Category: Observation

Robin Hood’s popular low-priced stock

Spark Global Limited reports:

Today we’re going to look at some of the more popular penny stocks in the Robin Hood market, but before we do that, let’s take a quick look at who Robin Hood is and what penny stocks are.
Who was Robin Hood?
“It’s Time to Do Money” is the motto of Robinhood, a leader in commission-free investing. Robin Hood provides you with trade and multiple channels to get more money. Our products include:
Stocks and funds: Gain mobile access to markets. Trading commission free companies or investment packages (ETFs).
Options Trading: Use this product to improve your trading, fast, direct, commission-free.

Robin Hood Gold: Access expert research files, invest on margin, and make more immediate deposits starting at $5 a month.
Cash management: Transaction, use and earn 1.80% APY, which may vary at the discretion of the project bank.
Robinhood Crypto: Buy and sell dogecoin, Ethereum, Bitcoin and other cryptocurrencies every day without a commission.
The Robinhood trading app was founded in 2013 and still attracts more than 6 million customers with a market cap of $7.6 billion.
Robinhood’s simplicity makes it easier to use apps and websites.
Not charging commissions is attractive to investors who are very concerned about cost and small volume transactions.
In reality, these products place little emphasis on evaluation and research, and there are serious concerns about the quality of trade execution.
What are penny stocks?
According to the SECURITIES and Exchange Commission, a penny stock index is a low-priced stock of a small company. They may not trade often, which means that once you own shares, they can be hard to sell. In addition, they may be unrealistic to the correct price, as it may also be a problem to position quotes.
Generally, penny stocks are traded over-the-counter, but they can also be traded on foreign exchange exchanges, as well as facilities and stock exchanges in the United States.

Market closing order interpretation

Spark Global Limited reports:

Have you ever wondered why there are huge spikes in volume in the last minute of trading, while prices barely move? This is the closing auction, which is the most liquid period during stock market trading, mainly because the market is more tightly organized.
This is where most investment funds, closing algorithm traders and index rebalancing take place.
Closing orders are basically mechanisms for these institutions to buy at the close of trading.

What are the closing market orders?
A closing order is a market order executed at the close of trading (16:00 EST). Because they are market orders, you can’t specify any prices, you can only receive closing orders.
They guarantee execution time, not price.
You must place your MOC order for the NYSE stock no later than 15:45 and 15:50 EST.
Let’s take an example.
You trade XYZ stock that day. The trend is strong, so you want to hold it at the close, but there is no overnight risk.
You’ve noticed that sometimes strong stocks move strongly at the close, so you want to get out at the last minute rather than hold stocks overnight or trade a few hours later.
That’s where the limit order comes in.
You submit an MOC order to your broker at 15:30 Eastern time before the deadline. Edt ends at 16:00 and you exit almost at 16:00:00 and receive the end print.
Notes on MOC orders
The deadline for
While the official deadlines for the NYSE and NASDAQ are 15:45 and 15:50, respectively, your broker may have different rules. Ask your agent, because they’re all different.
cancel
Neither nyse nor NASDAQ will allow you to cancel MOC orders after their respective deadlines of 15:45 and 15:50.
What happens during a daily limit order? Close the sale
The NYSE has appointed market makers, one of whose duties is to facilitate closing auctions. They do this by analysing all the closing orders and setting the auction price accordingly.
One of their obligations when conducting an auction is to provide liquidity for unbalanced orders.
For example, if there is an order to buy 100,000 shares and sell 120,000 shares, they need to provide liquidity of 20,000 shares to fill the gap.

Contingent or Emergency Orders: How do they work

Spark Global Limited reports:

Or a command requires an event to occur to trigger its execution.
They depend on certain things happening. If this does not happen, the order will never be executed and will be held by your broker. These can also be called “conditional orders”.
Here’s how NASDAQ defines a contingent order:
“An order that can only be executed in the event of another event; That is, ‘Sell on Oct 45, call 7-1/4, stock 52 or lower.'”

