Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.

In a week that saw many stocks and major indices outperform, there were notably a few outliers on both sides. Whilst some struggled to keep up with the S&P 500’s 4% weekly gain, others stood out from the crowd.

One of these was Shopify, posting a 11.3% gain over the period.

Despite the Shopify stock price having almost completed a round-trip to its March 2020 lows, the stock split itself doesn’t change the company’s fundamentals. However, one thing that did change was the approval of non-transferable ‘founder shares’ for CEO, Tobi Lutke.

This move is to ensure that the CEO secures 40% voting power as long as he continues to serve as a board member at Shopify and will reinforce the strong leadership needed to run a business in these challenging times.

No one can deny that the volatile changes in consumer spending, owing to the current cost of living crisis, have taken the company backwards from the initial lockdown boom. However, investors shouldn’t be too put off by this as universally, it’s still not clear what the new normal will look like in terms of retail spending.

Instead, investors should be keeping a watchful eye on Shopify’s competitors, such as Amazon, and should keep assessing how the competition intensifies and unravels over these coming months.

Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Not investment advice. Past performance does not guarantee or predict future performance.

Shares in China’s second-largest property developer Evergrande have plunged by almost 17% as investors weigh up whether the company’s huge debt problems could trigger a broader sell-off across other financial markets. 

In Hong Kong on Monday, Evergrande fell to its lowest market value ever, trawling the Hang Seng index down to its lowest point in almost a year. Other large property stocks in Hong Kong, such as Henderson Land and New World Development, also saw double-figure falls in their prices on Monday amid widespread anticipation that Evergrande will default on some of its debt repayments this week. The property developer currently owes $300 billion. 

There are concerns that such a move by Evergrande could have a dramatic knock-on effect throughout the Chinese economy and even beyond. 

This contagion factor was most perceptible in Australia as the benchmark ASX200 index closed down 2.1% on Monday as investors abandoned mining stocks such as Rio and BHP. The price of iron ore — Australia’s main export — also fell by 60% from its high point back in May due to a slowdown in the Chinese property and construction industries. If Evergrande were to collapse, such issues within the sectors would only accelerate. 

Shares in UK cybersecurity startup Darktracce surged as much as 43% on its hotly anticipated stock market debut on Friday.

The firm initially priced its shares at 250p on Friday morning, for a total value of £1.7 billion. But at around 8:15 AM London time, these shares climbed above 358p – an increase of 43%.

Darktraace said that its initial offering would comprise around 66 million shares, or roughly 9.6% of its issued share capital, and raise a total of £165.1 million. £143.4 million of this will go to the company, while the remaining £21.7 million will go to existing shareholders, with the possibility of a further 9.9 million shares also being sold if demand beats expectations.

Darktrace shares began trading in conditional dealings on Friday under the ticker “DARK”. Unconditional dealings are expected to begin on 6 May.

The firm’s successful stock market debut comes just weeks after the highly anticipated Deliveroo IPO, which became one of the biggest London debut flops in history. Shares in the Amazon-backed food delivery startup plummeted as much as 30% when trading began on 31 March.

As a similarly tech-focused UK startup, the Darktrace IPO has been viewed as the second major test of London’s viability for high-growth tech company debuts.

Darktrace uses AI technology developed by a team of Cambridge mathematicians to identify unusual patterns in firms’ IT systems that indicate hacking attempts. It has raised a total of $230.5 million from investors to date, according to data collected by Crunchbase.

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The startup’s progress towards Friday’s stock market debut has been dogged by concerns over its connection with Mike Lynch, founder of Autonomy and an early investor in Darktrace, who faces fraud charges in the US over allegations of having inflated his firm’s value before its sale o Hewlett Packard in 2011.

During the Internet bubble around the turn of the century, not a day would go by that a future Fortune 500 wasn't hitting the stock market for the first time as part of an Initial Public Offering (IPO). For those unfamiliar, an IPO involves offering new stock shares in a private company on the open market to stock investors.

Why initiate the Initial Public Offering process? For one, the IPO process is a way for private companies to raise capital or reward initial investors. Generally, the stock’s initial price is determined by the potential demand for the stock and the amount of money the company wants to raise. Once the shares open up for sale on the open market, market forces take the stock in one direction or the other, usually upwards.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require. Additionally, completing the IPO process can help a business owner improve their retention rate, as these company shares will enhance less-than-stellar benefit packages.

