Frequently Asked Questions about Trading

What is Cross Trade?

Learn about cross trade.

Cross Trade is the practice where buy and sell orders for the same stock are offset without recording the trade on the exchange. When a trade is unrecorded through the exchange, it's very likely that a client didn't get the best price. This is illegal on most stock exchanges. Cross Trade occurs when a broker executes both a buy and a sell for the same security from one client account to another where both accounts are managed by the same portfolio manager.

What are Franked Dividends?

Learn about franked dividends.

Franked dividend is an Australian arrangement that eliminates double taxation of dividends. It is the practice of issuing dividend with a personal tax credit attached to it. The amount of the tax credit depends upon the issuer's tax rate and the amount of the dividend.

What are Trade Options?

Learn about trade options.

An option is the right to buy or sell property at an agreed price; the right is purchased. It is a contract between a buyer and a seller that gives the buyer of the option the right, but not the obligation, to buy/sell a specified asset. If the option is not exercised by a stated date, the money is forfeited.

What are Share Purchase Plans?

Learn about share purchase plans.

Share purchase plans (SPP) allow companies to issue a maximum of $5,000 in new shares to each shareholder without having to issue a prospectus. SPPs were originally used to give opportunities enjoyed by big institutions to small shareholders. Shareholders also get to buy with no brokerage and at a discount to the current share price.

Is Brokerage Fee Tax Deductible?

Learn about tax-deductible brokerage fee.

There are two types of brokerage fees, one is tax-deductible and the other is not. If you are an investor, trading fees are usually factored into your cost base when calculating capital gains tax. If you are share trading, the brokerage fee is deductible as a business expense. You pay the second type of brokerage fee when you either buy or sell a stock, which is a capital expense rather than a deduction.

Trade Stocks First or Derivatives?

Learn whether to pick stocks first or derivatives.

Share trading will suit some, not others. Same goes for derivatives. Some people start with stocks first, then move on to derivatives when they're experienced. To be successful in anything, research and learn as much as you can about what you're investing in, so you can formulate a good strategy.

Pre-Open Trading

Learn about pre-open trading.

In the pre-open phase of trading, buyers and sellers can place their orders onto the market, but no actual trades happen until the market opens. Trading before the market opens can happen when a possible exchange-traded option has been exercised. Bigger trades also occur, which are actually off market (change of ownership in large holdings of securities without direct impact on market participants).

What Timeframes do I use for Entry, Trade Management, and Exit?

Everything about timeframes.

There is no need for a beginner to use different timeframes for setup and entry. Many people use a single timeframe to find a setup, manage the trade and exit the trade.

How to Pick the Right Stock?

Learn how to pick the right stock.

You trade because you want to profit, and you do this by picking the right stock or taking advantage of a stock moving in the "right" direction.

Stock selection requires a lot of research and knowledge about the stock market. General tips include picking blue chip stocks with competitive advantage, subscribing to analyst reports, understanding how to skew your trading to a positive expectancy, and working out intrinsic value.

What is Share Dilution?

Learn about share dilution.

Share dilution is a reduction in earnings per share of common stock, occurring when additional shares are issued. Common shares increase during a secondary market offering, when employees exercise stock options, and when convertible securities are converted.

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