Mastering Stocks 2020: Strategies for Day Trading, Options Trading, Dividend Investing and Making a Living from the Stock Market

By Michael K Brown

Master the Stock Market.
 

There is no doubt that many have become wealthy by trading alone. However, the stock market can be risky if you do not know what you are doing. This book is designed to give you in-depth knowledge and guidance so that you can avoid the pitfalls and reap the benefits of the stock market.

Topics Covered in this book:

- Day Trading

- Penny Stocks

- Options Trading

- Dividend Investing

- And Various Other Topics

If you are motivated to change your life for the better, this book will definitely guide you in the right direction!

• Language: English
• Publisher: Pluto King Publishing
• Release date: Nov 14, 2019
• ISBN: 9781989711132

Book preview

Mastering Stocks 2020

Strategies for Day Trading, Options Trading, Dividend Investing and Making a Living from the Stock Market

Copyright 2020 by Michael K Brown - All rights reserved.

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Table of Contents

Introduction

Disclaimer

Financial Notes

Chapter 1 – Entering the Stock Market Field

What Makes Stocks and Options Different?

What About Dividend Stocks?

Who Could Benefit from Day-Trading?

What Problems Persist With Day-Trading?

What Does it Take to be a Great Day-Trader?

What You Need for Trading

Chapter 2 – How to Tell What Stock is Right for You

Choose Stocks in a Field You Understand

The National Market

Do You Know the Company?

Review Price Trends

Work With Moving Averages

The Relationship between Revenue and Debt

Compare the Performance of a Stock With Other Similar Choices

What is Best for Short or Long-Term Needs?

Signs a Stock is Better for Day-Trading

Signs a Stock Works for Long-Term Investing

Chapter 3 – Reviewing an SEC Report

Background of a Report

10-K Report

10-Q Report

8-k Report

Internal Functions

Added Tips

What If a New Version of a Report Is Issued?

What About the Chairman’s Letter?

Chapter 4 – Understanding the True Value of a Stock

P/E Ratio

Price/Earnings Growth Ratio

Price/Sales Ratio

Analyze the Book Value

Chapter 5: Using a Stock Screener

How to Use a Screener

A Quantitative Approach

The Best Choices

Chapter 6: Working With a Great Trading Platform

Analytics Points

Can This Work In Lieu of a Stock Screener?

What Are the Best Trading Platforms?

Don’t Forget Simulators

Chapter 7: Trading the Same Stocks – A Good Idea?

Find Patterns

How Volatile Is the Stock?

Focus on One Stock for the Day

Time Between Trades

Check the Long-Term Report

Chapter 8: Identifying Patterns in a Stock

Reversal or Continuation?

Pennant

Wedge

Cup and Handle

Head and Shoulders

Triangles

Double Top or Bottom

Pocket Pivot

Chapter 9 – Using a Stochastic Oscillator

An Important Note

A Stochastic Oscillator

The Formula Used

Identifying the Value

When It Reaches the Value

Can You Change the Timing?

Strategies For Trading Using the Oscillator

Can the Rate Be Negative?

Chapter 10 – Identifying Trades During the First Hour

Significant Losses or Gains After the First Hour

Should You Trade During This Time Period?

If You Wish to Trade Here...

Chapter 11 – When to Buy Long and When to Sell Short

Investing In a Long-Trade

Investing in Short-Trades

A Warning About Selling Short

Works With Patterns

Chapter 12 – Planning Limit or Stop Orders

Stop Orders

Trailing Stops

Stop and Reverse

Limit Orders

Concerns About the Limit and Stop Orders

What About Commissions?

Is There is a Chance An Order Might Not Be Executed?

Watch for Volatility

Chapter 13 – Other Types of Stock Orders

Conditional Orders

Duration Order

Chapter 14 – Buying Stocks on Margin

Examples

For Which Stocks Can You Use Margins?

Margin Calls

Strategies for Margin Trading

Chapter 15 – How to Identify Bad Stock News

Social Media Is Risky

Avoid Anonymous Sources

Who Else Is Reporting?

Review the Fine Print

Where to Find News

Chapter 16 – Signs that You Should Avoid a Stock

The Debt to Equity Ratio is Too High

The Cash Flow is Negative

Profit Warnings

Insider Trading Is Prominent

A High-Level Resignation

SEC Investigations

Other Commonplace Points

Can’t You Just Place a Put Order On These Stocks?

Chapter 17 – False Signals and How to Recognize Them

What Causes False Signals?

How Can You Avoid a False Signal?

Chapter 18 – Understanding Penny Stocks

What Is a Penny Stock?

Serious Risks

What if You Do Want to Invest?