Due to the legalities involved with going public, the IPO process can be unnecessarily complicated. Fortunately, the private company in question can partner with legal professionals to help streamline the process.

Advantages of going public

Before initial investors willingly concede to giving up control of their company, they’ll have to understand the benefits they can derive from doing so.

The primary benefit of initiating an IPO has to do with the opportunity mentioned above to raise capital. With this extra capital, a company can fund research and development (R&D) projects, fund business acquisitions, expand company efforts, or reward initial investors.

After introducing the company to the marketplace, a company stands to benefit from the Initial Public Offering process. In most cases, undergoing the IPO process will swing open doors and allow the company to gain market share for its products or services.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require.

Downsides of going public

Of course, there are some disadvantages a company must manoeuvre when going public.

Firstly, there’s a significant cost associated with undertaking the IPO process. These costs include accounting and legal services to prepare for the IPO proceedings and the marketing costs of raising public awareness and piquing community interest.

Secondly, the new company's reporting requirements rise significantly. Under the scrutiny of the Securities and Exchange Commission, the company has to provide quarterly and annual financial information as a form of transparency to the government and investors.

Finally, the IPO process wrestles some management control away from initial investors/owners as a Board of Directors takes over.

The roadmap for an IPO

As was stated above, the IPO process is very complicated. For an IPO to legally and successfully make it to the IPO closing, every "i" needs to be dotted, and every "t" needs to be crossed.

If you’re contemplating taking your company public, you could probably use a roadmap to get your company where it needs to go. To help in that regard, here are the most important steps you would need to follow.

Securing the services of an underwriter

An underwriter is an investment bank specialist assigned to lead the company through the IPO process from a financial perspective. These underwriters assume the responsibility of setting the initial price. Often, these IPO players participate by selling/marketing the stock and becoming actual investors.

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Setting the IPO guidelines and framework

Once the underwriter is in place, there are many legal documents and agreements that the designated parties must fill out and sign. This list of documents/agreements includes (but is not limited to):

• Underwriting Firm Commitment
• Engagement Letter and Letter of Intent
• Red Herring Document (about the company in question)
• Underwriting Agreement
• S-1 Registration Statement for SEC
• Prospectus (defines IPO)

Roadshow and price setting

This stage is when marketing personnel make presentations to top investors and brokers to drum up interest and determine potential demand. This information collected during these presentations forms the basis for setting the initial price of the offering.

The quiet period

After executing marketing-based efforts, there comes a 25 day "quiet period." During this time, underwriters are granted access to oversubscribed purchases of the stock. This window, dubbed the quiet period, is the timeframe where the "lock-up" period is set. The lock-up period, usually 90 to 180 days in length, is when insiders can’t dump their allotted shares on the market.

IPO closing

IPO closing is the day and time when the IPO goes to market, and stock transactions can begin. To reach this long-awaited day with ease, follow the steps outlined above.

Some might believe that established businesses do not need financial aid, funding, or loans. The logic is those big companies are wealthy. It may be accurate, but owning stock or assets is not enough. A big company can sell items to inject some cash into their operations. It can apply for bank lines of credit. A working capital loan is the fastest way for a firm to keep things moving. Today, we will discuss this type of corporate loan. We will explain how it works and what corporations can access it.

What is a Working Capital Loan for Corporations?

Corporations use working capital loans to finance everyday operations. It is normal in the current economic landscape and the ongoing global health crisis. They could sell stock or get bank loans to fund investments. As many businesses know, this year was anything but ordinary when it came to daily operations. Even large firms need fast access to cash to pay debts, cover rent, pay employees, etc. A working capital loan is a financial instrument. It helps companies big and small to make it through periods of low business activity.

The definition of a working capital loan is simple. It represents the difference between your current assets and your liabilities. The resources can include accounts receivable, inventory, investment/stock portfolio, etc. The obligations can include owed payments to suppliers, debts, etc.

Most corporations receive unsecured business loans. It means that they are eligible for such funding without collateral. By comparison, small businesses and startups have to present guarantees. Corporations in need of a working capital loan can address a bank, governmental funding, and private lenders.

According to All Year Funding, alternative lenders offer loans to small and big companies alike. They do not push for perfect credit scores and collateral. In this context, startups and larger firms can access merchant cash advances. These types of business loans can quickly cover a company’s needs for money for daily operations. The advantage is that alternative lending works much faster than banks. Large food distributors, supermarket chains, and construction companies have access to loans in a couple of days. The limitation of such a loan is the payment threshold. A company needing a few million dollars should go to another type of lender.

