. I've even done in-depth reviews on how to open and register an account here. I've shown even how the platform works and how the options platform works.
There're some in-depth things that I've done because I signed up to all of these brokers. I've tried them out, and I've seen what I like and what I don't like.
TradeKing at this moment I think is one of the better ones to go with as far as price to value. There are a few other brokers.
If you look at TD Ameritrade you can see:
- they have $99 for a trade
- if you do options, it's $9.99 plus $0.79 contract
You can compare this to TradeKing. You might go into the pricing, and you can see it's going to be about $5 a trade. Here it's $4.95 plus 65 cents of transaction.
It's much cheaper, but their customer support is also, and their panel is excellent. I do think that TD Ameritrade with their thinkorswim platform is better on the platform side and the tools.
But if you're going to be an active trader the value of that at the beginning is probably not as worth it unless you don't mind putting that upfront cost in there and becoming a little more active.
As you become more active these rates are billboard rates. What I mean by billboard rates is these rates will change. That means if you trade more frequently, they will be cheaper.
Quick example: it's like ordering a thousand business cards versus ten thousand business cards. They will lower your rate which you have to be an active trader. Or more active. Those are some things to take into account.
You're going to have to call them up and ask them are they able to lower your rates. Sometimes they'll say yes. Sometimes they'll say no.
They're going to look into your account and look at how many trades you've done. Once you get those lower rates, you're a much better customer to them. The main reason is that you're active and you're trading more frequently, rather than the mom-and-pop who puts in one trade every two to three months.
They're not going to lower those people's rates. However, if you're trading consistently (100-500 times a month) they're going to lower your rate. All of that depends on if it meets their parameters.
Scott trade is also another good one, but their panel is out of date. They're slowly evolving it, but it's still not a bad one.
What About Internet Acces?
The other thing you need is internet access.
Everybody asks: "What internet access do you need?"
You don't need that fast of internet access. Even if you're doing day trading, the speed of that will have minimal effect on your profits rather than making the right decisions.
You should be more than fine if you have:
- Five megabits per second upload
- 10-20 megabits download
The speed of the internet it's not going to change from your human decision brainpower to make that trade. Instead, you might want to look at an appropriate computer that doesn't lag or have problems.
Quick note: Visit traders fly website and visit training section. Check Buying/Building a Trading Computer.
This is a three-hour course. It's free. Just get on the newsletter list. I think it's six or eight videos about Apple versus Windows laptops and these kinds of things.
You will learn how to put together, choose or select the computer for yourself. In this course, we cover a lot of details, but in general, I'll give you the summary.
I prefer Windows-based systems because they're easy to fix and repair if anything happens you want a Windows-based computer. Setting multiple monitors and screens for trading is easy. You can look at one screen with the charts. You can look at one screen with the process. I try to avoid laptops. They're slower.
You don't need the best computer in the beginning. Something simple average will be exceptional. Because in the end, it comes to learning your trading first. And once you learn then you can improve your tools and equipment. Or if things go it down those are the things that you want to take into account for.
Quick example: One time we were traveling, and we're putting on a lot of trades. When I have a lot of trades on, it freaks me out when I go on vacation. If something happens and we're on a road trip for 5-7 hours what are you going to do if the market starts moving against you?
Having those backup tools, additional cell phones, and additional internet signals can become very important. That's where the more expensive tools help. When you're trading a lot larger, but at the beginning, if you're trading small, I wouldn't worry too much about it. This will give you some insight if you're looking to buy a new computer.
How Does Trading work?
In either case, let's take a quick look at how trading works. Trading it's not too demanding on the surface level. However, it is difficult on the conceptual level. It's hard understanding it and taking action.
There's a quick rundown of how trading works. If you have a company (circle) and Joe and Sam (partners), this is how it works.
These two people owned 100% of the company. Between the two of them - they own 50%-50%.
Each part of this is technically considered a share. If you have your own company and you own 100% of that company than you are an entrepreneur.
But here if we have a partnership, we have two shares. I want to keep it simple. Joe owns one share, and Sam owns one share. If the company's worth or value is $10, that means the value that Sam has is $5. The value that Joe has is also $5.
If they're looking to grow their company one of the ways that they can get money is from a bank. That's a right approach, but you have to pay interest on that. That means that sometimes going to a bank is a little more expensive.
The other approach is what happens on stock trading. Companies go public because what they can do is sell part of their company.
They can sell these remaining shares to other people. Let's say they collect $5 for Jackie and $5 for Tommy.
This makes the company $20. The value of this company now is $20. Now what happens is over time as this company grows Joe and Sam got to keep an extra $5 from each person. The value of the company goes up. But in summary, they feel like they have more money to use to grow the company.
The main reason is that they took an extra $10 to grow the company. You could think of it as $10,000,000. But the value is still the same.
Over time the company may grow. Jackie can decide that she doesn't want to invest in this anymore. This company is bringing in more revenue, but two-three months later she can sell her shares. She can do it for $8.
When she sells it for $8, that means the last value of it takes into account for everybody. And the stock market works on the last value principle. That means every share is now $8.
Everybody's worth $8 because Jackie was able to get $8. Now you have this other guy coming in - call it Peter. He is currently the owner over here. He bought his share at $8. That means $8 times 4 - now the value of the company is $32.
In a small company, this works month after month or every couple of months. It's a slow process. In the stock market world, we have this moving all the time. Shares are constantly being traded and exchanged. That's why we base it on the last price principle. If somebody is trading at $8 now, the price is $8.
If it's $802, it becomes $802. It can be $755 and then it becomes $755. That's why it's always changing all the time moving and wiggling. That's the one way that you can make money from the market. All of which brings me to my next point.
