Investment 101
What is trading and investing? What is long and short?
- Long means buy first (at a low price) and sell later (at a high price) while Short means sell first (at a high price), buy later (at a low price).
What is Fundamental Analysis?
- Balance Sheet: Measures company’s financial leverages: Debt-Equity Ratio : Total Liabilities/Total Equity . if less than 20%, considered low.
- Cash Flow Statement: cash from operations > net income => high quality earnings => operating efficiently
- Income Statement = market cap/no. Of shares
A company is overpriced or underpriced?
Price/Sales => market cap / most recent revenue number
What is Technical Analysis? What is Support and Resistance?
There are 2 building blocks of Technical Analysis which are Support and Resistance. They are like glass floors (Support) and ceilings (Resistance) that seems to be limit a market’s range of movement.
Support:
Resistance:
Moving Average: gauge momentum as well as to confirm trends, and define areas of support and resistance.
Pro: Moving Averages smooth out the “noise” when trying to interpret charts. Noise is made up of fluctuations of both price and volume.
Con: Because a Moving Average is a lagging indicator and reacts to events that have already happened, it is not used as a predictive indicator but as an interpretive one for confirmations and analysis.
Common Types of Moving Average: Simple Moving Average (SMA), the Exponential Moving Average (EMA), the Weighted Moving Average (WMA) and the Hull Moving Average (HMA).
SMA
WMA
EMA
Learn more about Moving Average in Trading View. https://www.tradingview.com/wiki/Moving_Average#Simple_Moving_Average_.28SMA.29