A stop loss is a basic example of a contingent order.
Stop order execution depends on the stock reaching your stop price. As long as the stock does not reach the stop-loss price, the order is not executed.
For example, you enter an order to buy 100 shares of XYZ at $10 and then append two contingent orders: a stop loss order and a profit order.
The stop is $9, and the stop is $13.
In this case, your regular buy orders at $10 are immediately sent to the market for execution, while your stop loss and profit orders sit on your broker’s server, waiting for their unexpected events to occur.
As long as the price does not reach $9 or $13, your stop loss and stop gain will not be exercised.
Let’s say the price goes down to $9. Your stop loss order is activated and sent to the market. After the stop is executed, your profit order will be cancelled.
Or the type of order
Any instruction that requires certain conditions to be met before execution is a contingent instruction.
There are several different types of these orders, and your access to them depends on the type of order provided by your agent.
The simplest contingent order is the classical limit order.
Limit orders are conditional on buying or selling only at a specific price or better. A $10 buy order is executed only if the price is below or below $10, otherwise it stays in the order book.
The next stage is stop-loss and profit orders.
They are attached to your main order as a stand. Their conditions are similar to limit order.
For example, a stop loss may be conditional on placing a sell order in the market when the price reaches $8.00.
Most traders and investors use only these basic order types. However, contingent orders can get a lot more complicated if you want them.

 

Market limit orders for beginners to explain

Spark Global Limited reports:

The world of day trading is fast-paced and intense.

Profits can turn into losses in a matter of seconds if you hesitate or type wrong orders, especially during volatile trading sessions.

Precision is critical when it comes to day trading if you want to maximize your profits and minimize your losses.

To make your trades more precise, you need to understand not only the technical signals on the chart, but also the types of orders you can place when executing trades.

Using the wrong order type could result in your trade not executing or being filled at an unacceptable price.

If the goal is precision, you need to take advantage of more than basic market commands. Here are some basics to know, including how to use so-called market limit orders.

Understand order types
Using different order types will ensure that you trade as close as possible to your ideal price. Some order types can even be combined to limit losses.

These are the five basic order types that your broker will provide you.

Market orders – Market orders are orders that will be executed immediately at the best available price. When you place a market order, you want to get your order immediately and not worry too much about a drop in the purchase price.
Brokers must fill orders at the NATIONAL Best Deal Price (NBBO) set by the SECURITIES and Exchange Commission, which means they must offer the best available price. However, optimal availability doesn’t always mean the price you want. Market orders are best used in liquid stocks such as large caps.

Limit orders – Limit orders are not executed immediately, but are triggered when a certain price is reached. For example, if you want to buy A shares at $10.65 and it is currently trading at $10.85, A limit order can be set to automatically execute A buy if the price falls to $10.65.
Limit orders are more accurate than market orders, giving traders more control over their money in volatile or thinly traded stocks.

Stop loss/profit taking orders — Stop loss and profit taking orders are automatic sell orders that are executed when a stock rises or falls to a certain price.
For example, if you buy A shares at $10.65, you can place A stop loss at $10 and A profit taking at $12. In this case, if the stock rises to $12 or falls to $10, your sell order will be executed. Like limit orders, stop-loss and profit orders give the trader more control and minimize losses.

In addition, you can use a trailing stop to set a level at which you want to sell the stock, but that level will follow the stock if its price rises. If you place a $10 stop on a $10.65 stock, the stop will continue to “track” the share price at $0.65 if it rises.

If the share price falls by more than $0.65 at any time, a sell order is triggered.

One triggers another (OTO) – These are complex instructions that allow traders to string multiple instructions together in a single command. OTO orders are often used to hedge positions or slowly build inventory through multiple orders.
What is a price limit order?
A limit order is a limit order that is set above or below the buyer’s ask price.

What is the purpose of using limit orders that are executed immediately like market orders?

Because in day trading, we often have trades where we want to get in right away but are worried about the price going down when we use market orders.

Sliding is when your market order executes at a lower price than expected because the stock is either too volatile or too thinly traded.

If you enter a market order for A shares at $10.65 on a volatile trading day, you may not be able to complete the order quickly and may end up trading at $10.80. But if you set the limit order at $10.65, you might not be able to close the deal at all.

That’s where market limit orders come in.

By setting a limit purchase order price above the asking price, you can account for a little slippage, but you won’t get one over your limit.

If you set the limit order at $10.70 when A shares were trading at $10.65, you could end up at $10.68 or any NBBO price. But if the price rises to $10.71 or more during a replenishment search, the order won’t be executed.

This also applies to selling — if you set your limit at $12 and the stock trades at $12.05, you’ll get a fill at $12 or more, but not if the stock slips to $11.99.

What is a Thinly Traded Stock?

Spark Global Limited reports:

If you’re new to the trading world, you might hear traders refer to a particular stock as “thinly traded” in conversation, which leaves you a little confused.

Don’t worry, because you’ll find us traders coming up with a ton of jargon for the simplest of concepts, and most of the time, there’s no complicated explanation behind it.

