Frequently Asked Questions about Trading

What is Intrinsic Value?

Learn about intrinsic value.

Fundamental analysis introduces the concept of intrinsic value. Intrinsic value is the "real" value of a security. This implies that market prices are not true reflections of a stock's worth. This is where fundamental analysis comes in. For example, Trader X is following stock ABC, which is trading at $25. After doing his analysis however, he finds that stock ABC has an estimated value of $30, its 'intrinsic' value.

Australian Tax: Capital Gains and Losses?

Learn about tax on capital gains and losses.

When share trading, you earn capital gains (positive) or losses (negative) when you sells shares that you hold on to for capital growth. Holding shares for more than 12 months may entitle you to a capital gains tax (CGT) discount.

Australian capital gains tax applies to profits made on the sale of a capital asset that was acquired after 20 September 1985. Legislation defines capital gains as "any kind of property" or a "legal/equitable right that is not property."

Where Can I Play Free ASX Trading Games/Simulations?

Everything about ASX games.

A great way to practice share trading is through simulation and games. You get to take investment techniques and strategies for a test drive with zero risk. Here are some sites which offer free share trading simulations:

A Question About Stop Losses

Learn about stop and limit orders.

Q: Trader X buys stock ABC at $3.00. X sets a stop loss at $2.80. The following day, stock ABC opens at $2.65. Does it get sold?

A: You obviously do not want to stay in the market for an unlimited amount of time if your capital is limited. A stop or limit order tells your broker you dislike the current price, and you want the price to move up or down before you buy or sell.

How Do I Become a Stock Broker?

How to become a stock broker.

A stock broker's job involves a fast paced working environment where pressures are high and the risks are higher. The broker may find himself selling certain plays to their clients whose decision may yield a huge commission. Anyone can be a stock broker but not everyone can be successful in it.

Day Trading For Beginners

Day trading strategies for beginners

Share trading is one of the most common ventures for beginners. However making money out of the stock market can be very difficult. Its a place where opportunities are grabbed and losers are taken advantage of. For any newbie, even for the pros, the stock market is a cut throat world. Fortunately there are day trading strategies that beginners can use.

Am I Eligible for Dividends If I Sell Before Settlement Date?

Learn when to sell shares to get dividends.

The all important settlement or closing date is when a transaction is finalised. Share trading is like buying or selling property, you buy the house but don't actually own it until after closing. The seller also does not get the money until the closing date. On the settlement date, a seller collects money and gives up stock ownership while the buyer pays for the securities and becomes the official shareholder.

What is Market Depth?

Learn about market depth.

Market depth is the overall level of open buy and sell orders for an individual security. You can quickly check the number of orders and their corresponding prices if you want to know if there are sufficient liquidity levels. For example, low liquidity can be present for particular interest rate securities and warrants.

A market depth table is composed of buyers, sellers, and prices that the buyers want to buy at and sellers wish to sell at. In the middle column you will see quantity, which is the total shares in the market and total shares bought and sold at a certain price.

Is Technical Analysis Still "Reliable" in Times of High Volatility?

Learn about using technical analysis in bear markets.

Technical analysis evaluates stocks using charts and other tools to pin down patterns that suggest future market activity. Charts are still charts regardless of market conditions. In times of high volatility, the pattern is merely down trending. A pattern which took weeks to trace out in low volatility times can take only hours or days to move in a highly volatile market.

Should I Trade or Invest my Margin Loan?

Is Margin Loan a good capital investment?

To be able to bank big profits you also have to risk big amounts of money. Unfortunately most traders, especially newbies don't have that much capital begin with. Apart from that, trading will most likely be a sideline other than a day job to have a stable source of income. One of the ways to get extra cash is to borrow from a bank. This is called a margin loan. The question is, should you risk a loan in hopes of earning a big payout?

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