Corporations use working capital loans to finance everyday operations.

Where Can You Secure Corporate Funding for Working Needs?

When it comes to corporate funding, your best bet is the Small Business Administration. Do not let the name fool you. The entity allows you access to loans as high as $5 million. It depends on your working capital needs. Here are some popular SBA working capital loans for corporations:

• Standard 7(a) Loans. A company can get up to $5 million. The maximum guarantee from the SBA for loans up to $150,000 is 85%.
• Working CAPlines. They are revolving lines of credit to finance seasonal or short-term needs.
• International Trade Loans. The maximum SBA guarantee is 90%. The loan works best for companies that need funds for global exports. The maximum loan amount is $5 million.
• Export Working Capital. It provides companies with additional funding to increase domestic export sales. The maximum SBA guarantee is 90%, and the maximum loan amount is $5 million.

Small businesses have their SBA microloans and 7(a) working capital loans to access. They also have private lenders to rely on in emergencies. In comparison, corporations need to meet rigid criteria to access SBA funding. A high credit score and no history of bankruptcy in the past three years are mandatory.

The Pros and Cons of Working Capital Loans for Corporations

Before you jump at the opportunity of accessing working funds through a bank, the SBA, or private lenders, you need to know the pros and cons of this type of loan.

Pros of Working Capital Loans

• It allows businesses to cover all gaps in the working capital expenditures. This way, corporations can keep employees on the roll, pay suppliers, deliver goods, and expand.
• A working capital loan is among the fastest types of loans big businesses can access.
• It does not require any equity transactions. It means that the owners of the company still have full control over their business.
• It is among the most popular business loans in the current health crisis; corporations had to face economic instability and adjust to the present challenges.
• Companies usually take such loans to make ends meet when cyclic businesses are slow. By the time the trade booms again, they already have paid the loan.
• Some types of working capital loans are unsecured, removing the collateral obligation stress.

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Cons of Working Capital Loans

• Working capital loans’ interest rates depend on the lender. Medium and large businesses work with interest rates between 6% and 16%.
• Missed payments on such a loan can lead to disruptions in the company’s credit score.
• Most lenders agree to a loan period of 6-12 months.

Bottom Line

The global economy is taking some hits as of late, and they do not spare medium and large corporations either. Whether your lenders are banks, the SBA programs, or private financial entities, you need to make sure you meet their criteria. Working capital loans are great solutions to keep employees. They allow you to run the business through all your facilities and boost marketing efforts. You have to pick the best conditions for your company and make sure you pay on time.

Nigel Green, the chief executive and founder of deVere Group, explains that as Tehran threatens “revenge” on the US over the killing of Qassem Soleimani, the commander of Iran’s elite Quds Force, who was in charge of the country’s regional security strategy.

It remains uncertain how, when, or if Iran will respond, but any retaliation is unlikely until after the end of three days of mourning.

Last week we saw the price of oil jump as a result of political tension. This week, Bitcoin, the world’s largest cryptocurrency by market capitalisation, jumped 5% as news of the strikes broke around the world on Friday. Simultaneously, the price of gold – known as the ultimate safe-haven asset - also moved higher.

We’ve seen Bitcoin price surges before during times of heightened geopolitical tensions. For instance, in August it jumped as global stocks were rocked by the devaluation of China’s yuan during the trade war with the US.

According to Nigel Green, this latest Bitcoin price increase underscores a mounting consensus that Bitcoin is becoming a flight-to-safety asset.

“Bitcoin is living up to its reputation as ‘digital gold’. Bitcoin - which shares gold’s characteristics of being a store of value and scarcity and of being perceived as being resistant to inflation – could potentially dethrone gold in the future as the world becomes increasingly digitalised.”

He continues: “With an escalation in geopolitical turbulence, which typically unsettles traditional markets, it can be expected that a growing number of investors will decide to increase their exposure to decentralised, non-sovereign, secure currencies, such as Bitcoin, to help protect them from the turmoil.

“The serious concerns created by geopolitical issues, such as the US - Iran issue will likely prompt an increasing number of institutional and retail investors to diversify their portfolios and hedge against those risks by investing in crypto assets.

"This will push the price of Bitcoin higher. In turn, due to the market influence of Bitcoin, other major digital currencies will receive a price boost.”

