Newbie stock market qns

teehee93

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hi guys, I am new to stock market investing, still doing much online research and reading. However I have these few qns that I would like to clarify in order to help me understand the stock market. Some of these qns may sound stupid and lame, please understand I am an absolute beginner. thank you

1) When I sell my shares on sgx, who exactly am I selling to? For eg, I have 10 lots of shares with company X and I decide to sell all of them, who am I selling it to? And what if there are no buyers?

2) What does bVol and sVol mean?

3) What affects the total number of shares a company has? For eg, if company X initially issues out 100,000 shares through an IPO, but after a few years the company is growing and expanding rapidly, can company X increases the amount of shares it has? and if so how does it do it? Won't the current share prices be affected?
 

Shiny Things

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Some of these qns may sound stupid and lame, please understand I am an absolute beginner. thank you
In the words of Mr Garrison: "there are no stupid questions, just stupid people".

1) When I sell my shares on sgx, who exactly am I selling to? And what if there are no buyers?
You're selling to another trader. They might be a bank; they might be a high-frequency algorithm sitting on a server somewhere; or they might be Joe Bloggs sitting in his underwear in front of his POEMS screen. Either way, that person (or that algorithm) has posted a bid - they've said "I want to buy 100 shares of Pear Computers at $500" - and when you sell, you're saying "OK, I sell you those 100 shares at $500".

If there's no bids - that is, there's no buyers - then you can't sell your shares, and you are, as they say, fuçked.

2) What does bVol and sVol mean?
"Buy Volume" and "Sell Volume" - the number of shares that people want to buy or sell at a given price level.

3) What affects the total number of shares a company has? For eg, if company X initially issues out 100,000 shares through an IPO, but after a few years the company is growing and expanding rapidly, can company X increases the amount of shares it has? and if so how does it do it? Won't the current share prices be affected?
Generally a company will only increase the number of shares outstanding if they want to raise more money.

The original number of shares is pretty much just pulled out of the air, and set in the company's documents. If the company grows and expands, they don't necessarily need to expand the number of shares outstanding: the price of those shares expands instead, and that's how the company's valuation grows.

If a company needs to raise more money, and doesn't mind pissing off its existing shareholders, they can create more shares and sell those shares to existing investors - this is what a rights issue is. Generally rights issues aren't a good way to raise money, because the new shares have to be sold at a discount to the old shares (which reduces the value of the existing shares), and because existing shareholders tend to get a bit pissy when you tell them "either give us another thousand dollars or we'll dilute your existing shareholding". Also, shares tend to have a higher cost of capital for the company than bonds or bank loans, so issuing new shares is kind of an expensive way to run your business.

I'm kind of surprised that rights issues are such a regular feature of the Singaporean capital markets landscape, to be honest. If a company has to resort to rights issues instead of funding itself with bonds or loans, that's generally because it's under some sort of stress - c.f. the entire financial sector in 2008.
 

teehee93

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"Buy Volume" and "Sell Volume" - the number of shares that people want to buy or sell at a given price level.

Means if the BVol is 1000, there are 1000 ppl waiting to buy the shares at this price? Then if I want to buy the shares, I have to queue up behind 1000 ppl? If got so many ppl want to buy the share at that price, isnt it a low chance of me getting it also since I have to queue behind 1000 ppl?


The original number of shares is pretty much just pulled out of the air, and set in the company's documents. If the company grows and expands, they don't necessarily need to expand the number of shares outstanding: the price of those shares expands instead, and that's how the company's valuation grows.

Isn't share prices determined by market demand and supply for that company's shares? How does the company increases the prices of its shares?

Thank you so much for your patience and taking your time to explain to me! greatly appreciated:D
 

peterchan75

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BVol = 1000 means there are investors/speculators who intend to buy 1000 lots at various prices. IF it's people, then it would be BPpl. :s13::s13::s13:
If you want to buy the shares, then it depends what price that you are willing to pay. If you are willing to pay the price that the seller is asking, then you jump over those who are not. So, in stock, jumping queue is allowed. Here is an example of Level2 screen shot for Microsoft. The BID is the buyer queue and ASK is seller queue.
level-ii.gif

Both buyer and seller can jump queue with price.

When a country print more money, the value of the money drop. Similarly, when a company issue more shares to raise capital, the share price drop. Company can increase share price by making tons of $$$$ i.e. profitable companies will have higher stock price. BUT speculators or manipulators can also bid up the share price of a junk company and hoping to sell it to the next suckers. Alexander Elders said in his book, Trading for a living, it's hard to make money from the stock market, you have to steal it from the next guy.
 
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Shiny Things

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Here is an example of Level2 screen shot for Microsoft. The BID is the buyer queue and ASK is seller queue.