How Do You Make Money in The Market?
You're more concerned about how do you make money. There're a couple of ways. The main way is through value appreciation of the stock price.
This is what most people know when it comes to trading. The value appreciation in the stock price is the most common way that you make money in the markets. That's the first way.
The second way is through dividends. If you don't know what dividends pay attention, it's a payout every quarter that the owners or the company decide to do when they are paying back their shareholders.
Let's say the company is profitable and Joe and Sam who owns the majority of the shares they decide to pay a dividend. Or a payout for being our investor. This is like the bank getting their loan commissioner fees. That's the same thing here. Even though Peter, Jackie, and Tommy want to make value through appreciation, they would also like to get paid for holding the stock. Just like a bank does.
In that respect what happens is Joe and Sam, or the company decides that they're going to pay everybody a dividend based on the number of shares you have.
This is what might be the case:
- Joe had two shares
- Peter had one share
- Sam had three shares
- Tommy had one share
And they decide to pay out a specific dividend - $1 dividend per share. That way Sam would get $3 every quarter. Joe would get $2, and Peter would get $1. Tommy would get $1.
Usually, it's like something like 35 cents or 22 cents per share. Keep in mind that we're talking simple numbers here. Joe might own 2,000 shares and now if you multiply that times 43 cents you get the number and you can do the calculations.
But in general, that's how it works. You're getting a percentage of the value, and that's what dividends are all about.
When you get a dividend, you're getting a percentage of value. This you have to hold on to the stock for a bit of time up until that ex-dividend date. You can't buy it one day, and then they're going to give you a dividend the next. This is for longer-term holdings.
These are the two ways to make money. This is how most people build wealth in their life. If you're looking to build wealth in stock trading and investing you're going to be a long term investor. This is the majority of ways that most people build up wealth.
Maybe you're looking to be more active. Then you more than likely will not be doing dividends or not be getting dividends. The main reason is that because you're probably more productive and you're looking for value appreciation within the stock. That's perhaps the initial approach.
The third more common way is to sell options or trade options. This is a little bit more advanced. If you own stock, you can sell option premium which is writing covered calls. Or you could trade the options on their own. That's even more complicated level. But that's another way that you can make it.
You can trade futures, commodities, Forex. There's a lot of other ways that you can trade if you're more active.
Stock appreciation and dividends are the main ones. If you do options that is more advanced. But those are the three main ways that you make money in the market.s
How do you look for which stock to invest and choose?
This depends on your ultimate goal and plan. Everybody's at a different point in time. Everybody has a different amount of capital. It's challenging to decide. If you want to keep a simple approach, I would say get a stable company who may not have the most value appreciation. But also choose a company that has a long term and stable dividend.
If you're browsing companies, you could look up which companies pay dividends. That would allow you to calculate what you're going to be profitable from. Or how much you're going to be making.
Maybe you want to be a little more active. This is where the more difficulty comes in.
You might ask yourself these questions:
- Do I want to do it based on technical analysis?
- Am I choosing it based on fundamentals?
There're different two main real ways. Technical analysis is based on charts and price history. Fundamentals are based on the company, overall health, earnings, the CEO, products.
And within those, it becomes even more complicated. I don't want to make this lesson too tricky for you. But these are the two main ways to choose.
If you're a regular investor looking at a general stock you probably already know certain stocks that are getting your attention. As we start looking into this how do you find certain stocks that have dividends?
You start looking things up. Take a company like Verizon - type in Verizon dividend in Google. You do a quick little search.
You can see here the dividends that they've been paying. You can see the cash amount that they've been paying. It's 57 cents per share basis.
Then we had 56 cents, 55 cents, 53 cents. You can see that over the years what they've paid every single quarter. That allows you to do a calculation.
A quick calculation: Let's say you have 1,000 shares and you multiply that times 57 cents. You'd be getting $570 every quarter for those shares. You start budgeting those things accordingly.
The question is how much Verizon is. Well, Verizon at the moment is $52.47. This, by the way, is TC 2000 and that's another software that I like for charting. This is what I use for looking and scanning for charts.
But when we go into Verizon $52, and I want let's say 1,000 shares you're looking at $52,000 investment. But on $52,000 investment you're making about $570.
These are all things to consider. As you start browsing stocks and doing your research, you can also look at combining ideas. Things like how has the chart been on a monthly or the long-term basis. Consider the fact it is the stock at a low price. If you're not an active trader, this is the approach I would recommend.
A quick example - CMG
There's nothing available for the dividend history of CMG. Even though Chipotle Mexican Grill is very popular. The stock has been selling off a little bit recently, but there's no dividend.
There's no dividend history. That means if you bought this stock, you could only make money only through appreciation. That's something to consider.
If you go to the famous Apple, you can see here's the dividend that they've had recently. You can play around and search for this. Caterpillar has 77 cents. Some companies will pay more substantial dividends. Other companies will pay lower dividends.
Caterpillar is more of a stable company than when you compare it to Apple. Because Apple is a tech company, it might be a little more volatile whereas caterpillar might be a bit more stable.
The thing is Caterpillar may have a better dividend on a cash amount value, but it may go up in value much slower. And Apple may have more innovation, and they go up faster in terms of appreciation. But they pay less of a dividend.
Quick search: type top dividend stocks and you can look through these. But you don't want to choose the stocks based on the dividend that they give you. Instead what you want to do is look at the chart, put things together and then combine those things.
Those are the main ways that you make money from the market. The primary way is value appreciation. Then you have dividends and options. If you're looking at the value appreciation and you want to be more active value appreciation is your way.
As a starting point, you're looking at either technical analysis (choosing it by the chart) or looking at fundamentals (company earnings, reports and how the company's health is).