Forex means foreign exchange; and is also known as FX.  In general, each country has a national currency, Canada’s currency is the Canadian Dollar, known as the Loonie, Japan’s currency is the Yen.  An exception would be the Euro, which is used as currency in many European countries, such as Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and  Greece.  The major currencies which are traded daily are the Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar, Australian Dollar and the US dollar:  which makes up 85 percent of the foreign exchange. Currencies trade in pairs, for example the Euro / US Dollar (EUR/USD) or US Dollar / Canadian Dollar (USD/CAD).

The foreign exchange is the marketplace where currencies are traded. The overall foreign exchange market is the largest, most heavily traded, most liquid market in the world with an average traded value which exceeds $1.9 trillion per day; or approximately $279 for every person on this planet.  Trades of $200 million to $500 million are not unheard-of .

The Foreign exchange market is open 24 hours a day, five days a week, with currencies being traded worldwide between the chief financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.  As the business day starts spanning the times zones of Tokyo, then London, and New York, some countries are just starting their business day as others are winding down to a close.  For example when London trading begins at 8:00 am, the trading day in Hong Kong is closing; and when New York opens trading, it’s 1:00 pm in London.  Therefore Forex traders must be vigilant because major worldwide events at any given hour can modify the market.

Foreign exchange makes it possible for global transactions such as imports and exports and the movement of assets between countries. The value of one foreign currency relative to another is defined by the exchange rate. Foreign exchange is an over-the-counter market: a network of commercial banks, central banks, brokers, and customers. Foreign exchange traders make markets and speculate in different currencies, usually expecting future appreciation of stronger currencies against weaker ones, through the foreign exchange Forward Market and the Currency Futures market.

Variables which affect the value of certain currencies are business cycles, politics, stock market news, government policies, changes in tax laws, central banks etc.  A country which decides to print large quantities of its currency can have the effect of devaluing it as becomes more abundant; conversely a country which buys up its own currency can raise the value by making is scarce.

Foreign trade makes up 5% of proceeds in the world’s currencies daily as companies buy and sell products in foreign countries, and convert profits from foreign sales into their domestic currency. The remaining 95% is risk speculation for profit.  Bid and ask price spreads are settled in pips, which is the hundredth of a currency unit.  Pips are the smallest percentage increase movement allowed in the currency market.  Many transactions are in millions of dollars therefore a one cent gap can equal thousands of dollars, currency price quotes are usually extended out to four decimal points (ex. 1.0429).

Forex trading is very high-risk and we strongly recommend you seek additional support and counselling before beginning.

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When buying or selling securities there are different types of orders that can be specified when placing a trade, such as:

Market Order:  is an order to buy or sell a specified number of securities at the best available price on the market

Good Through Order:  is an order to buy or sell that is valid for a specified number of days and then automatically cancelled if the order has not been filled by the end of the specified day.

Stop Loss Order:  is an order to sell a security when it has reached a specific stop price to protect you from further loss

Stop Buy Order:  is an order to buy a security only after it has reached a certain price

Professional Order (Pro) Order:  is an order for the account of a partner, director, officer, shareholder, broker and sometimes employee of the company where they hold a direct or indirect interest

Good Till Cancelled (GTC) Order:  is an order that is in valid until it has either been executed or cancelled.  This is the same as an open order.

Day Order: is an order that is valid only for the day it was placed, if it has not been filled, it will expire.  All orders are considered day orders unless otherwise specified.

Limit Order:  is an order to buy or sell securities at a specific price or better.  The order will only be executed if the market reaches or exceeds that price.

Dividend payments on common shares are not mandatory.  The Board of Directors decides whether to pay a dividend, how much and when it should be paid.  Dividends may be received quarterly, semi-annually and annually. 

The company makes an announcement in advance of the payment date, confirming that it will pay a dividend to all its shareholders on a certain date.  This is known as the dividend record date.  All shareholders of record on the dividend record date will receive the dividend. 