The deVere CEO concludes: “Bitcoin was one of the best-performing assets of 2019 and we can expect to see its investment appeal further strengthen as it becomes known as a safe-haven asset during periods of heightened geopolitical tensions.”

Make no mistake: if Schwab can pull off a deal for TD Ameritrade then it has pulled off something of a coup. It is not just the deal of the year-in this sector it is the deal of many a year.

The market is slightly stunned but loves the potential Schwab TD Ameritrade tie up and well it might. Schwab’ share price is up by 7.5% since news of the possible deal broke. For its part, TD Ameritrade’s share price is up by 17%.

Schwab already ranks first by market share in the discount brokerage market. Snapping up the number two player TD Ameritrade means that Schwab would tower over the sector.

However, regulatory approval for the proposed mega deal is in no way guaranteed. But if Schwab can get over the regulatory hurdles – and that is a big if – expect Schwab to boost its earnings per share. For starters that will come through better monetisaton of Ameritrade’s sweep deposits. Then there are the synergy cost savings.

KBW suggests that an all-equity transaction could equate to 10%-15% EPS accretion for Schwab. And such a forecast may even be on the conservative side.

Schwab has about $3.9trn in client assets and over 12 million active brokerage accounts. TD has about $1.3trn in assets and services 11 million client accounts. In addition, it provides custodian services for more than 6,000 independent advisers. Only privately held Fidelity, with about 30 million brokerage accounts, is in the same league.

However, Spare a thought meantime for shareholders of smaller rival E*Trade. Any Schwab/TD tie up is the stuff of nightmares for E*Trade and its share price promptly dropped by 10%.

(Source: Retail Banker International)

Options trading is a sector of the stock market that is fairly easy for most newbies to investing. If you've never heard of options trading or you just want to learn more about how to make money with this method, we're going to go over all of this below.

What Is Options Trading?

Options trading is purchasing the ability to buy or sell a specified number of stock for a set price in the future. With options trading, you're not actually purchasing ownership or stock in a company. Rather, you're purchasing the opportunity to buy or sell ownership or stock of a company in the future. Let's look at some common terms involved in an options agreement so you can better understand what it's all about.

Expiration Date

Options contracts come with a few key terms that you'll need to understand. First, each options contract has an expiration date. You can exercise your options contract up through the expiration date. After the option has expired, you no longer have the ability to exercise the agreement.

Stock

Each option contract is for a particular stock. When looking at options online, you'll see the ticker symbol of the company that the options contract is regarding. When you purchase your options contract, you don't get ownership of the stock. Rather, only when you exercise your option do you get to actually buy ownership via the stock.

Strike Price

The strike price is a very important number to understand as it determines how and when you exercise your options agreement. The strike price is the price at which you can buy or sell stocks that were included in your options agreement. For example, if the strike price is four dollars for a call option, then you could exercise your contract by purchasing the identified stock at the strike price.

Call or Put

Every options contract will be either a call or a put. In the stock market, a call is when you buy a stock. A put is when you sell a stock. Therefore, you can purchase an options contract that gives you the ability to buy or sell a stock at the agreed-upon strike price before the expiration date.

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How Can You Make Money With Options Trading?

If you're thinking about making money trading options, there are various ways you can do so. By understanding the basics of call and put options, you can start to formulate your own method for making money. Let's go over a few examples of basic options to get you started.

A Call Option

A call option is ideal to purchase when you know that a company's stock price is likely to rise in the near future. For example purposes, let's say that you buy a call option for 100 shares of stock ABC that has a strike price of $50 and an expiration 30 days from now. Fast forward 20 days and you notice that the stock price of ABC has increased to $60 per share.

You'll want to exercise your call option. This means that you can purchase 100 shares of ABC for $50 per share. Then, you can turn right around and sell those stocks at the current market rate of $60 per share. That's a $10 per share profit from your call option.

A Put Option

The other common type of options contract is a put option. This option agreement gives you the ability to sell stocks in the future at a set price. You'll want to use this type of option when you know that a company's stock is likely to decrease in the near future.

For this example, let's say you're looking at an options contract for company XYZ. The options contract is for 30 days, 100 shares of stock, and sports a strike price of $30 per share. The day before your options agreement expires, the stock price of XYZ drops down to an all-time low of $10 per share. You can exercise your options contract.

You'll start by purchasing 100 shares of stock XYZ on the market for $10 a share. Then, you'll go ahead and sell those shares according to your options contract sale price of $30 per share. You'll be able to profit $20 per share with this method.

