Your Questions About Investopedia

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Charles asks…

How do you short sell a stock using Investopedia Stock Simulator?

I’ve been using investopedia as a way to learn stock trading, but I have never short sold a stock. Can someone explain the steps, and what exactly it mean….Also, what does “buy to cover mean”? Thanks to all for the help……….

Justin answers:

To open a short:

“Short” or
“Sell to open”

To close a short:

“Cover” or
“Buy to cover”

short sales
http://www.sec.gov/answers/shortsale.htm

David asks…

Does anyone know of a fantasy stock game / simulator that is free and lets you trade options?

I use investopedia but you can’t sell to open options. I would like a means of practicing writing covered calls for free.
Thanks in advance!

Justin answers:

Investopedia.com

Michael asks…

What does market, limit$ and stop$ mean when investing in shares?

Im using the investopedia simulator and am about to buy shares. But it has a market, limit and stop. What does this mean??
Also, there is a title that says Duration and a drop down menu that says good till cancelled and day order.

What does these things mean???

Thanks

Justin answers:

You are using Investopedia and don’t know how to define your terms?

What Does Limit Order Mean?

An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.

Depending on the direction of the position, limit orders are sometimes referred to more specifically as a buy limit order, or a sell limit order.

Investopedia explains Limit Order
Limit orders typically cost more than market orders. Despite this, limit orders are beneficial because when the trade goes through, investors get the specified purchase or sell price. Limit orders are especially useful on a low-volume or highly volatile stock.

Read more: http://www.investopedia.com/terms/l/limitorder.asp#ixzz1f5RjEdpk

Stop Loss Order
Buy Stop
Trailing Stop
Stop Limit
http://www.investopedia.com/search/default.aspx?q=stop&submit=Search#axzz1f5RWluo4

When a Stop executes, it becomes a Market Order

Chris asks…

Could you teach me how to use options in a stock simulation game ?

I’m learning how to trade in an Investopedia simulation game. But all the top ranked people are using options to get high revenues. I want to learn how to use them too.

Justin answers:

Its all about experimentation. Options are in a sense gambling because it all depends on what the stock is going to do. Buying on Margin is good when the stock is sure to perform very well, Short Selling if it will fall. If the stock does not perform as expected, you will have to take a hit and replace those shares you bought or sold.

Robert asks…

How do I start building an investment portfolio?

I’m brand new to investing and I’ve been reading some of the articles on Investopedia, but I could use a little more guidance. What is the best way to begin putting together an investment portfolio? Should I just start buying stocks or should I immediately think about diversification and mix it up a bit?

Any help would be greatly appreciated, and I’d be really happy if you could link to some further reading. Thanks!

Justin answers:

If you’re a rookie in investing or stocks, go to

www.finance.yahoo.com.

Open up a portfolio without using real money. You can give yourself as much or as little money to try out the market. The stocks you want to focus on is consumer staples, consumer discretionary, and healthcare. These are DEFENSIVE stocks that will survive through good and bad times. Most of my positions are in these stocks. Some names include 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco. Everybody’s got to eat and wipe their butts regardless of the state of economy. Many of these companies survived through the Great Depression.

That’s the benefits. You can sleep at night knowing your money is doing well. There are NO guarantees that you won’t lose money. It’s just that these stocks are the best. They pay good dividends too.

Daniel asks…

What is the difference between a stop limit order, a stop order, and a limit order?

I’ve looked online everywhere and everything I read is virtually the same thing – no difference. When a site like investopedia tries to explain it, I read the explanations and I come to the conclusion that it’s exactly the same thing, just explained in different terms. So can someone please explain this? What’s the difference between a stop limit order, a stop order, and a limit order? Thanks.

Justin answers:

1) limit order : Puts a limit on buy/sell price
Ex:
Buy – limit price = $10 -> Maximum price you are willing to invest per share
Sell – limit price = $10 -> Minimum price you are willing to sell per share

2) Stop order: sell the stock if the share price hits the specified stop price. Stop order becomes a market order when the price is hit

Ex:
Sell – stop price = $10; When the price falls down to $10, broker will sell your shares at market price (which could be less than $10. For example $9.90)

3) Stop Limit order: When the stock hits the stop price, a limit order will be configured with the specified limit price
Ex: stop price = $10, limit price = $9.75

When the price hits $10, a limit order with $9.75 will be configured

Paul asks…

Is there any good online sources for information regarding sector rotation?

Just looking for more details on the business and market cycles, and which sectors are stonger during the different phases. I’ve checkes out some of the bigger information sites like investopedia, but really haven’t found any good information, at least not as detailed as i would like it to be. If anyone knows of a good place to find this information, I would really appreciate it. Online sources are preferred.

Justin answers:

Stockcharts.com (free) Market Summary(scroll down) and Carpet selection(Fidelity funds)

Bigcharts.com (free) has industry summary and you can plug in stocks vs their industry….

Investors.com – Investors Business Daily (modest subscription fee) has more granular industry breakdown and shows rank by current, last week, last 3 months and 6 months ago so you can see movement

Dorseywright.com (expensive fee) specialize in point and figure charts, but is premier sector rotation site, shows sector bell curve (where they are vs overbought or oversold) and show relative strength and if currenlty favored or not. Unlimited query capability for time horizons, comparisons, etc…

George asks…

Which is the best free online stock exchange simulator?

I’ve dabbled with Marketwatch’s VSE and Investopedia‘s, but I’d like to know what ppl think is the best one. Best one to me means that it has good layout, well-featured, and updated quickly and efficiently; looking up stocks and their news is easy, etc.
Whadya think?

Justin answers:

To simulate day trading I actually like Marketwatch’s virstualstockexchange. For a more realistic simulation of how to invest as an institutional money manager I think that Marketocracy.com is a great site.

Of course as has already been mentioned, despite efforts no simulated site is completely accurate as they fail to account for market impact costs, trading costs, tax issues etc. Marketocracy, however, does a pretty good job of taking into account costs (and gains) related to the delays executing the trade.

James asks…

I would like to learn about the Stock Market starting from the basics. are there any on-line tutorials?

I see all the on-line trading sites. Do any of these have a step by step tutorial, and are there any on-line forums or classes where I can ask questions? I also have already signed in to Investopedia.

Justin answers:

Keep reading investopedia, its excellent, and loaded with tutorials

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