When a stock is actively trading the shareholders of record are continuously changing, to determine whether the buyer or seller is entitled to the dividend an ex-dividend date is set.  The ex-dividend date is set to two business days before the dividend record date.  On or after this date the stock sells ex-dividend and the seller retains the dividend.  However, when a buyer buys the stock on ex-dividend date he/she will not receive the dividend until the next dividend date, if they still hold the shares.  The person who purchases the stock before the ex-dividend date will receive the dividend payment and it is said the stock is trading cum dividend, meaning with dividend.

For example: 

ABC Inc. announces a dividend payment to shareholders of record on November 10 (dividend record date)

Trade Date                 Settlement Date        Ex- or Cum Dividend

Nov. 6                          Nov. 9                          Cum Dividend

Nov. 7                          Nov. 10                        Cum Dividend

Nov. 8                          Nov. 11                        Ex-Dividend

Nov. 9                          Nov. 12                        Ex-Dividend

Nov. 10                        Nov. 13                        Ex-Dividend

*transactions settle on the third business day after the trade date

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Short selling is selling a security you don’t have first, and buying it later. In essence you are loaned the security at the time of the transaction, so that you may sell it on the open marketplace with the intention of buying identical stock at a later date to return to the lender – usually your broker.

The short seller seeks to profit from a decline in the price of the assets between the sale and the repurchase, paying less to buy the assets than he received selling them. Conversely, the short seller will suffer a loss if the price of the assets rises.  Shorting can also refer to an agreement under which an investor profits from a drop in the value of an asset.

For example if you barrow 10 000 shares of XYZ and sell them at $10 per unit.  If the price drops to $8, you buy the shares back and return them to your lender.  You sold stock at $10 per unit and bought them back for $8, netting a profit of $2 per share.  The same return if you would have purchased them for $8 on the first place selling it for $10 later; however if you barrow 10 000 shares of company ABC and sell them for $10 and if the price jumps to $12 and you cover the loss and buy them back paying $12, you’ve lost $2 per share.

Shorting opportunities can be risky but effective to hedge your portfolio and prosper during a bearish trend. 

At the height of the global economic crisis in September 2008 short selling was prohibited by the SEC for 799 financial companies in the US for three weeks in order to alleviate severe market instability.  Similar measures were adopted in the UK, Spain and Australia.

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Investing on the Margin is an extremely risky but potentially profitable type of trading if it is conducted with the utmost skill.  This is not something for a novice trader.  In effect Margin trading is buying stocks when you do not have enough money to pay for all of the shares you wish to purchase.

The first step you have to take is to open a Margin account with your broker as a normal account is not able to trade on the Margin. After that you will be able to borrow up to 50% of the cost of your stock purchase.  Once you have sold the stock the broker takes their share to cover your ‘loan’ first; any funds beyond that is profit to you making short term investments ideal. Of course, there is usually interest on this loan account and brokers will set limits in terms of the value of stocks you can purchase with your Margin account before you are required to deposit more money into the account.

 The interest normally does not occur until you have spent beyond your deposit thereby using your loan.  If you deposit $1000 you now have $2000 worth of buying power.  If you purchase $500 worth of a stock, you have not yet borrowed into your loan as you have enough in your account to cover it so no interest is accrued and you have $1500 left in purchasing power.

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Most penny stocks are listed as an Over the Counter (OTC) stock. These types of shares are traded directly between two different parties not a centralized exchange. This is usually done as the company is still small, with a small market capitalization, and does not yet meet the exchange listing requirements. Which means, they are not listed on the formal exchanges such as the New York Stock Exchange or the Toronto Stock Exchange.

In the US, there are two main OTC markets, the OTC Bulletin Board (OTCBB) and the Pink Sheets. The market makers govern the trade of the OTC shares using a system of inter-dealer services, usually trading over computer networks or by telephone. While shares listed on the Pink Sheets are categorized as securities, the OTCBB stocks must comply with the Securities Exchange Commission (SEC) reporting requirements. Bonds are also considered OTC securities and are not traded on formal exchanges.