As you can see, there are various ways to make money with options trading. Understanding the basics above can give you a great foundation to which you can build upon to create your own unique methods for options trading.

In this article, we are going to have a look closely at the earnings per share formula – including why it is important, what it is used for, what it indicates, and how it can be worked out.

Earnings per share (commonly abbreviated to EPS) is a financial figure based on a calculation  that show the past profitability of a company, the present profitability of a company, as well as that profitability that it could experience in the future. The EPS can be calculated by first establishing the net income (the net income is the income that a company makes after overheads have been considered), and then dividing this number by the total number of outstanding shares that the company in question has. If you are new to the stock market and the world of investing, you may not know exactly what ‘outstanding shares’ refers to – it refers to the number of shares that a company has that are not held by them, for example those that are held by its various different types of shareholders, no matter how big or small they may be individually. In simple terms, it is a calculation that one can execute and that can be useful as part of the decision in whether or not one would like to make an investment in the company in question, and whether or not they think the idea is a financially wise one.

The earnings per share (EPS) therefore, refers to what proportion of  a company’s profit has been dedicated to each individual share of that company’s stock. People regard this measure very highly, most particularly those that are interested in and that invest in the stock market actively – investors and traders. It is generally accepted that if a company has a higher earnings per share value than another, then it also has a better level of profitability and is therefore usually the more desirable option for investment. When the earnings per share is being calculated, it is recommended that a weighted ratio is made use of, since the number of shares that an organisation has in different types and places can be a varying one over the course of time naturally. The ‘weighted average’ of a company refers to the number of outstanding shares, more specifically, how much the number of outstanding shares that a company has, has changed over time, and whether or not it has at all! It is considered to be an important calculation to make prior to working out the earnings per share, in order to obtain a more accurate reading of where the company could be in the future, and to ensure that the earnings per share value that is obtained is not just one that is based on recent successes and endeavours of the company.

With the weighted earnings per share in mind, there are two different ways that the earnings per share value of a company can be calculated. It can be calculated firstly as the normal earnings per share, which is done by establishing the net income of the organisation in question after tax and then dividing this number by the total number of the outstanding shares that a company has. Alternatively, it can be calculated and a more realistic result can be obtained by calculating the weighted earnings per share value, which is done by taking the total dividends away from the net income after tax, and then dividing this number by the total number of outstanding shares that the company in question has.

The earnings per share value can be a provider of valuable information to a potential investor, depending on what type of investment that said investor is looking for.

The earnings per share value can be a provider of valuable information to a potential investor, depending on what type of investment that said investor is looking for. For example, an investor may be in search of an investment that is slightly more risky but that could provide extremely high returns if there risk happened to be worth it. On the other hand, an investor may be looking for an investment that can provide them with a steady source of reliable income that keeps any risk-taking to an absolute minimum. The earnings per share ratio of a company can tell this investor how much room the company in question has in terms of room for expansion to take place, and how reliable an investment they are making, as well as how much potential the investment has to return their needs.

Different types of Earnings Per Share Measure

There are many types of earnings per share measures that exist, three of which get the most focus from investors and shareholders.

Trailing EPS – the ‘trailing EPS’ is the earnings per share that the company in question had throughout the course of the previous financial year. It is an accurate reading to think about since it is based on  actual factual financial happenings within the organisation being looked at – it is not merely guesswork that is based on predictions on the company and how they think their business year is going to end up. However, the main problem with this figure is that it does not refer to what is relevant at the current time – a company’s profits can be extremely different 10 months apart.

Current EPS -  the ‘current EPS,’ refers to the earnings and the numbers of the company at the present time. This figure can be based on differing data however, in that a certain amount of the data will be factual and will use recent factual information surrounding the organisation in question, whilst the remainder of the data will be made up of reasonable predictions. The accuracy of this number is very much reliant on what stage of the financial year the company is in when the readings are made.

Forward EPS – ‘forward EPS’ is a number that is based on the profits that the organisation believes they will be making at some point in the future. These estimations are made either by the company in question, or stock market analysts. Anyone that is seriously considering investing in a company should consider these values, since they can be a good indicator as to what the future holds for the company.

But have you ever thought about where these came from, or how each savings initiative has changed over the years? In the following infographic, personal pension specialist True Potential Investor has taken a step through time with this question in mind.

