Stock Market, Investing, Trading & Day Trading 101
STOCK MARKET, INVESTING, TRADING & DAY TRADING 101
PURPOSE OF THIS STUDY GUIDE
This guide teaches the foundation I need to understand:
Stocks
The stock market
Long-term investing
ETFs and index funds
The S&P 500
Fidelity
Apple stock
Dell stock
Bitcoin and cryptocurrency
Trading
Day trading
Charts and candlesticks
Technical analysis
Fundamental analysis
Risk management
Options basics
Trading psychology
Coding for finance
Careers where I can help clients invest or place trades
Securities licenses such as the SIE and Series 7
IMPORTANT:
Investing and day trading are not the same thing.
Long-term investing usually focuses on building wealth over years.
Day trading attempts to profit from short-term price movements and is much riskier.
There is no guaranteed investment or guaranteed trading strategy.
UNIT 1: WHAT IS A STOCK?
Stock:
A piece of ownership in a publicly traded company.
Share:
One individual unit of stock.
Example:
Buying Apple stock means buying partial ownership in Apple.
Ticker Symbol:
The short abbreviation used to identify an investment.
Examples:
Apple = AAPL
Dell Technologies = DELL
Microsoft = MSFT
NVIDIA = NVDA
Amazon = AMZN
Bitcoin = BTC
Shareholder:
A person or organization that owns shares of a company.
Equity:
Ownership in a company.
Portfolio:
All of the investments a person owns.
Asset:
Something with financial value.
UNIT 2: WHAT IS THE STOCK MARKET?
Stock Market:
The overall system where investors buy and sell shares of publicly traded companies.
Stock Exchange:
A marketplace where securities are traded.
Major U.S. exchanges include:
New York Stock Exchange = NYSE
Nasdaq
Bull Market:
A market that is generally rising.
Bear Market:
A market that is generally falling.
Correction:
A meaningful market decline from a recent high.
Volatility:
How quickly and dramatically prices move up and down.
Liquidity:
How easily an investment can be bought or sold.
Market Capitalization:
The total market value of a company's outstanding shares.
Basic formula:
Share price x number of outstanding shares = market capitalization
UNIT 3: INVESTING VS TRADING
INVESTING
Investing usually means buying assets with the intention of holding them for months, years, or decades.
An investor may focus on:
Company growth
Profits
Dividends
Long-term economic growth
Retirement
Building wealth over time
TRADING
Trading focuses more heavily on shorter-term price movement.
Types of traders include:
Position Trader:
May hold positions for weeks or months.
Swing Trader:
Usually holds positions for several days or weeks.
Day Trader:
Opens and closes trades during the same trading day.
Scalper:
May hold trades for seconds or minutes.
Key difference:
Investor asks:
What could this company or investment be worth years from now?
Trader asks:
What is the price likely to do next?
UNIT 4: DIVERSIFICATION
Diversification:
Spreading money across multiple investments instead of putting everything into one company.
Example:
Less diversified:
100% of investment money in Apple.
More diversified:
Money spread across hundreds of companies through an index fund.
Diversification does NOT guarantee that I will not lose money.
Its purpose is to reduce the damage that one company's poor performance can cause to an entire portfolio.
UNIT 5: WHAT IS AN INDEX?
Index:
A group of securities used to measure a particular part of the market.
Examples:
S&P 500
Dow Jones Industrial Average
Nasdaq Composite
S&P 500:
An index representing approximately 500 major U.S. companies.
The S&P 500 includes companies from different industries.
Apple is included in the S&P 500.
This means:
If I own an S&P 500 fund, I already have some exposure to Apple.
If I buy an S&P 500 fund AND additional Apple shares, I am increasing my exposure to Apple.
UNIT 6: ETF VS MUTUAL FUND VS INDEX FUND
ETF:
Exchange-Traded Fund.
An ETF is a basket of investments that trades on an exchange similarly to a stock.
Examples of funds designed to track the S&P 500 include:
VOO
SPY
IVV
Mutual Fund:
A pooled investment fund whose shares are generally bought or sold based on the fund's calculated net asset value.