In this context, a “thinly traded” stock is one that doesn’t trade very often.

The stock may have only a handful of trades a day, compared with hundreds of thousands for a stock like Apple (AAPL).

Why is this important? Because when you buy a stock, someone has to sell it to you, or if you want to sell a stock, someone has to buy it from you. If you want to buy or sell quickly, you need someone to wait in the market to buy or sell from you at a fair price.

If no one is waiting for you in the market, you may have to bid a high price to get a seller to sell you their shares.

That’s not a problem for an active stock like Apple, because at any given time there are thousands of people buying or selling at a reasonable price.

That can be a real problem for thinly traded stocks. Let’s say you already own stock and you really need to sell it. Maybe prices are falling, or you need to raise cash to buy a new home. Whatever the reason, you need the money asap!

If you really need to sell now, you must accept the highest offer in the current market. For a thinly traded stock, that could be a big discount to its recent trading price.

How do you know if a stock is thinly traded?
In financial markets, there is a concept of “liquidity”, which refers to your ability to trade (buy or sell) assets such as stocks, bonds or property quickly without getting a bad price.

Let’s use a real life example that we’re all familiar with.

Let’s say you’re a real estate flipper. You’re interested in a foreclosed house, and it’s in bad shape. The listing price is pretty attractive, and by talking to the realtor, you feel you can get a better deal. You and your team are good at fixing houses, so you’re confident about it.

But what is the next worry?

Because you’ll be mortgaging your house for the duration of the fixed N ‘flip operation, you’ll be spending money every month.

So the faster you throw, the more profit you make. In a really bad case, if you have a hard time selling it, you could lose money because you have to make a lot of mortgage payments before you can sell it.

So you really need to think about how quickly you can sell the house after you fix it.

You can determine this by looking at local real estate statistics, such as how long the average home has been on the market, how many homes are currently on the market (inventory), or how many homes in the neighborhood are dropping their listing prices (indicating buyers aren’t interested).

 

What is day trading?

Spark Global Limited reports:

Day trading has surged in popularity in recent years, but what is it and why is it important?

According to the SECURITIES and Exchange Commission, day traders hold a stock for a few seconds or minutes in the hope that the price will continue to rise or fall in order to quickly lock in profits and quickly buy, sell, or short a stock throughout the day.

Day trading is a great way to make money and achieve financial independence. You can day trade in almost any market, though stocks, options, index futures, cryptocurrencies and forex are the most common.

But what is day trading? What is day trading? Today, we’re going to tell you the most important things you need to know about day trading.

What is day trading?
Day trading refers to buying and selling stocks or financial instruments for the purpose of making a profit during a single trading day.

When day traders trade stocks, they want to take advantage of the day’s price movements rather than trading overnight.

For example, if you buy GameStop stock (GME DOLLARS) on Monday, you have to sell it that day to be considered trading of the day.

Take a closer look at day trading and the associated risks
Day traders rely on sentiment and stock charts to generate trading ideas rather than basic data.

These traders typically trade only a small number of stocks or securities — sometimes just one — and have a detailed understanding of how those particular securities respond to events. This allows them to predict how prices will react, allowing them to trade profitably.

This type of speculation is common in stock markets and foreign exchange trading. But day traders can also trade exchange-traded funds, cryptocurrencies, bonds or commodities such as precious metals or crude oil. They can also trade futures or options — different types of derivative contracts.

Day trading is often portrayed in the media as a potentially high return and exciting endeavor. However, most junior day traders lose money because the practice carries a lot of risk that can lead to a person losing tens of thousands of dollars very quickly.

While most aspiring day traders seek financial security and freedom, one must adopt a trading strategy in order to be a successful trader.

Day traders have a wide range of trading strategies to choose from, but it is important to note that not every strategy will work in every market cycle and certain day trading styles may not be ideal.

If you don’t have a good trading strategy, you probably don’t have risk management, and you’re likely to blow up your account in a short period of time, like 90% of day traders.

How Do SVXY and VXX Work? Volatility (VIX) ETFs Explained

Spark Global Limited reports:

Outright speculation on future volatility is a fairly new phenomenon in financial markets.

The mathematicization of derivatives markets has made traders realise that they are largely betting on future volatility, not prices, encouraging Wall Street to create more “pure game” products.

The main volatility products in the US market are VIX futures/options and exchange traded products (ETPs) that mimic VIX futures positions.

Direct VIX derivatives have existed for more than a decade, but it was only after the 2008 financial crisis that they began to see sufficient liquidity.