Did you know that the first known building society formed for groups of individuals who were looking to help each other to buy property? Or that the Bank of England was founded towards the end of the 17^th century to fund the war effort against France? How about that the Amsterdam Stock Exchange was believed to be the world’s first stock market?

Discover even more fascinating facts by browsing through the full infographic below…

The longest bull market rally in history has further to run – but investors may wish to start to build cash positions before next year.

The message from Tom Elliott, deVere Group’s Senior International Investment Strategist, comes after the S&P 500 index reached a new all-time high late August, and recorded its longest ever rally (which began in March 2009).

Mr Elliott comments: “Wall Street is celebrating the longest stock market rally in history. One suspects it has further to go, given that the current defining features of the U.S. economy - strong growth and a cautious Fed - are an investor’s dream.

“This happy combination can be seen in last week’s upward revision to second quarter U.S. GDP growth estimates, to 4.2%, which comes just a week after Fed chair Jay Powell promised caution over the pace of interest rate hikes next year in his address at Jackson Hole -- although he did as good as confirm two more rate hikes this year, in September and December.

“Furthermore, global stock and credit market valuations are more attractive than at any point this year, thanks to corporate earnings growth outpacing share price growth.”

He continues: “But while the outlook for Wall Street over the coming months appears good, as we go into 2019 investor sentiment towards the U.S. stock market may change sharply.

“Cautious investors may want to start building up cash positions, and so take advantage of any sell-off.

“After all, the Fed’s caution is justified: many economists suspect that behind the current GDP growth spurt are temporary boosts to the economy, such as tax cuts and strong exports of goods ahead of the imposition of counter tariffs by America’s trading partners.”

He goes on to say: “Then we have political risk, whether over trade negotiations, North Korea, Iran, and the risk of the impeachment of Donald Trump, should the Democrats win control of the Senate in the mid-term Congressional elections.

“But perhaps the biggest risk to investors is the steady draining away of global liquidity, as central banks end or - in the case of the Fed, actually put into reverse - their quantitative easing policies.”

Mr Elliott concludes: “A diversified multi-asset portfolio remains the best protection against unpredictable markets.  This should contain exposure to global equities and bonds, with property, gold and cash also included. After all, a 2% return on dollar cash isn’t to be sneezed at.”

(Source: deVere Group)

Said markets present anticipated price developments daily, weekly, monthly and yearly, and when scouting for profits, bidding investors will act according to the market sentiment.

If the anticipated price development of a market’s stock is upwards, meaning the value of certain stock is rising or expected to rise, as a consequence of trends, single events, supply materials, current affairs or many other factors, the market sentiment is expressed as bullish. Vice versa, if the anticipated price development is on the downtrend, by any of the same reasons, the market sentiment is expressed as bearish.

It isn’t always as simple as this however. Market sentiment is also considered to be a contrarian indicator. For example, extremely bearish markets may subsequently display dramatic spikes – the turning point for this is often where the risky decision making appears.

Market sentiment, the overall expression of a certain market as bullish or bearish, is normally determined by a variety of technical and statistical methods that factor in the comparisons of advancing & declining stocks as well as new lows & new highs in the market. One of these is known as the Relative Strength Index (RSI); it relates the number of assets bought to assets sold, indicating whether capital is flowing in or out of the market in question. Normally, as a market follows sentiment either way, the flock follows, meaning the overall movement of the market’s stock follows the market sentiment directly. To quote a popular Wall Street phrase: “all boats float or sink with the tide.” The more investors buy, the more investors buy; it’s usually exponential development.

This of course could happen indefinitely, if it weren’t for the fact that as stock trading volumes rise, as does the price. Eventually the price hits a market high and the potential for profits is minimized. At this point the fall to a bearish market usually comes to fruition. On the other hand, as trading volumes fall, prices go down, to the point where eventually the price is so low it would be foolish not to buy, therefore turning the market on its head.

As obvious as it may seem, the words bullish and bearish reflect exactly what you would expect and are not simply paraphrases. An optimistic investor, happy to buy, buy, buy as the market sentiment is bullish, is considered a bull; aggressive, optimistic and almost reckless, striking upwards with its horns. Equally a bearish investor is considered a bear because he or she does not trade without utmost consideration, he or she is pessimistic towards trading expectations and believes prices will fall, or fall further than they already have. The bear therefore decides to sell, sell, sell, and pushes the prices down; as a bear that strikes its paws to the ground.

Make sure you check one of our top read features ‘The Top 10 Greatest Stock Market Trades Ever’.