Chapter 19 – Strategies for IPOs

Be Cautious When Reading a Prospectus

Review the Underwriters

Watch the Lock-Up Period

Is the First Day a Good Time?

Chapter 20 – What Determines the Values of Options?

Intrinsic Value

Is the Equity Good?

Look at Market Conditions

Time Value

Time Decay

Supply and Demand

Chapter 21 – Planning an Options Trade

American or European?

Review the Option Premium

How Long Can an Option Keep Its Value?

How Long Should Your Option Last?

When to Use a Shorter Option

When to Use a Longer Option

Use an Options Simulator

Chapter 22 – When and When Not to Exercise An Option Early

How Deep In the Money Are You?

A Dividend Might Be Issued

Review Commissions

What Is the Risk?

Chapter 23 – Covered or Uncovered Options Calls

Understanding the Covered Call

Is the Covered Call Ideal For Day-Traders?

Looking At the Uncovered Call

Which Is Best?

Chapter 24 – Bull and Bear Spreads For Options

The Bull Spread

The Bear Spread

Can These Work for Any Investment?

Chapter 25 – Other Options Trading Strategies

Long Straddle

Long Strangle

Married Put

Protective Collar

Butterfly

Condor

Synthetic Long

Synthetic Short

Chapter 26 – Analyzing the History of a Dividend Stock

Review the Values

Watch if the Stock Value Goes Down

Check When Dividends Are Paid

Look At the Various Dates

How Are Dividends Increasing?

Can One-Time Dividends Work?

Chapter 27 – Understanding the Dividend Totals In Stocks

How to Calculate the Dividend Yield

Review the Price-Dividend Ratio

Forward Dividend Yield

Chapter 28 – Added Strategies for Dividend Stocks

How Does a Stock Manage Its Earnings?

Focus on Stocks You Will Hold For a While

Watch for Taxes

Should You Buy a Stock Solely for the Dividend?

How This Works

Does the International Market Play a Part?

Watch For the News Stories

Analyze Closing Prices and Volume Totals

Watch for Share Totals

Avoid Options at This Time

Use Proper Screeners

Keep Your Research Going

Avoid Late-Day-Trading

Does Early Trading Really Make a Difference?

Chapter 30 – Analyzing the Doji

Analyze the Volume Line

Continuation or Reversal?

Types of Doji

Watch When the Doji Candle Closes

Analyze How Much of a Change Happens

Watch for Stop-Loss Orders

Exit and Enter Quickly

How Many Doji in a Row?

Chapter 31 – Advanced Points on How Candlesticks Are Positioned

Star

Harami

Hammer

Inverted Hammer

Hanging Man

Shooting Star

Marubozu

Spinning Tops

Abandoned Baby

Dark Cloud Cover

Engulfing Pattern

Stick Sandwich

Three White Soldiers

Three Black Crows

Two-Crow Gap

Chapter 32 – Stock Repair Strategy

What Stocks Should You Work With?

Why Two Traditional Strategies Won’t Work

How Long Does the Strategy Take?

How to Use the Strategy

Determining Strike Prices

Can You Buy More Shares When the Long Call Is Exercised?

Chapter 33 – Bid and Ask Prices

Recent Changes Make a Big Difference

Is it Better to Work With More Shares?

Analyze the Size of the Spread

Analyze Bid-Ask Spread Changes In a Day

Check on What a Broker Offers

Chapter 34 – High-Frequency Trading

How Does It Work?

How Long Does It Take?

How Big of a Change Is There?

Can This Work the Other Way Around?

Is This Profitable?

Review Latency

Chapter 35 – Strategies to Avoid When Investing

Not Having a Sensible Plan

Using Long-Trades on Non-Volatile Stocks

Switching Strategies Too Quickly

Being Too Dependent on Analysts

Investing in Just Any Business

Not Having a Stop-Loss Plan

Chapter 36 – What To Do With Stock During a Merger

Will You Have a Voice?

Stock-For-Stock

Combination

Reverse Merger

Should You Sell During a Merger?

Watch for Premiums

When Do You Have to Enter?

Chapter 37 – When to Sell a Stock

Look at Dividend Changes

Review Your Price Target

When the Volume Slows

When a Business Is About to Go Bankrupt

Tax Considerations for Losing Stocks

Avoid Emotional Concerns

Chapter 37 – How Much Money Should You Spend At One Time?

Plan a Percentage Limit

Review the Cents Per Risk

How Big of a Position Should You Have?

A Sense of Balance

Chapter 38 – What About Preferred Stock Shares?

How Are Preferred Shares Different from Common Shares?

How Can You Buy Preferred Shares?

What About Maturity?

Why Would a Business Issue Preferred Shares?

The Three Types of Preferred Shares

Important Concerns

Chapter 39 – Will These Strategies Work For Other Types of Investments?