Index Fund:
A fund designed to follow an index rather than having a manager constantly choose individual investments.
Important:
An index fund can be structured as an ETF or a mutual fund.
UNIT 7: FIDELITY
Fidelity:
A financial-services company and brokerage where investors can open accounts and buy investments.
Types of investments available through brokerage firms may include:
Stocks
ETFs
Mutual funds
Bonds
Options
Money market funds
Other securities
Fidelity also has cryptocurrency-related offerings.
FXAIX:
Fidelity 500 Index Fund.
FXAIX is designed to closely track the S&P 500.
When comparing funds, study:
Expense ratio
Minimum investment
Index being tracked
Performance
Risk
Turnover
Tax considerations
Account type
UNIT 8: EXPENSE RATIO
Expense Ratio:
The percentage of a fund's assets used annually to cover fund operating expenses.
Example:
If two funds track approximately the same thing, a lower expense ratio generally means less money is being taken from the investment for fund operating expenses.
Do not choose a fund ONLY because the expense ratio is low.
Also examine:
What it owns
What index it tracks
Risk
Investment objective
Taxes
Trading costs
Account type
UNIT 9: APPLE STOCK
Ticker:
AAPL
Buying AAPL means investing specifically in Apple.
Reasons an investor might research Apple include:
Revenue
Profit
Cash flow
Products
Services
Customer loyalty
Competitive position
Debt
Innovation
Growth
Valuation
Risk:
Apple is one company.
Even a strong company can have a falling stock price.
A great company is not automatically a great investment at every possible price.
UNIT 10: DELL STOCK
Ticker:
DELL
DELL represents Dell Technologies.
Before buying Dell or ANY individual stock, answer:
What does the company sell?
How does the company make money?
Is revenue growing?
Is profit growing?
How much debt does it have?
Does it generate strong cash flow?
Who are its competitors?
What gives it an advantage?
What could damage the company?
Is the stock expensive compared with its earnings?
What would cause me to change my investment thesis?
UNIT 11: FUNDAMENTAL ANALYSIS
Fundamental Analysis:
Studying the actual company and its financial health.
Important terms:
Revenue:
Money a company earns before expenses are subtracted.
Net Income:
Profit after expenses.
EPS:
Earnings Per Share.
EPS shows how much profit is attributable to each share.
P/E Ratio:
Price-to-Earnings Ratio.
P/E compares a company's stock price with its earnings.
Free Cash Flow:
Cash remaining after important business expenses and investments.
Profit Margin:
Percentage of revenue that becomes profit.
Debt:
Money the company owes.
Assets:
Things the company owns that have value.
Liabilities:
Financial obligations the company owes.
Dividend:
Money some companies distribute to shareholders.
Dividend Yield:
Annual dividend relative to stock price.
Earnings Report:
A company's periodic report about financial performance.
Guidance:
Management's expectations about future company performance.
UNIT 12: TECHNICAL ANALYSIS
Technical Analysis:
Studying price movement, volume, trends, momentum and chart patterns.
Technical analysis is commonly used by traders.
It does NOT predict the future with certainty.
UNIT 13: CANDLESTICKS
Candlestick:
A visual representation of price movement during a specific period.
Each candle has:
OPEN:
Price at the beginning of the period.
HIGH:
Highest price reached.
LOW:
Lowest price reached.
CLOSE:
Price at the end of the period.
A candlestick chart can represent:
1 minute
5 minutes
15 minutes
1 hour
1 day
1 week
or other timeframes.
UNIT 14: TRENDS
Uptrend:
Price generally forms higher highs and higher lows.
Downtrend:
Price generally forms lower highs and lower lows.
Sideways Market:
Price moves within a range without a strong upward or downward trend.
Trend:
The general direction price is moving.
UNIT 15: SUPPORT AND RESISTANCE
Support:
An area where buying pressure has previously appeared.
Resistance:
An area where selling pressure has previously appeared.
Breakout:
Price moves beyond an important support or resistance level.