As a result, ETF managers have created their own volatility derivatives in the form of etPs similar to those used to trade stocks. As of today, the two major VIX ETPs are SVXY and VXX.

Before we continue, let’s take a look at the VIX index and how it works.

VIX index interpretation
VIX refers to the STANDARD & Poor’s 500 Volatility Index.

The calculation shows how s&p 500 options traders expect volatility over the next 30 days.

VIX incorporates various short-term S&P options contracts into its calculations and looks at price movements.

When the VIX is 20, what does that mean? That means market expectations for volatility over the next 30 days are running at an annualised rate of 20 per cent. That’s based on the price of the option. The more expensive the options (insurance), the higher the VIX.

The financial press has dubbed the VIX the “fear index” and options traders have pounced on it, but for the most part it’s true.

Most of the time, the S&P 500 and VIX are inversely correlated, meaning that when the S&P falls, the VIX rises. Why is that? Because the market to take the stairs, take the elevator. When the market started to plummet, people started buying insurance (options) to protect their portfolios.

When everyone buys insurance at the same time, prices go up.

Remember, the VIX is just an index. You can’t trade it directly, nor is it practical to re-establish an exact option portfolio.

There are VIX futures, VIX options and VIX futures, all of which have very liquid markets. You can trade them, but they may change hands at a different price than the actual index.

What is the ETN?
It’s worth noting that VXX is not an exchange-traded fund. It’s an exchange-traded note, or ETN.

This difference may sound trivial, but it is actually very important for these purposes. An ETN is an unsecured debt note issued by an ETN manager, which means there is a credit risk, whereas a normal ETN has no credit risk.

So keep in mind that there are external factors that can affect the value of an ETN.

What is SVXY? How does it work?
SVXY is a systematic ETF that shorts the front end of the VIX futures curve, particularly in the first two months. The product is managed by ProShares and structured as an ETF rather than an ETN.

If you don’t know what a VIX curve is, I’ll explain.

A futures contract is an agreement to trade at a locked price on a specific date in the future.

For example, if I buy a July 20 VIX futures contract, I agree to settle the difference in cash by that date if I remain the contract owner on that date.

If I buy futures at $20, which is $18 at maturity, I have to give my counterparty, the seller of the trade, $2.

In the futures market, there are several different maturities.

If you are a farmer and want to hedge next season’s crop, it doesn’t make much sense to hedge it with next month’s futures contract. If you’re a short-term trader, hedging next year’s futures doesn’t make much sense. So there’s a lot of expiration dates.

The VIX futures curve is a price sequence of different futures contract maturities. Here’s an example from VIX Central:

How to choose a day trading laptop

Spark Global Limited reports:

When you’re looking for a new day trading laptop, it’s important to be realistic about your budget and needs. If money is no object and you’re just looking for the best laptop, we have some tips for you.

Obviously, most of you are looking for a balance between cost and performance/functionality. With a limited budget, you have to narrow down the most important components you need and work your way back from there.

Laptops have different uses; Gaming laptops don’t take traders into account, just as chromebooks for students don’t take gamers into account.

Identify the component requirements for your trading laptop
A computer is a collection of different parts, each with a specific function.

Building a powerful computer means getting a powerful set of components, but when you have the budget, it makes sense to focus on the most important components for everyday needs before optimizing anything else.

The basic building blocks of a computer are:

 

CPU: central processing unit. This is the brain of your computer. It processes all the instructions you give it and produces an output. When you tell your computer to do something like “open Google Chrome,” the CPU performs the task.
GPU: graphics processing unit. Gpus are like cpus that perform graphics tasks, such as drawing 3D animations or rendering video games.
Hard drive: A hard drive is like a filing cabinet. It has a lot of information, but it’s slow to sort and find what you need.
RAM: Random access memory. RAM temporarily stores memory that a computer needs to access quickly. RAM is like taking information you often need to access from a hard drive and putting it on a desk where it can be accessed quickly. There is less space on the table, but the items on it can be found quickly. RAM is critical for running multiple processes at the same time, essentially giving your computer short-term memory.

Most trading software uses a lot of CPU and/or RAM, making expensive Gpus less important.

To determine whether your trading computer should be centered on CPU or RAM, simply open up all the trading software you use and start interacting with it. Also, use Windows Task Manager (or system monitor on a Linux computer) to see which resources are most stressed.

With some exceptions, most standard charting platforms are RAM intensive, which means you should focus on maximizing your laptop’s RAM rather than other components.

With a few exceptions, you can skip an aftermarket GPU for your trading laptop. And since laptops come preloaded by the manufacturer, it’s hard to replace the motherboard.

