Getting Started in Stock Investing and Trading (Paperback, Edition)

Acknowledgments viii Element Key ix Introduction xi PART 1 INVESTING CHAPTER 1 THE NATURE OF STOCK INVESTING 3 Favorable Conditions for Owning Stocks 4 Relationships between Price and Fundamental Value 5 CHAPTER 2 INVESTMENT RISKS 17 Market Risk 18Leverage Risk 20 Knowledge and Experience Risk 22 Sector Risk 25 Political and Economic Risk 26 Inflation Risk and Tax Risk 27 Fundamental Risk 30 Lost Opportunity Risk 32 CHAPTER 3 VALUE INVESTMENT AND GROWTH INVESTMENT 37 Value Investing and Control 41 Value Investing Myths and Facts 43 CHAPTER 4 MARKET STRATEGIES 53 A Basic Strategy: Buy and Hold 54 A Strategic Requirement: Diversifi cation 55 Other Market Strategies 63 Ex-Dividend Date Buying 66 CHAPTER 5 FUNDAMENTAL ANALYSIS 71 The Balance Sheet 75 The Income Statement 77 The P/E Ratio: Finding a Bargain-Priced Stock 78 Revenue and Earnings: Fundamentals Based on the Operating Statement 83 Working Capital: Fundamentals as a Form of Money Management 86 CHAPTER 6 DIVIDEND STRATEGIES 93 Dividend Yield as a Means for Stock Selection 93 Calculating Dividend Yield 94 Reinvesting Dividends 97 When Dividends Are Earned and Paid 98 Picking Stocks for Dividends 101 CHAPTER 7 ALTERNATIVES: STOCKS OR MUTUAL FUNDS 107 Investment Clubs 108 Types of Mutual Funds 110 Mutual Fund Fees 112 Classification by Features 115 Other Conduit Investments 117 Variable Annuities 119 PART 2 TRADING CHAPTER 8 THE NATURE OF STOCK TRADING 127 Favorable Conditions for Trading Stocks 132 Relationships between Technical and Fundamental Value 137 CHAPTER 9 TRADING RISKS 143 Market Risk and Volatility Risk 145 Leverage Risk 149 Short Position Risk 152 Extreme Reaction Risk 153 Technical Knowledge and Experience Risk 156 Technical Risk and Market Culture 157 CHAPTER 10 TRADING METHODS: DAY AND SWING TRADING 165 Day Trading 166 Swing Trading 172 Exit and Entry Signals 175 CHAPTER 11 CHARTING TOOLS AND INTERPRETATION 185 Traditional Types of Charts 186 Candlestick Charts: The Basics 189 Combining Candlesticks with Western Technical Analysis 198 CHAPTER 12 ESSENTIAL TECHNICAL INDICATORS 203 Support and Resistance: The Trading Range as a Defining Attribute of Price 204 Popular Price Patterns and Their Meaning 212 Trend Lines for Spotting Reversals 217 Breakouts and Gaps 219 Moving Averages, Oscillators, and Volume Tests 222 CHAPTER 13 SIGNALS AND CONFIRMATION 229 Swing Trade Reversals 231 Candlestick Reversals 234 Signal Failure 241 CHAPTER 14 TECHNICAL ANALYSIS, DOW THEORY, AND PRACTICE 247 The Efficient Market 248 The Random Walk 251 Charles Dow and His Market Theory 257 Glossary 265 Recommended Reading 289 About the Author 291 Index 293