Breakdown:
Price falls below an important support level.
Pullback:
Temporary movement against the larger trend.
False Breakout:
Price moves through a level but quickly returns.
UNIT 16: VOLUME
Volume:
The number of shares or contracts traded during a certain period.
High volume can show strong market participation.
Low volume can show weaker participation.
Volume should be studied together with:
Price
Trend
Support
Resistance
Volatility
UNIT 17: COMMON INDICATORS
Moving Average:
Average price over a selected number of periods.
Examples:
20-day moving average
50-day moving average
200-day moving average
RSI:
Relative Strength Index.
RSI is a momentum indicator.
MACD:
Moving Average Convergence Divergence.
MACD is commonly used to study momentum and trends.
VWAP:
Volume Weighted Average Price.
VWAP represents an average traded price weighted by volume.
IMPORTANT:
Indicators do not guarantee what price will do next.
UNIT 18: BID, ASK AND SPREAD
Bid:
Highest current price a buyer is willing to pay.
Ask:
Lowest current price a seller is willing to accept.
Spread:
Difference between the bid and ask.
Example:
Bid = $99.95
Ask = $100.00
Spread = $0.05
Smaller spreads often occur in very liquid securities.
Larger spreads may occur in less liquid securities.
UNIT 19: ORDER TYPES
Market Order:
An order to buy or sell immediately at the best available price.
Important:
A market order prioritizes execution, not a specific execution price.
Limit Order:
An order to buy or sell at a specified price or better.
Buy Limit:
Executes at the limit price or lower.
Sell Limit:
Executes at the limit price or higher.
Stop Order:
An order activated when a specified stop price is reached.
A traditional stop order becomes a market order after activation.
Stop-Limit Order:
A stop activates a limit order instead of a market order.
Advantage:
More control over price.
Disadvantage:
The order might not execute.
UNIT 20: LONG VS SHORT
Going Long:
Buying an investment because I expect its price to rise.
Example:
Buy at $50.
Sell at $60.
Gain before costs = $10 per share.
Short Selling:
Selling borrowed shares because I expect the price to fall and planning to buy them back later.
Example:
Short at $100.
Buy back at $80.
Difference = $20 per share before fees and costs.
Short selling can be extremely risky because a stock can theoretically continue rising with no fixed maximum price.
UNIT 21: DAY TRADING
Day Trading:
Buying and selling securities during the same trading day.
Day traders may look for:
Breakouts
Pullbacks
Momentum
Reversals
High volume
Catalysts
Support and resistance
Price patterns
Day trading is high risk.
Never assume that frequent trading automatically equals faster wealth.
UNIT 22: BASIC TRADE PLAN
Before entering a trade, answer:
1. What ticker am I trading?
2. Why am I considering the trade?
3. What is the setup?
4. What direction is the trend?
5. What is my entry price?
6. Where is my stop or invalidation point?
7. How much money am I risking?
8. What is my position size?
9. Where is my target?
10. What would prove my trade idea wrong?
11. What is my reward compared with my risk?
12. Will I follow my plan even if I become emotional?
UNIT 23: RISK MANAGEMENT
Risk Management:
Controlling how much money can be lost.
One of the most important trading skills is protecting capital.
Position Size:
The number of shares or contracts used in a trade.
Basic educational position-sizing formula:
Amount willing to risk ÷ risk per share = number of shares
Example:
Entry = $50
Stop = $49
Risk per share = $1.
If maximum planned loss = $10:
$10 ÷ $1 = 10 shares.
This is an educational example, not a recommendation for how much I personally should risk.
UNIT 24: RISK TO REWARD
Example:
Entry = $100
Stop = $98
Risk = $2 per share.
Target = $106
Potential reward = $6.
Reward compared with risk = 3 to 1.
Written:
3:1
A good reward-to-risk ratio does NOT guarantee that a trade will succeed.
Probability also matters.
UNIT 25: STOP LOSS
Stop Loss:
A planned price where a trader intends to exit a losing position.
Purpose:
Prevent one trade from causing an uncontrolled loss.