Should You Move On?

Conclusion

Introduction

Have you ever taken a look at the stock market? If so, you might have seen many great stocks all around the place. It is intriguing to see what types of stocks are available and how individual stocks might change in value.

The stock market is an untamed beast. It is a market that can quickly go up or down in value. Even the most experienced people in the field might struggle with trying to get a hold of the market, but you can tame this monster if you know what you are doing.

The key is to make sure you think about the strategies you want to follow. No successful investor has ever gone into the trading world without thinking twice about what to do. It takes a strong strategy to help you figure out what you can do to succeed.

This guide is all about helping you to understand what you can do to make the most out of any trades you want to enter into by deciding on the right strategies to use. You will explore many points in this guide relating to how you can find stocks and options. These points are useful for many investors, but they are especially valuable for day-traders who plan on working with multiple transactions over a shorter period of time.

This guide covers not only stocks but also options and dividend stocks. All three of these are valuable choices for day-trading that anyone can use and find beneficial. These also work well when people are trying to get into long positions that might take a while. The universal nature of the points in this guide will give you sensible plans for making the most out of your investments. Details on how to review a stock are covered in this guide. Understanding the ins and outs of any stock is vital to any strategy you wish to use. An analysis of a stock entails not only trends in how the value of a stock might change but also many of the underlying points of a stock. This includes information you might find in an SEC report. Stock analysis points relating to how price changes happen are covered in this guide. You will also learn about specific types of trades that you can use including ones that might be placed on margin.

The ways that a candlestick chart is organized are prominently featured in this guide. A candlestick chart shows everything relating to a stock’s movements and can illustrate when a stock is about to shift momentum. The shifts could be worth targeting if you know when to take advantage of them. Fortunately, in this guide you will learn all about how you can work with those shifts.

While there are many ways to invest in stocks, not all stocks are worth investing in. You will read points in this guide on how to identify stocks you should avoid and how to identify stock tips that might not be legitimate or worth following. There is even a chapter in this book about penny stocks and how they could be too risky for you to invest in (although you can do a few things if you do actually want to invest in them).

Various points relating to options are highlighted in this book as well. These include points involving how to trade them correctly and what to read from anything you see in the market. The difference between a call and put is not much, but you will learn of the many things in between that make a difference in an option.

Finally, you will understand how dividend stocks work. These include stocks that focus on paying out dividends over a period of time. These can be profitable, but you should look into many specifics regarding these stocks if you want to benefit from them.

The strategies covered in this guide explain when to sell a stock, what to do when a merger takes place, how to manage after-hours trading, and even what to do with initial public offerings or IPOs. You will be impressed with how well you can control your stock market experience when you use the pointers in this guide. The points listed here are all designed to help you get the most out of your investments.

Disclaimer

Although this guide will help you understand how the stock market works and how to find stocks of value to you, caution must be taken throughout the investment process. Every investment has the potential to lose value. Know the dangers before you start investing in any stock or option.

Carefully consider your financial plans before you start investing and the potential losses that you might incur before you place a trade. Only use what you can afford to lose on your stock investments. Keep a check on your total investing budget and spending so you know when to keep moving and when you have to get out.

Although this guide includes many details on how to analyze stock and option values, there are no guarantees that any stock might act in certain ways based on your analysis. There are far too many variables that influence stock values. It is also hard to predict future events.

Review the points in this guide carefully, but also use your own judgment when trading. Decide on an appropriate strategy for your investments so that you have a clear idea of what you wish to do when investing in a stock.

Financial Notes

All examples listed in this guide, unless specified otherwise, are in American dollars. The strategies could still be used regardless of where in the world you are trading and what currency you are using.

Most of the examples do not consider any additional costs that might be incorporated into a stock or option transaction. These include the commissions for a trade, dividends, taxes, and any other additional charges. Contact a broker to work with for details on the charges involved with your transactions.

Contact a tax advisor for additional information on any taxes that might be associated with your trades. These include impacts on your taxes based on any write-offs for profits or gains you make on your investments.

Chapter 1 – Entering the Stock Market Field

The stock market is one of the most exciting fields of investment. There are thousands of stocks from all over the world available for trading. There are stocks available for all budgets. There are stocks that only cost a few dollars per share and some high-end stocks worth thousands of dollars per share.

Stock trading is a massive industry where billions of dollars are traded every day. People from all walks of life are investing in stocks in the hopes that they will increase in value. Some people work with short sales or other options that focus on the market falling in value. The diversity of the market is one of its biggest benefits and there is something to interest everyone.

It takes an expert to know how to play the stock market and do well. Only the best and most seasoned traders can consistently find stocks that will be more likely to perform to their best potential.

This guide is to explain how the stock market works and how you can identify stocks of value.

