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What is meant by Bulls and Bears?What is meant by Bulls and Bears?

The market goes through cycles, trending The market goes through cycles, trending upward for periods of time, then reversing upward for periods of time, then reversing itself, and vice versa.itself, and vice versa.

A rising period is known as a bull market—A rising period is known as a bull market—bulls being the market optimists who bulls being the market optimists who cause prices to rise.cause prices to rise.

A bear market is a falling market, where A bear market is a falling market, where the pessimists are driving prices lower.the pessimists are driving prices lower.

Key noteKey note

Sometimes market trends last a long time, Sometimes market trends last a long time, even years. Overall, bull markets usually even years. Overall, bull markets usually continue for longer periods of time than continue for longer periods of time than bear markets.bear markets.

This doesn’t mean, however, that markets This doesn’t mean, however, that markets usually rise farther than they fall; it just usually rise farther than they fall; it just means that drops in the market tend to means that drops in the market tend to happen quickly while rises tend to take a happen quickly while rises tend to take a long time.long time.

What is the Fed?What is the Fed?

The Federal Reserve (The Fed) is the U.S. The Federal Reserve (The Fed) is the U.S. national bank. Its origins go back to 1907, when national bank. Its origins go back to 1907, when a sudden nationwide financial scare resulted in a a sudden nationwide financial scare resulted in a disastrous outcome on the bank.disastrous outcome on the bank.

JP Morgan saved the day by importing $100 JP Morgan saved the day by importing $100 million worth of gold from Europe. The million worth of gold from Europe. The government decided it couldn’t continue to rely government decided it couldn’t continue to rely on industry giants to save the economy.on industry giants to save the economy.

What is the Fed?What is the Fed?

In 1913, Congress created the Federal In 1913, Congress created the Federal Reserve to stabilize and secure the Reserve to stabilize and secure the nation’s financial system. Since then, the nation’s financial system. Since then, the trend has increased toward coordination.trend has increased toward coordination.

Today, all banks are part of the Federal Today, all banks are part of the Federal Reserve system.Reserve system.

What does the Fed do?What does the Fed do?

The bankers’ banker: If your bank wants to The bankers’ banker: If your bank wants to lend more money to customers, it has to lend more money to customers, it has to borrow money from its own bank—the borrow money from its own bank—the Fed. Fed.

The interest the Fed charges banks is The interest the Fed charges banks is called the called the discount ratediscount rate..

What does the Fed do?What does the Fed do?

The watchdog: The Fed is also the bank’s auditor. Fed The watchdog: The Fed is also the bank’s auditor. Fed officials regularly examine every bank’s records to make officials regularly examine every bank’s records to make sure loan decisions are based on sound judgments and sure loan decisions are based on sound judgments and that regulations are being followed.that regulations are being followed.

The regulator of the money supply: In our economy, if The regulator of the money supply: In our economy, if there’s a lot of money around, we spend too much. If there’s a lot of money around, we spend too much. If there’s too little, we don’t spend enough. The Fed tries to there’s too little, we don’t spend enough. The Fed tries to maintain just the right balance of money so the dollar will maintain just the right balance of money so the dollar will buy roughly the same amount of goods and services buy roughly the same amount of goods and services every year. If prices remain stable, so will the value of every year. If prices remain stable, so will the value of our money.our money.

What does the Fed do?What does the Fed do?

The controller of the currency: As coins and The controller of the currency: As coins and paper money become damaged, the Fed takes paper money become damaged, the Fed takes them out of circulation and orders the Treasury them out of circulation and orders the Treasury to replace them with fresh new coins and bills.to replace them with fresh new coins and bills.

The US Government’s bank: The Fed, through The US Government’s bank: The Fed, through the Reserve Banks, is where the Treasury has the Reserve Banks, is where the Treasury has its bank account—and where many its bank account—and where many governmental agencies have their accounts—governmental agencies have their accounts—depositing and withdrawing funds like any other depositing and withdrawing funds like any other customer.customer.

What does the Fed do?What does the Fed do?

The clearinghouse: The Fed performs the The clearinghouse: The Fed performs the monumental task of serving as the nation’s monumental task of serving as the nation’s check-clearing system, processing over 15 check-clearing system, processing over 15 billion checks a year. That is over 41 million billion checks a year. That is over 41 million checks a day.checks a day.