A stop is not guaranteed to execute at the exact stop price during fast market movement.
UNIT 26: TRADING JOURNAL
For every practice or real trade, record:
Date
Ticker
Strategy
Entry
Stop
Target
Position size
Why I entered
Chart screenshot
Why I exited
Profit or loss
What went right
What went wrong
My emotions
Whether I followed my plan
What I learned
Goal:
Determine which strategies actually work for me instead of relying on memory or emotion.
UNIT 27: TRADING PSYCHOLOGY
FOMO:
Fear Of Missing Out.
Example:
Buying a stock simply because it is rapidly rising and I am scared of missing profit.
Revenge Trading:
Taking emotional trades after losing money because I want to immediately recover the loss.
Overtrading:
Taking too many trades.
Confirmation Bias:
Only looking for information that supports what I already believe.
Loss Aversion:
Feeling losses more strongly than equivalent gains.
Greed:
Ignoring the plan because I want more profit.
Fear:
Abandoning a reasonable plan because normal price movement makes me nervous.
Discipline:
Following the trading plan instead of emotion.
UNIT 28: MARGIN
Margin:
Borrowing purchasing power from a brokerage firm using account assets as collateral.
Margin can increase:
Buying power
Potential gains
Potential losses
Risk
Possible consequences include:
Margin calls
Forced liquidation
Interest charges
Larger losses
IMPORTANT:
Day-trading and margin regulations can change.
Always check current FINRA rules and my brokerage firm's current rules before using margin.
UNIT 29: SETTLEMENT
Settlement:
The process of officially completing a securities transaction after a trade occurs.
Many U.S. securities currently use T+1 settlement.
T+1 means:
Trade date plus one business day.
UNIT 30: OPTIONS 101
Option:
A financial contract based on an underlying asset.
Call Option:
Generally benefits from an increase in the underlying asset when other factors remain equal.
Put Option:
Generally benefits from a decrease in the underlying asset when other factors remain equal.
Strike Price:
Price specified in the options contract.
Expiration:
Date on which the option expires.
Premium:
Price paid for an option.
Contract:
Standard listed equity option contracts commonly represent 100 shares of the underlying stock.
Delta:
Measures how an option's price may respond to movement in the underlying asset.
Theta:
Measures sensitivity to passage of time.
Implied Volatility:
Market-implied expectation of future volatility.
Assignment:
When an option seller is required to fulfill the contract.
IMPORTANT:
Options can create significant losses and should be learned after understanding stocks and risk management.
UNIT 31: BITCOIN
Bitcoin:
A decentralized digital asset.
Ticker:
BTC
Blockchain:
A distributed digital ledger used to record transactions.
Bitcoin is NOT a stock.
It does not represent ownership in a corporation.
Bitcoin prices can be extremely volatile.
Crypto investors can lose substantial amounts of money.
UNIT 32: BUYING BITCOIN DIRECTLY VS A BITCOIN FUND
Direct Bitcoin:
The investor owns exposure to BTC through a cryptocurrency account or platform.
Bitcoin Fund:
A security designed to provide Bitcoin price exposure through a brokerage account.
Example to research:
FBTC = Fidelity Wise Origin Bitcoin Fund.
Difference:
BTC:
Direct cryptocurrency exposure.
FBTC:
A brokerage-traded product designed to provide exposure to Bitcoin's price.
These are not exactly the same investment structure.
UNIT 33: CRYPTO TERMS
Cryptocurrency:
Digital assets that use blockchain or related technology.
Wallet:
Technology used to access and manage cryptocurrency.
Private Key:
Secret information used to control cryptocurrency.
Never share a private key or seed phrase.
Exchange:
Platform where cryptocurrencies may be bought and sold.
Stablecoin:
Crypto asset designed to maintain a more stable value relative to another asset, often a currency.
Mining:
Process used by certain blockchain networks such as Bitcoin to validate transactions and secure the network.
Market Cap:
Price multiplied by circulating supply.
Altcoin:
Cryptocurrency other than Bitcoin.