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About Picksthatmove.com
Picksthatmove.com is an independent electronic publication that provides information on selected publicly traded companies.  Picksthatmove.com is not a registered investment advisor or broker-dealer.  Picksthatmove.com’s affiliates, officers, directors and employees may buy and sell shares in any company mentioned herein and may profit in the event those shares rise in value. Please do your own Due Diligence before investing in any of the stocks mentioned above. 

Market Makers
Every minute of the stock market, the Market Makers stand ready to buy and sell shares from brokers, allowing investors to buy and sell their shares quickly.  Market Makers are the firms that accept the risk of offering both the buy and sell prices for shares. Market Makers compete for customer orders by providing the buy and sell for a guaranteed amount of shares. They often will buy shares without already having a buyer lined up. Once the Market Maker sells from their inventory they proceed to make an offsetting order to replenish their supplies of the stock. They are responsible for ensuring liquidity in the market and preventing excess volatility.

The Market Makers make their money by managing the buy and sell spread.  While there may only be a small difference in the sell and buy price, when millions of shares are trading this small difference can add up to a sizable profit.

At Picks That Move, we want to provide investors with some general guidance in penny stocks trading.
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About Picksthatmove.com
Picksthatmove.com is an independent electronic publication that provides information on selected publicly traded companies.  Picksthatmove.com is not a registered investment advisor or broker-dealer.  Picksthatmove.com’s affiliates, officers, directors and employees may buy and sell shares in any company mentioned herein and may profit in the event those shares rise in value. Please do your own Due Diligence before investing in any of the stocks mentioned above. 

Penny Stock Day Trader

Day Trading itself refers to the act of buying and selling a stock in the same day.  Those that participate in this activity are known as Day Traders.  In most cases the Day Trader will try to close all positions before the close of the market. This is done to avoid any uncontrollable risks such as overnight movements.  They also tend to manage a varied portfolio including stocks and currency. Day Trading is considered to be very risky, which translates into the possibility of an incredible profit or loss in one day.  It is estimated that the majority of new Day Traders will lose money while they are first trading.  However, if you are successful it is possible to earn a living by Day Trading alone.

Every Day Trader can have a different type of strategy when trading.  Some will look at the momentum of the stock price, while others will review the technical patterns of the stock or look for trends in the stocks.  While initially Day Traders were employees in an investment firm, the advent of Internet trading has allowed Day Traders to flourish in the general population. They tend to trade in such huge volumes that they are often given discounts with their brokers.  We at Picks That Move want to help make sure you minimize your losses by encouraging you to sign up for our FREE newsletter.  Let us do some of the work for you and find those hot stock picks. 

At Picks That Move, we want to provide investors with some general guidance in penny stocks trading.
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Picksthatmove.com has been watching the following stocks: Cell Therapeutics, Inc. (NASDAQ:CTIC), Novavax Inc. (NASDAQ:NVAX), Lear Corp. (NYSE:LEA), DayStar Technologies Inc. (NASDAQ:DSTI), Uranium Resources, Inc. (NASDAQ:URRE), Nautilus Inc. (NYSE:NLS), Angiotech Pharmaceuticals Inc. (NASDAQ:ANPI) and Boots & Coots Intl. Well Inc. (AMEX:WEL)

About Picksthatmove.com
Picksthatmove.com is an independent electronic publication that provides information on selected publicly traded companies.  Picksthatmove.com is not a registered investment advisor or broker-dealer.  Picksthatmove.com’s affiliates, officers, directors and employees may buy and sell shares in any company mentioned herein and may profit in the event those shares rise in value. Please do your own Due Diligence before investing in any of the stocks mentioned above. 

What are Authorized and Outstanding Shares

While the most basic definition of stock is ownership there are many types of ownership therefore many types of stocks available.

Authorized shares are the total number of shares that a company is able to issue.   This is determined by the company’s articles of association – the regulations regarding the relationships between shareholders and the company’s directors. Once they have determined the number of Authorized shares they are issued on the stock market.  Once released, the shares are purchased by investors and are considered Outstanding Shares. Outstanding Shares are the common shares of the company that have been issued and purchased by investors.

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