The keeper of the gold: One of the most popular The keeper of the gold: One of the most popular tourist attractions in the US is the gold vault at tourist attractions in the US is the gold vault at the New York Federal Reserve Bank. This the New York Federal Reserve Bank. This massive underground vault right on the bedrock massive underground vault right on the bedrock of Manhattan, contains the largest known of Manhattan, contains the largest known accumulation of gold in the world—about 13,000 accumulation of gold in the world—about 13,000 tons.tons.

What is an odd lot trade?What is an odd lot trade?

Most stock trading orders refer to Most stock trading orders refer to round round numbersnumbers of shares—multiples of 100. But of shares—multiples of 100. But what of the small investor with a fixed sum what of the small investor with a fixed sum of money to invest—say, a gift of $300? of money to invest—say, a gift of $300? The number of shares that $300 will buy is The number of shares that $300 will buy is likely to be an odd number, not a multiple likely to be an odd number, not a multiple of 100 shares; hence the term odd lot for of 100 shares; hence the term odd lot for this kind of order.this kind of order.

The rules of the tradeThe rules of the trade

Just about every activity has rules, whether it’s Just about every activity has rules, whether it’s touch football or stock trading. Here are some touch football or stock trading. Here are some trading rules for the New York Stock Exchange trading rules for the New York Stock Exchange and American Stock Exchange.and American Stock Exchange.

If two orders are equal, the first order gets If two orders are equal, the first order gets priority.priority.

If two orders are equal and simultaneous the If two orders are equal and simultaneous the larger order gets priority.larger order gets priority.

If two orders are equal in all respects… What If two orders are equal in all respects… What else? They flip a coin.else? They flip a coin.

How do you choose a stock?How do you choose a stock?

There is no one method. Simple ways are There is no one method. Simple ways are talking to your broker, reading the talking to your broker, reading the newspaper, tracking stocks progress in newspaper, tracking stocks progress in the daily stock tables.the daily stock tables.

There are two major schools of thought on There are two major schools of thought on picking stocks. picking stocks.

How do you choose a stock?How do you choose a stock?

Many serious investors swear by Fundamental Many serious investors swear by Fundamental analysis, which involves appraising a company’s analysis, which involves appraising a company’s financial condition and management, and an financial condition and management, and an industry’s competitive position.industry’s competitive position.

Many investors, however, live and die by Many investors, however, live and die by technical analysis, which ignores fundamentals technical analysis, which ignores fundamentals and, instead, uses charts based on past and, instead, uses charts based on past performance to identify price trends and cyclical performance to identify price trends and cyclical movements of particular stocks, industries or the movements of particular stocks, industries or the market as a whole.market as a whole.

How do you choose a stock?How do you choose a stock?

Those who feel every factor must be Those who feel every factor must be considered study both fundamental and considered study both fundamental and technical information (which probably technical information (which probably leaves very little time for their families).leaves very little time for their families).

Finally, of course, there is the less time-Finally, of course, there is the less time-consuming method of throwing darts at the consuming method of throwing darts at the stock page. stock page.

Good’till Cancelled or day orderGood’till Cancelled or day order

When you give your broker a stop order or When you give your broker a stop order or a limit order, the broker will ask if you want a limit order, the broker will ask if you want it to be Good’till Cancelled or GTC (the ordit to be Good’till Cancelled or GTC (the order will stand until either it’s filled or you caner will stand until either it’s filled or you cancel it), or a day order (it will either be filled cel it), or a day order (it will either be filled that day or cancelled automatically).that day or cancelled automatically).

Example of oral orderExample of oral order

Order: I wanna buy or sell 6oo,ooo shares Order: I wanna buy or sell 6oo,ooo shares of UMC (the stock code is 2303) at 20.5 or of UMC (the stock code is 2303) at 20.5 or at CD (careful discretion). My account numat CD (careful discretion). My account number is xxxxxx.ber is xxxxxx.

Blue ChipsBlue Chips

The term blue chips was introduced in 1904 to mean the The term blue chips was introduced in 1904 to mean the stocks of the largest, most consistently profitable stocks of the largest, most consistently profitable corporations. The term comes from the blue chips used corporations. The term comes from the blue chips used in poker always the most valuable chips.in poker always the most valuable chips.

Secondary issues are the solid well-established Secondary issues are the solid well-established businesses which receive a little less investor confidence businesses which receive a little less investor confidence than the blue chips.than the blue chips.

Growth stocks generally are relatively young companies Growth stocks generally are relatively young companies with growth potential but no assurance of success.with growth potential but no assurance of success.

Penny stocks are the long-shots, companies with Penny stocks are the long-shots, companies with virtually no value other than their speculative potential.virtually no value other than their speculative potential.