UNIT 34: APPLE VS S&P 500 VS BITCOIN
APPLE:
One company.
Ticker AAPL.
Higher concentration risk than owning a broad index fund.
S&P 500 FUND:
Exposure to hundreds of large U.S. companies.
More diversified than owning one individual stock.
BITCOIN:
Crypto asset.
Highly volatile.
Different risks than stocks.
Important:
There is no universal answer to which is the "best."
The appropriate investment depends on:
Goals
Time horizon
Risk tolerance
Emergency savings
Debt
Income
Portfolio
How much loss I could tolerate
UNIT 35: CORE AND SATELLITE INVESTING
Core:
The main diversified part of a portfolio.
Example:
Broad-market or S&P 500 index exposure.
Satellite:
Smaller investments chosen for additional targeted exposure.
Examples:
Apple
Dell
Bitcoin
Another individual company
The purpose of this structure is to avoid allowing one speculative investment to control the entire portfolio.
UNIT 36: DOLLAR-COST AVERAGING
Dollar-Cost Averaging:
Investing a set amount of money on a repeating schedule regardless of whether prices are currently high or low.
Example:
Investing a fixed amount each payday.
Potential advantage:
Reduces the temptation to constantly guess the perfect moment to enter the market.
It does not guarantee profit.
UNIT 37: COMPOUNDING
Compounding:
Investment returns can potentially begin generating additional returns over time.
Simple example:
Money earns a return.
That return remains invested.
Future returns may then occur on both the original money and previous gains.
Time is an important factor in compounding.
UNIT 38: CAPITAL GAINS
Capital Gain:
Profit from selling an investment for more than its cost basis.
Capital Loss:
Loss from selling below cost basis.
Cost Basis:
Generally the amount invested in an asset, adjusted when applicable.
Short-Term Capital Gain:
Generally involves an asset held one year or less.
Long-Term Capital Gain:
Generally involves an asset held longer than one year.
Tax rules can change.
Always check current IRS rules or speak with a qualified tax professional.
UNIT 39: WHAT MOVES STOCK PRICES?
Stock prices may move because of:
Earnings
Revenue
Company guidance
Interest rates
Inflation
Employment data
Economic growth
Federal Reserve decisions
New products
Laws and regulations
Lawsuits
Mergers
Acquisitions
Industry changes
Competition
Investor expectations
News
Supply and demand
UNIT 40: ECONOMIC TERMS
Inflation:
General increase in prices over time.
Interest Rate:
Cost of borrowing money.
Federal Reserve:
The central bank of the United States.
GDP:
Gross Domestic Product.
Measure of economic output.
Unemployment Rate:
Percentage of the labor force that is unemployed and actively seeking work.
CPI:
Consumer Price Index.
A commonly followed inflation measure.
Recession:
A significant decline in economic activity.
These factors can influence financial markets.
UNIT 41: STOCK SCAMS AND RED FLAGS
Warning signs:
Guaranteed profits
"Risk-free" investment opportunities
Pressure to invest immediately
Secret information
Promises a stock will definitely explode
Requests to send crypto to strangers
Fake celebrity endorsements
Fake financial professionals
Social media pump-and-dump groups
Remember:
High potential return usually comes with higher risk.
UNIT 42: PAPER TRADING
Paper Trading:
Practicing trades using simulated money instead of real money.
Purpose:
Learn the platform
Practice order types
Practice chart reading
Practice risk management
Build discipline
Test strategies
Paper trading cannot perfectly recreate the emotions of risking real money.
But it is useful for beginners before risking real capital.
UNIT 43: BACKTESTING
Backtesting:
Testing a trading strategy against historical market data.
Purpose:
See how a strategy would have performed in the past.
Important:
Past results do not guarantee future performance.
Overfitting:
Creating a strategy that fits historical data extremely well but performs poorly on new data.
UNIT 44: CODING FOR TRADING AND FINANCE
Coding is NOT required to invest.