So, in essence, your search boils down to finding a laptop with enough CPU, enough RAM, and enough hard disk storage.

On most laptops, replacing a hard drive is easy and cheap, so this is one thing you can compromise and replace at a later date. However, don’t expect to replace the CPU. There are some technical details here, but assume that you are tied to the CPU that comes with your laptop.

RAM is also easy to replace, but your laptop needs to have slots to expand it, because RAM is like a stick that you can put in a computer slot, and a laptop motherboard usually has a limited RAM slot.

 

 

Here’s why the Evergrande crisis is not China’s ‘Lehman moment’

Spark Global Limited reports:

BEIJING — Property developer China Evergrande’s debt woes are not likely to cause the same fallout as the collapse of U.S. investment bank Lehman Brothers in 2008, analysts said.

Evergrande’s Hong Kong-listed shares have tumbled nearly 90% since July 2020, as the Chinese government cracked down on speculation in the real estate market.

The stock has lost more than 20% in the last five trading days and investors are watching to see if the highly indebted real estate giant will be able to make millions of dollars in interest payments on U.S. dollar-denominated bonds in the coming days. The jitters have contributed to global stock market declines this week.

Evergrande holds physical assets

However, when it comes to the scale of potential impact on international financial markets, analysts point to a major difference between the Evergrande crisis and the Lehman collapse: Evergrande holds land, while Lehman held financial assets.

Evergrande has cash flow problems, but talk of systemic risks is “a bit overdone, frankly,” Rob Carnell, regional head of research for Asia-Pacific at ING, said Wednesday on CNBC’s “Squawk Box Asia.”

“Let’s face it, this is not Lehman’s, this is not LTCM,” Carnell said, referring to a large American hedge fund, Long-Term Capital Management, that failed in the 1990s. “It’s not a hedge fund with massive leveraged positions or a bank whose financial asset prices are hurtling towards zero. It’s a property development firm with quite a lot of debt, you know, 300 billion plus thereabouts in dollar terms.”

The UK jobs market is booming – what does that mean for investors?

Spark Global Limited reports:

Unemployment in the UK is back to pre-pandemic levels, employers are desperate to hire more staff, and wages are rising. John Stepek looks at what that means for your money.

I realise you won’t need any further incentive than that to share your thoughts, but just in case, if you fill in our survey, you’ll also get the chance to win a £50 Amazon voucher.

And now to this morning’s news – the latest employment data.

One thing’s for sure, the UK’s labour shortage isn’t going away any time soon.

The UK jobs market is roaring ahead

The latest UK employment figures came out from the Office for National Statistics (ONS) this morning. Not to put too fine a point on it, they were extremely strong.

In the three months to July, the unemployment rate fell to 4.6%, from 4.7% before. And during August, according to more timely data from HMRC, payrolls grew by 241,000. That puts us back to pre-pandemic levels.

The employment rate (that is, the proportion of people aged between 16 and 64 who are in work) rose to 75.2%. That’s still lower than before the pandemic and the shutdown (when it was sitting at 76.5%) but it’s higher than it was last quarter.

And the inactivity rate – that is, people who are of working age, but aren’t actively seeking work for various reasons – is sitting at 21.1%. That’s higher than pre-pandemic (when it was 20.2%) but it’s again fallen from the previous quarter.

Meanwhile, employers are desperate to hire more people. The number of job vacancies rose to 1.034 million in the three months to August. That is the first time ever that the figure has gone above one million.

In short – more and more people are returning to work; the proportion of “discouraged” workers is falling all the time; and employers are still really struggling to find people.

Add that all up, and it’s no wonder that wages are shooting up. The ONS finds that weekly earnings (including bonuses) rose by 8.3% in the quarter to July 2021, compared to last year. Excluding bonuses, the figure was 6.8%.

Now, we have to take those figures with a big pinch of salt. They are distorted by the fact that lots of people lost their jobs (or went on reduced hours) a year ago. In other words, the average individual isn’t getting an 8% pay rise (which is one reason why pensioners aren’t getting one this year either). Instead, we’re seeing a big rebound whereas at the same time last year we saw a collapse. This is known as a “base effect”.

However, that said, after carrying out various adjustments, the ONS still reckons that underlying annual earnings growth is coming in at between 3.6% and 5.1%. Even at the lower end of that range, that’s significantly above the current inflation rate.

So we don’t even need to reach for the “anecdata” stories about employers offering £1,000 sign-on bonuses and the like to conclude that wage growth is strong.