New to Stock Trading?

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A Trading Account from a Brokerage

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Here are definitions for some of the terms used on the site:

Drawdown: this is a measurement of the risk of a stock for a given strategy. It's measured as the largest single drop from peak to bottom over a given time period. For example, if a stock's performance has a 1-year drawdown of 5%, then if you had been unlucky enough to purchase it at its highest peak in the past year, you would have experienced a loss of 5% before it turned around and hit a new high.

Stop Order: an order to sell a stock when the price falls to a specified value. Used to limit your losses. For example, if you wanted to sell a stock if it falls to $31.27, then you would enter a stop order for that value.

Market Order: an order to sell (or buy) a stock at the currently available market price.

Good 'Til Cancelled (GTC): An order to buy or sell that is active until either the trade executes, or you decide to cancel the order. If an order is not GTC, then it will expire at the end of the trading day that the order was placed. Combine the above three terms and you get a Market on Stop Good 'Til Cancelled order. For example, if you wanted to sell at market price if the price hits $54.99 anytime in the next few days.

Limit Order: an order to buy or sell a stock at a specific price or better. This is commonly used to buy or sell a stock at better than the current market price. Careful! If you really want to get rid of a stock (e.g. close to the end of the trading day) then a market order will guarantee your order executes.

Compounding Profit: Suppose you invest $10,000 into a stock that returns 20% in each year. In your first year, you would make $2000 of profit. In the second, you'd make $2400 of profit because the extra $2000 from year one would also appreciate by 20%. This is compounding profit: generating profit from previous profit. You can go to your account profile and set whether you would like results in Stock-O-Matic to be calculated using compounding by default or not.

Commission: The amount your brokerage charges for each trade (buy or sell) that you execute.

Margin Requirement: Margin refers to borrowed money that is used to purchase securities. For example, if the margin requirement is 30%, then you can buy up to 70% on margin. A margin requirement of 100% means you will not borrow any money for purchases.

Average Win/Loss: The average amount of profit (loss) you take from each winning (losing) trade.

Win Percentage: The percentage of trades that are profitable for you.

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