Coding can be useful for:
Algorithmic trading
Quantitative finance
Financial-data analysis
Fintech
Backtesting
Automation
Research
Best beginner programming language to study:
Python
Python topics to learn:
Variables
Strings
Numbers
Lists
Dictionaries
If statements
Loops
Functions
Classes
Files
APIs
Data analysis
Later study:
Pandas
NumPy
Matplotlib
Statistics
Probability
Time-series analysis
SQL
UNIT 45: ALGORITHMIC TRADING
Algorithmic Trading:
Using computer instructions to automatically analyze or execute trades according to programmed rules.
Example idea:
IF:
Price moves above a certain moving average
AND:
Volume reaches a certain level
THEN:
The program creates a signal.
Important:
A computer strategy can still lose money.
Automation does NOT remove market risk.
UNIT 46: STATISTICS FOR TRADERS
Mean:
Average.
Median:
Middle value.
Standard Deviation:
Measure of how spread out values are.
Probability:
Likelihood of an event occurring.
Correlation:
Measurement of how two variables move relative to each other.
Expected Value:
Average expected result over many repetitions.
Win Rate:
Percentage of trades that are profitable.
Average Win:
Average profit from winning trades.
Average Loss:
Average loss from losing trades.
A strategy does NOT need a 100% win rate to potentially be profitable.
Risk and reward matter.
UNIT 47: CAREERS INVOLVING INVESTING AND TRADES
Possible careers include:
Financial Representative
Brokerage Customer Service Representative
Registered Representative
Broker
Financial Advisor
Investment Adviser Representative
Trader
Securities Trader
Investment Analyst
Portfolio Analyst
Portfolio Manager
Financial Planner
Wealth Management Associate
Client Relationship Representative
Investment Solutions Representative
Fintech Analyst
UNIT 48: HELPING PEOPLE PLACE TRADES
A job helping brokerage customers may involve:
Explaining account features
Helping customers navigate the trading platform
Helping clients enter trade requests
Explaining order types
Discussing account balances
Solving account problems
Explaining brokerage procedures
Documenting interactions
Following securities laws
Following company policies
Protecting customer information
IMPORTANT:
There is a major difference between:
Helping someone execute a trade they requested
AND
Personally recommending what they should buy or sell.
Providing investment recommendations can require specific licensing, registration, employer supervision and compliance requirements.
UNIT 49: SIE EXAM
SIE:
Securities Industry Essentials Exam.
The SIE teaches foundational securities-industry knowledge.
Topics include:
Stocks
Bonds
Investment products
Trading
Markets
Regulations
Risk
Prohibited practices
A person can take the SIE without already being sponsored by a brokerage employer.
Passing the SIE alone does NOT authorize someone to perform all securities activities.
UNIT 50: SERIES 7
Series 7:
General Securities Representative qualification exam.
It covers areas such as:
Stocks
Bonds
Mutual funds
ETFs
Options
Customer accounts
Recommendations
Trades
Regulations
The Series 7 generally requires association with and sponsorship by an eligible financial firm.
UNIT 51: SERIES 63, SERIES 65 AND SERIES 66
Series 63:
Focuses on state securities law for broker-dealer representatives.
Series 65:
Used for investment adviser representative qualification.
Series 66:
Combines certain Series 63 and Series 65 concepts and is commonly paired with Series 7.
Exact licensing requirements depend on the person's job and jurisdiction.
UNIT 52: SKILLS NEEDED FOR A FINANCIAL-SERVICES CAREER
Customer service
Communication
Sales
Listening
Organization
Problem solving
Attention to detail
Mathematics
Financial literacy
Professionalism
Compliance
Technology
Risk awareness
Time management
Emotional control
Confidentiality
UNIT 53: QUESTIONS TO ASK BEFORE BUYING ANY INVESTMENT
What am I actually buying?
How does it make money or gain value?
What are the major risks?
How volatile is it?
How long do I plan to hold it?
Why am I buying it?
Would I still want it if the price fell 20%?
Am I buying because of research or FOMO?
How much of my portfolio would it represent?
Could I financially handle losing this money?
Do I understand the fees?
Do I understand the tax consequences?
Am I diversified?
