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Sometime in the third quarter of 1997, someone told me that I should play the stock market. Knowing nothing about the stock market,I turned to
some colleagues to seem to know a lot about it. Following their advice, I opened an account with a stock brokerage company. Well, up to that point it was simple enough. But what should do I do next? So I go to my knowledgeable colleague of mine again. But now he says nothing. Hmm... The very person who was nterested in opening an account for me, is completely indifferent now.
So I stop pestering them. I understand why they would guard their trade secret. Oh well, that’s life. So I start watching the market myself. I go to Yahoo finance to learn the market. But I see at the top, Dow Jones, NASDAQ, Amex etc followed by volume. Now what are these Dow Jones, NASDAQ etc? Are they stock or bond?
And what is volume? All I knew about volume was something related to space. So I start to do research. I learn that Dow Jones, NASDAQ are just indices. You can not buy or sell them, at least in the beginning.
So I learn how to get quotes, how to put an order to buy or sell stocks: market order, limit order, stops order etc. I learn that a market order is an order to buy a stock such that , when one buys a stock at some price, then it immediately goes down. Then what is a limit order? It is an order to buy or sell stocks where one can specify a price. This sounds well and good, but actually what happens is the
So I stop pestering them. I understand why they would guard their trade secret. Oh well, that’s life. So I start watching the market myself. I go to Yahoo finance to learn the market. But I see at the top, Dow Jones, NASDAQ, Amex etc followed by volume. Now what are these Dow Jones, NASDAQ etc? Are they stock or bond?
And what is volume? All I knew about volume was something related to space. So I start to do research. I learn that Dow Jones, NASDAQ are just indices. You can not buy or sell them, at least in the beginning.
So I learn how to get quotes, how to put an order to buy or sell stocks: market order, limit order, stops order etc. I learn that a market order is an order to buy a stock such that , when one buys a stock at some price, then it immediately goes down. Then what is a limit order? It is an order to buy or sell stocks where one can specify a price. This sounds well and good, but actually what happens is the
following: one either puts an order to buy at a price so low that the order never gets filled, or if one puts a reasonable price, it gets filled but when one check one’s account, the stock is trading at least five points below. And what about stop orders? It is an order one is supposed to use to lock in profit. Sounds wonderful! Here is how it works. Let’s say you bought a stock at $40 a share, and now it is trading at $50 a share. So you put a stop order to sell at $45. And you are happy that you will at least make $5 a share profit for this one. Well, one day the stock opens at $35, reacting to some bad news. Your order gets immediately filled. Later in the day, however, one institutional buyer, some hotshot fund manager of Janus super growth fund family, comes in, and the stock closes at $47, down only $3 for the day. So in stead of making $10/share profit, you are left with a humiliating loss of $5/share. So one can see putting a market order is uncertain, limit orders difficult to execute, and stop orders are completely beyond your control. There is yet another type of order called stop-limit order. Description of these kinds of orders is simple: just combine the characteristics of limit order as well as stop order.
At this point I start learning about the market in depth. I learn that there are growth stocks, and there are value stocks. I could understand the growth stocks easily, the stock of the companies, which are growing at some good rate and have good prospect in future. And value stocks? What about value stocks? These stocks are valuable because they are not growing any more and have no prospect
At this point I start learning about the market in depth. I learn that there are growth stocks, and there are value stocks. I could understand the growth stocks easily, the stock of the companies, which are growing at some good rate and have good prospect in future. And value stocks? What about value stocks? These stocks are valuable because they are not growing any more and have no prospect
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Experience of a Naive Market Operator
Gautam Dev
Short Essay
