Getting Started in Stock Investing and Trading

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 18    Leverage 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