UNIT 54: RULES TO MEMORIZE
1. Never invest in something I cannot explain.
2. Never assume a popular stock is automatically a good investment.
3. A low share price does not automatically mean a stock is cheap.
4. A high share price does not automatically mean a stock is expensive.
5. Diversification reduces concentration risk.
6. Investing and day trading are different skills.
7. Protecting capital is more important than chasing fast profit.
8. Determine risk before entering a trade.
9. Never trade only because social media says an asset will rise.
10. Past performance does not guarantee future performance.
11. No legitimate investment has guaranteed high returns without risk.
12. Learn with simulated trades before attempting complicated strategies.
13. Do not risk emergency or bill money on day trading.
14. Do not use margin until I understand exactly how leverage works.
15. Keep learning.
FLASHCARD REVIEW
QUESTION: What is a stock?
ANSWER: Partial ownership in a publicly traded company.
QUESTION: What is a share?
ANSWER: One unit of stock ownership.
QUESTION: What is a ticker symbol?
ANSWER: The abbreviation identifying a publicly traded security.
QUESTION: What is AAPL?
ANSWER: Apple's ticker symbol.
QUESTION: What is DELL?
ANSWER: Dell Technologies' ticker symbol.
QUESTION: What is BTC?
ANSWER: Bitcoin's ticker symbol.
QUESTION: What is a portfolio?
ANSWER: A collection of investments owned by an investor.
QUESTION: What is diversification?
ANSWER: Spreading investments across multiple holdings to reduce concentration risk.
QUESTION: What is the S&P 500?
ANSWER: An index representing approximately 500 major U.S. companies.
QUESTION: What is an ETF?
ANSWER: A basket of investments whose shares trade on an exchange.
QUESTION: What is an index fund?
ANSWER: A fund designed to track a specific market index.
QUESTION: What is FXAIX?
ANSWER: Fidelity 500 Index Fund, designed to track the S&P 500.
QUESTION: What is fundamental analysis?
ANSWER: Studying a company's financial condition, business and valuation.
QUESTION: What is technical analysis?
ANSWER: Studying price, volume, trends, momentum and market behavior.
QUESTION: What is support?
ANSWER: An area where buying interest has previously appeared.
QUESTION: What is resistance?
ANSWER: An area where selling pressure has previously appeared.
QUESTION: What is volume?
ANSWER: The amount of an asset traded during a period.
QUESTION: What is volatility?
ANSWER: The degree to which prices fluctuate.
QUESTION: What is liquidity?
ANSWER: How easily an asset can be bought or sold.
QUESTION: What is a market order?
ANSWER: An order that prioritizes immediate execution at the best available price.
QUESTION: What is a limit order?
ANSWER: An order to buy or sell at a specific price or better.
QUESTION: What is a stop order?
ANSWER: An order activated when a specified stop price is reached.
QUESTION: What is the bid?
ANSWER: Highest current price a buyer is offering.
QUESTION: What is the ask?
ANSWER: Lowest current price a seller is accepting.
QUESTION: What is the spread?
ANSWER: Difference between the bid and ask.
QUESTION: What is going long?
ANSWER: Buying because I expect the price to rise.
QUESTION: What is short selling?
ANSWER: Selling borrowed securities with the goal of buying them back at a lower price.
QUESTION: What is day trading?
ANSWER: Opening and closing trades during the same trading day.
QUESTION: What is a swing trade?
ANSWER: A trade usually held for several days or weeks.
QUESTION: What is position size?
ANSWER: The number of shares or contracts in a trade.
QUESTION: What is risk management?
ANSWER: Controlling the amount of potential loss.
QUESTION: What is FOMO?
ANSWER: Fear Of Missing Out.
QUESTION: What is revenge trading?
ANSWER: Emotional trading intended to quickly recover previous losses.
QUESTION: What is margin?
ANSWER: Borrowed brokerage purchasing power secured by account assets.
QUESTION: What is Bitcoin?
ANSWER: A decentralized digital asset using blockchain technology.
QUESTION: What is FBTC?