Wow, how old is that screenshot? I see Madoff Securities and Salomon in there. (Or does Citi still use the Salomon code?)
 

teehee93

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Thanks guys for your reply! I am now reading up on how to understand stock chart patterns..However I don't understand the term 'base pattern'. Tried to google the definition of it but dont have good explanation
 

peterchan75

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Thanks guys for your reply! I am now reading up on how to understand stock chart patterns..However I don't understand the term 'base pattern'. Tried to google the definition of it but dont have good explanation

Free resource from stockcharts.com.
StockCharts.com - ChartSchool

This is from IBD.
http://education.investors.com/ibd-university/452143-451713-charting-the-course-base-patterns-part-i.aspx

Free trading books.
https://archive.org/details/JesseLivermoreReminiscencesOfAStockOperator
https://archive.org/details/abcofstockspecul00nelsiala
 
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teehee93

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sorry but I have another question. So now I have a slightly clearer understanding and picture of how to read stock charts, like the 'cup with handle' and 'double bottom' stock chart patterns. And in books and websites I've browsed through, most of them will tell you when is a good time to buy a stock at a specific time of the stock pattern. However all of it shows examples from past records after the pattern has completed. How do I know when to buy it in real time? What I'm trying to ask is that its easy to teach someone when to buy the stock after the full pattern has emerged and analysing it as the full pattern is already out. But what if its in real time? I do not know what will the pattern be tmr or next week, so how do I identify what type of stock pattern is it? All the websites I seen only teaches how to identify the pattern after it has already emerged but not while the pattern is emerging or forming.
 

Yowzer

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sorry but I have another question. So now I have a slightly clearer understanding and picture of how to read stock charts, like the 'cup with handle' and 'double bottom' stock chart patterns. And in books and websites I've browsed through, most of them will tell you when is a good time to buy a stock at a specific time of the stock pattern. However all of it shows examples from past records after the pattern has completed. How do I know when to buy it in real time? What I'm trying to ask is that its easy to teach someone when to buy the stock after the full pattern has emerged and analysing it as the full pattern is already out. But what if its in real time? I do not know what will the pattern be tmr or next week, so how do I identify what type of stock pattern is it? All the websites I seen only teaches how to identify the pattern after it has already emerged but not while the pattern is emerging or forming.

That is correct. The patterns must emerge 1st and then you make your bet on what will likely come along after that. If the patterns don't emerge or form fully then it is not valid & so you shouldn't place your chips on what comes next.

You are NOT betting on what pattern is going to form. But what comes after it.
 
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teehee93

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When a company wants to go public, how do they decide the initial stock price to release during IPO? From what I understand, the company will first divide their net equity by their total no. of shares.

For example:
Company A net equity is $4m and they have 2million shares outstanding, so the stock price is $2 per share? Then in the IPO they state that stock price per share is $2 and the public do some kind of auction to see who gets the stocks.

Is this correct?
 

lzydata

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When a company wants to go public, how do they decide the initial stock price to release during IPO? From what I understand, the company will first divide their net equity by their total no. of shares.

For example:
Company A net equity is $4m and they have 2million shares outstanding, so the stock price is $2 per share? Then in the IPO they state that stock price per share is $2 and the public do some kind of auction to see who gets the stocks.

Is this correct?

Somewhat...

A common mistake people make is to assume that the more expensive the stock, the better the company is. For example, the 3 local bank stocks are priced around $10, so are they necessarily better investments than the stocks priced at $1 or $2? Are they worth five or ten times as much? Nope. The number of shares is not fixed. It is more like the company chooses the price and then arranges whether to split or combine shares.

For example, say a company worth $100m is owned by Messrs A and B, and they want to go for a public listing. The partners decide they want to hold on to 60% of the company and sell 40% (i.e. raise $40m). They also want to list each share for $1. Originally maybe Mr A has 1 share and Mr B 1 share. They can split each share into 30 million shares and create another 40m new shares to be sold to the public. Hey presto, now the total number of shares is 100m.

Another way they can do it is to split a share into 50 million shares each, and then each sells 20m shares to the public. Then they would get the cash, rather than the company. But the result in terms of shares is the same. You can read about such arithmetic in the prospectus.

Different stock exchanges have different norms for prices. For Singapore, SGX's minimum issue price is 50 cents; most IPOs debut at slightly less than $1. If the price is 90c, then the minimum an investor can buy is 1 lot worth $900 (excluding commissions), which is relatively comfortable. In other markets such as the US with no minimums, you see most share prices are in the tens of dollars, except for certain prominent tech companies and Berkshire Hathaway.
 

teehee93

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does ETF gives out dividends also?

And how do ppl earn money if they invest in blue chips? Cause blue chips stocks wont have much price fluctuations and therefore the price of the stock wont be able to rise much?
 

Shiny Things

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does ETF gives out dividends also?

Yes they do. The STI ETFs pay a couple of percent a year.

And how do ppl earn money if they invest in blue chips? Cause blue chips stocks wont have much price fluctuations and therefore the price of the stock wont be able to rise much?

Some people - you included, mate - have really skewed expectations about what constitutes a good return in stocks. Investing in the STI will make you, on average, about 8-10% a year. That's a pretty good return! 8% a year will give you TEN TIMES your money in 30 years' time.
 

lzydata

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does ETF gives out dividends also?

And how do ppl earn money if they invest in blue chips? Cause blue chips stocks wont have much price fluctuations and therefore the price of the stock wont be able to rise much?

One component of returns is dividends - some blue chips give good dividends, others don't - and another is capital gains. Of course they have capital gains. Not all the time and not with all blue chips, but in general, if the economy is growing, blue chips will grow with them.

Stocks fluctuate, and blue chips fluctuate too. The STI is made up of blue chips, and it can fluctuate a lot. The case for blue chips is to do with their fundamentals: they are larger businesses, so they are less risky than smaller businesses. Whatever the stock price happens to be doing, the actual underlying business is not so volatile.
 

teehee93

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I was looking through the STI components when I saw that Jardine corporation and some of its branches are inside the STI. However I thought that Jardine is an MNC which does not have its roots in Singapore, only has some of its operations here. If so why is it listed under the SGX and not the country which it originated from?
 
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