What Makes Stocks and Options Different?

Stock trading and options are among the best investment opportunities. Many brokerage firms offer both of these services for investors. What are the differences between these two investment opportunities?

A stock is a fraction of ownership in a particular company - how much of something you own at a given time. You could own as many shares of stock in a company as you can afford.

An option is not an actual form of ownership but rather a right to own or trade a certain investment. With an option, you have the right to buy or sell a particular stock at a certain value within a specific time period.

Intrinsic and Derivative Values

A stock’s intrinsic value refers to the actual value of an asset or company. The value relates to how much confidence people have in a company and how well that group is growing. It might also change in value due to news stories or other reports surrounding the stock.

An option is based on the derivative value - the value of the security at a specific time. An option’s value is influenced by the price of the stock and simply adapts to the changes in the stock.

Long or Short-Term?

There are no real rules as to how long you have to hold an option or stock. However, options have an expiry date. That is, an option will have to be exercised within a given time. You can set the specific time period at which the option will expire, thus allowing you to execute a purchase or sale at a certain value at that time period. You can keep an option running for as long as you want. Some options last for an hour. Others could go on for a few days or even a few weeks. Knowing how to choose the right timing for an option is vital to your strategy.

Stocks are different in that you could hold them for as long as you deem necessary. Day-traders often trade stocks many times in the course of a day. This is interesting when you consider the potential for a stock to increase in value over the long-term. For instance, the Home Depot (NYSE: HD) had its stock trading at around $80 during the start of 2014. As of February 2018, that stock has a value of a little more than $185. Day-traders still benefit from changes in the value of a stock within a day. In a typical day, that same Home Depot stock could start at $185 and then move up to $188, down to $186, and then back to $188 at the end of the day.

What About Dividend Stocks?

Dividend stocks are stocks that will pay stockholders dividends and the values of these dividends can vary. You would be more likely to realize a profit from stocks if their values continue to rise and the company remains profitable. Dividend shares may be worthwhile provided you consider their performance. You would have to research how many shares you need to own if you want to profit from a dividend stock. You will learn later in this guide about a measurement to use to determine what you would have to spend on a stock to get a dollar in dividends; this measurement might influence the size of the position you want to buy.

Who Could Benefit from Day-Trading?

There are many types of people who could get more out of day-trading:

People who are looking for better profits over shorter periods of time can get more out of day-trading. This is regardless of whether one invests in stocks or options.

Anyone who wants to be one’s own boss will love day-trading. With this, you can work according to your own schedule while trading at a pace you are comfortable with.

You don’t necessarily have to be highly educated to be a great day-trader. It does help to have some training, as you will read later in this chapter.

Day-traders can work with any investments they want. Trading platforms make it easy for them to find unique stocks and options. When paired with a screener program, it becomes easier for day-traders to find the right choices.

People who want a thrilling work environment will be excited about day-trading. There is never a dull moment in the work of a day-trader.

What Problems Persist With Day-Trading?

As exciting as it can be to be a day-trader, there are some problems you should be aware of.

There is always a potential that you could lose money from a trade. Sometimes those losses could be significant depending on how a stock moves. These could be worse if the proper stop-loss orders are not placed.

You would have to prepare the proper materials before you can actually start trading. These materials will be referenced later in this chapter.

It can be stressful to those who are not fully prepared or ready to handle some of the trades involved. You have to be ready to execute trades quickly. Sometimes the window of opportunity for a trade might be extremely short.

Many day-traders will trade during the entire regular trading period from 9:30am to 4pm Eastern Time. Some traders might even trade well beyond those hours.

There is risk involved to make a profit. Although you can make various small trades here and there, it is much easier for you to make money if you are able to buy larger positions.

What Does it Take to be a Great Day-Trader?

Anyone could be a good day-trader provided that person is actually prepared and knowledgeable. You must have the appropriate skills to make the most out of day-trading activities:

The best investors know how to identify how stocks are performing and can recognize certain trading patterns.

People also have to know the background of the business whose stocks they are considering. Sometimes the earnings totals and other internal factors within a business might directly impact market sentiment toward a stock.

Research skills are critical for all traders. Traders must be able to identify certain markets and how they are evolving.

The best traders will remain focused on the individual stocks they want to invest in. It is often easy for people to lose track of the things they find available on the market.

One’s emotions must also be carefully controlled. It is very easy to be emotional over some trade not going as well as one might have hoped.

A great day-trader knows to never assume anything. An investor will look at what moves into a stock while looking for contingencies to keep potential losses from being worse than they could be.

What You Need for Trading

You will read throughout this guide about what you can do to master the stock market. To make it work, you will have to get the proper resources ready for trading purposes. There are several things that you will need that are designed to help