ANSWER: A Fidelity fund designed to provide exposure to Bitcoin's price.
QUESTION: Is Bitcoin a stock?
ANSWER: No.
QUESTION: Does owning an S&P 500 fund give me some Apple exposure?
ANSWER: Yes, because Apple is one of the companies included in the index.
QUESTION: What is dollar-cost averaging?
ANSWER: Investing a set amount on a regular schedule.
QUESTION: What is compounding?
ANSWER: The process in which previous returns can potentially generate additional returns over time.
QUESTION: What is paper trading?
ANSWER: Practicing trading using simulated money.
QUESTION: What is backtesting?
ANSWER: Testing a strategy using historical market data.
QUESTION: What is the SIE?
ANSWER: Securities Industry Essentials exam.
QUESTION: Does the SIE require employer sponsorship?
ANSWER: No.
QUESTION: Does the Series 7 generally require sponsorship?
ANSWER: Yes.
QUESTION: What programming language should I study first for financial data and algorithmic trading?
ANSWER: Python.
DIAGNOSTIC TEST
1. Buying one share of Apple means:
A. Lending Apple money
B. Owning a small portion of Apple
C. Owning Bitcoin
D. Owning the entire S&P 500
Answer: B
2. Which is generally more diversified?
A. One Apple stock position
B. One Dell stock position
C. An S&P 500 index fund
D. One Bitcoin position
Answer: C
3. What does AAPL represent?
A. Amazon
B. Apple
C. Bitcoin
D. Fidelity
Answer: B
4. What does BTC represent?
A. Bitcoin
B. Apple
C. Dell
D. S&P 500
Answer: A
5. A limit order is used primarily to:
A. Guarantee profit
B. Control the acceptable execution price
C. Eliminate taxes
D. Guarantee the stock will rise
Answer: B
6. Fundamental analysis studies:
A. A company's business and finances
B. Only candlestick patterns
C. Social media popularity
D. Only cryptocurrency
Answer: A
7. Technical analysis studies:
A. Price and market behavior
B. Only company employees
C. Tax returns
D. Company logos
Answer: A
8. What is diversification?
A. Putting everything into one stock
B. Spreading investments across multiple holdings
C. Day trading every day
D. Borrowing on margin
Answer: B
9. What is FOMO?
A. Fear Of Missing Out
B. Financial Options Market Order
C. Federal Market Organization
D. Fixed Option Margin Objective
Answer: A
10. What should I determine before entering a trade?
A. Only the potential profit
B. Entry, risk, invalidation/stop, position size and target
C. Whether social media likes the stock
D. Nothing
Answer: B
11. Is Bitcoin a stock?
A. Yes
B. No
Answer: B
12. Does an S&P 500 fund already contain exposure to Apple?
A. Yes
B. No
Answer: A
13. Which exam can generally be taken without employer sponsorship?
A. SIE
B. Series 7
Answer: A
14. Which is most closely associated with coding for quantitative trading?
A. Python
B. Photoshop
C. PowerPoint
D. GarageBand
Answer: A
15. Does past investment performance guarantee future returns?
A. Yes
B. No
Answer: B
STUDY ORDER
PHASE 1:
Learn stocks, shares, the stock market, indexes, ETFs, S&P 500, Fidelity and diversification.
PHASE 2:
Learn Apple, Dell, Bitcoin and fundamental analysis.
PHASE 3:
Learn candlesticks, charts, trends, support, resistance, volume and technical analysis.
PHASE 4:
Learn order types, entries, exits, position sizing and risk management.
PHASE 5:
Paper trade and keep a trading journal.
PHASE 6:
Learn options, margin and more advanced strategies only after mastering the basics.
PHASE 7:
Study the SIE and financial-services careers.
PHASE 8:
Learn Python, statistics, financial data and algorithmic trading.
FINAL GOAL:
Be able to explain how the stock market works, understand long-term investing, evaluate individual stocks and diversified funds, understand Bitcoin, read basic charts, create a responsible trade plan, manage risk and understand the career path for working at a brokerage or helping clients with securities.