Basics of Stock Shares
Shares of stock represent the amount of money that an investor can purchase in order to invest in a corporation and become one of many shareholders. Each share represents ownership in the company and this ownership entitles the shareholder to certain rights such as dividends, voting rights, and more.
The company decides how many shares it will issue and the class of shares it will issue before incorporating. Some of the different classes of shares include common stocks, preferred stocks, participating, par and no par stock shares. Those shareholders who invest in common stock are paid a dividend last, after the preferred shareholders. If there are no preferred shareholders then the common shareholders receive dividend amounts spit equally among them.
Basically, the different classes of stock are what determine how any dividends will be paid out and how much money is paid per share of stock in the company. The par, as mentioned above, is the minimum amount of money that is required for a share. This information is marked on the share certificate itself when buying shares. No par marked on the certificate means that there is no minimum amount required to purchase a share. This is decided by the corporation at the beginning of incorporating.
When studying stock investing basics and stock shares it important to understand more about what the ‘par value’ of a stock is. Remember first that corporations decide to sell shares of stock in order to provide the corporation with its own capital. This capital is separate from that of the owners of the corporation. As a result, this prevents the shareholders from having any personal liability for any obligations or potential debts of the corporation. The definition of ‘par value’ is a dollar value assigned to shares of stocks that is the minimum amount for which each share can be sold. Share can also have ‘no par value’ meaning that the Board of Directors assign a value to the stock below which the shares cannot be issued. The corporation may not sell more stock shares than it is authorized to sell and it must receive consideration in exchange for its shares, but there is no minimum number of shares that must be authorized when incorporating.
There is a lot more to buying stocks and shares than this article provides so be sure to continue to research and study the basics of stock market investing before you begin to invest. You should also take stock trading courses as well to increase your stock market education. Understanding the basics of stock market investing is crucial to your success as a stock investor. Good luck!
Market Direction: The question was asked from the chat room, "If the longer a trend persists, requiring a more compelling reversal signal to change of investor sentiment, why are you still suggesting we have to remain nimble?" In normal market conditions, there is usually other markets that will have an influence on the equity markets. Normal market conditions usually experience price trends in those other markets that can be analyzed using candlestick analysis. If crude oil prices are moving lower, causing a bullish effect on the equity markets, that trend can be analyzed to see when the investor sentiment is changing. The same is true with interest rates, the US dollar, the Japanese yen, or any other trading entity that would cause bullish or bearish affects on the equity market. However, currently the markets are being influenced by government mandates. This puts a completely different dynamic into the evaluation of the market's value.
The course of government thinking can reverse in an instance. Not enough reform in the auto industry's was the instigation of today's selloff. Friday showed potential sell signals in both the Dow and the NASDAQ. Both indexes had moved slightly away from their support levels, the 50 day moving average and the T-line. The probability of some profit taking back to those levels was increased with the signals created on Friday. Today's weak pre-market futures amplified the selling after Friday's potential sell signals. The magnitude of the weakness in the premarket futures allowed for some very simple position closing procedures. Many of our profitable positions were now in the overbought condition. It became a very simple process as to where to set stop losses.
The information provided in potential candlestick sell signals allows an investor to be prepared for non-emotional decision-making on the 'open.' Lower prices, confirming a candlestick sell signal, and trading below the tee line, mandated closing profitable positions immediately on the open. Why is this important? It diminishes the amount of delay for executing a position. As witnessed this morning, many positions opened and immediately started selling off. Knowing a lower open would instigate a sell and the morning futures illustrated a lot of weakness in the market, there would have been no hesitancy to close out positions immediately.
This may seem like a very simple rationale, but many investors will sit and wait to see if there is a possible bounce after the open. They are hoping to get a better price. That hesitancy to sell immediately, even when it is obvious the premarket futures are demonstrating much more weakness, usually costs investors additional profits. When all the selling indicators are in alignment, a candlestick sell signal, a weaker open, and an open that is not going to hold at the tee line, move quickly. The indicators confirm it is time to take profits.
Candlestick analysis makes selling decisions very mechanical. The probabilities are extremely strong that further weakness will be coming into the market based upon the factors witnessed this morning. Not seeing any buying strength in the final hour reveals the fact that the sell signal confirmation was decisive, not indecisive. This now makes further profit taking eminent. From this point, the next support levels should be sought. It could be moving averages. It could be Fibonacci retracement levels. Or the next few days demonstrate indecisive trading that would create a Jay hook pattern.
Each individual formation provides valuable information. As illustrated in the ARB chart, it had formed a very powerful bullish signal over the past few trading days. It opened lower on Monday as the market was selling off hard. But note the type of formation it created. It closed near the top end of the trading range. This was an indication that the Bulls could be coming back into the position near the end of the day. Although Monday was not a day to participate in this position, witnessing additional bullish action would confirm the strong signal. A positive open would be a clear indication the Bulls were still very much active
Candlestick analysis allows an investor to participate and execute trades on a much more timely basis. It allows an investor to make if/then decisions without going through an emotional trauma. Candlestick analysis provides much more clarity on which direction a trend will be moving. If you continued to lose money over the past year during the big market decline, then you were not taking advantage of a valuable information candlestick signals were revealing. Many investors are commiserating about losing more than half their equity over the past year. Many candlestick investors produce profits during that time and had more asset base to participate in this most recent trend reversal.
Take advantage of the information provided by candlestick signals. It will alter your investment perspectives for the rest of your life.
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The Candlestick Forum Team
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