A look around the industry shows you just how profitable trading is for traders and how much they expect to make from it. “If you want to make money doing this,” says Tom Hsieh, an analyst at Cantor Fitzgerald, “you don’t have to be a stock-trading genius.”
When you buy shares of a stock, it’s called a “call.” A call price means that the price of the stock is now below the price it was at the time you bought it. For stocks, this means stocks are less likely to go up over the day-to-day trading sessions. “A call is what traders call a good trading signal,” says Bill Barakat, chief market strategist at TD Ameritrade, which tracks 200 popular stock indexes. “If you think stocks are going up today, you need to act fast.”
That’s where the trades in stocks come in. The price of a stock moves by buying or selling short positions on the company, allowing you to bet that the price will go up and therefore make money. Traders trade short the stock, or buy shares in the hopes that the price will drop. A short seller is the person who bet against a firm. The market makes bets, and each bet costs a certain amount of dollars if the price goes up and if it doesn’t go up, the bet will give away money. There are many different trading strategies, so that the risk is different but the reward is constant. Traders are looking to sell a share of company B and take a profit. (If the share rises, so will the short seller’s short position.) The risk-reward ratios for every type of trade are different but some are much safer than others.
A stock analyst, who trades the company’s stock at a certain price and makes money at certain levels, is sometimes known as an “activist.” Activists use leverage to try to force the company to make changes. They’re mostly focused on price and volume, and they try to push a stock into a more favorable sector. Traders in this position, who have some degree of control over the company, call a short, or calls the shares of the company, but the company needs to call longs. The other trade in the middle is what’s known in finance as “volume arbitrage.” Traders buy a certain number of shares at a certain price and try to sell those shares at a different price. “Volume arbitrage makes you money when you have volume available and that
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