I'm Stock Trader Lance Breitstein.
Let's answer some questions from the internet.
This is Stock Market Support.
[upbeat music]
@_Konqueror_Khan asks,
As a trader, what is your response to the question,
what do you do for a living?
As cliche as it is,
we're always trying to buy low and sell high.
The market, especially when there's breaking news,
can move so, so, so, so fast,
and there's no room for hesitation.
If a headline comes out,
company A is in talks to buy company B,
that company B's share price will shoot up within seconds.
So as a day trader, it's my job to try
and process that headline as quick as I can.
Then if I think it's gonna be positive for stock B,
I wanna buy that stock as quickly as possible,
and all of this elapses in a matter of seconds.
@Vivek_Investor asks, When to sell a stock?
A million dollar question, right?
Answer: when people who are not familiar with the markets
are talking about the specific stock.
Well, Vivek, I actually think you have
a really great point there.
As a trader, we often want to be placing our bets
before the euphoria,
before people are super, super excited,
and so often tops in a stock really do align
when investor sentiment just gets too hot.
When is the worst time to sell?
Generally, the worst time to sell is going to be
when stock prices are falling so, so, so, so quick,
and you feel that panic in your stomach,
and all your friends are scared.
In those times of panic,
you really wanna follow Warren Buffett's advice
and do the opposite.
As they say, when there's blood in the streets,
that's when you want to be buying stocks.
@TheFinancePilot asks,
Does the stock market feel like a casino to you?
If you were to pick 10 random stocks for me to trade,
that would be like taking me to a casino,
and sitting me down
at a random slot machine. [machine beeping]
Over the long run, I will lose.
But if I am able to pick the specific tickers,
then all of a sudden, rather than sitting at a slot machine,
it's like me sitting at the poker table,
and sometimes at that poker table,
it might happen that I get Pocket Aces,
and while I might get Pocket Aces,
I can never guarantee the outcome of that hand,
but what it does allow me to do
is occasionally stack the odds in my favor
so that if I bet properly and play my hand right,
in the long run,
it allows me the chance of beating the market.
@Abhishekkar_ asks,
Why do big traders use so many screens?
If you've ever seen a picture of a trading floor,
you know that this is absolutely true.
I myself used six screens for my trading.
Why do we do this?
It's because we need to be glued in
and queued into so many different things.
So on this top left here, you'll see my watch list.
That will be a list of all the stock tickers
that I'm looking at that day.
Every trader has their watch list.
As part of their preparation for the day,
they decide what stocks they wanna look at
so that they're really queued in
to how their prices are changing over time.
Right here, that box is the live news.
It feeds in all the news headlines
on a specific stock ticker,
and a lot of that news happens through a Bloomberg terminal.
A Bloomberg terminal and the keyboard is
one of the critical pieces of hardware
that you'll see on a trader's desk.
All of these color-coded keys really help you interface
with the Bloomberg software.
It really comes down to speed and precision,
so that traders can do exactly what they need to do
as quickly as possible.
Right here, we have the Level 2 box.
On the left, you have all the bids.
The bids are anybody out there in the world
that wants to buy that specific stock.
You can even see the price.
Then on the right side is the ask.
The ask is the price and size
of every single person out there
that's looking to sell the stock.
When you have the price intersect,
that's when a transaction occurs.
When we look at this stock chart,
there's a whole lot more to it.
In fact, there's a whole science essentially of trading,
and that subject is called technical analysis.
@cookieco*kss wants to know, What is technical analysis?
Technical analysis is a really big word
for essentially the essence of day trading.
What we have here is a chart of Tesla.
This is just Tesla's stock price over time.
The bars will be green when the price goes up,
the bars will be red when the price goes down.
And so when we look at this specific chart,
there's a couple things we notice.
First, overall, this is what I would call a strong stock.
Stock prices are going up and towards the right,
which means it's increasing in price.
We see a little bit of a volume spike around noon,
and then the price spiked as well.
The most volume tends to occur either at the open
or the close for most stocks.
So that tells me that something atypical happened there.
I suspect it's very likely that a piece of news occurred
that drove that price higher,
and increased all the transactions
in the stock at that time.
Another thing this chart tells me is
we spent pretty much the whole day above that yellow line,
the volume-weighted average price,
or VWAP, as us traders like to call it.
It takes every single transaction
that occurred in the stock,
it multiplies it by the price,
and you get essentially the average price
based on the volume that occurred there.
A lot of traders like to think that
if a stock is trading above that VWAP line,
that's a bullish signal.
In other words, we suspect that
the trend might continue higher.
If a stock is trading below VWAP,
we take that as a bear signal.
In other words, we interpret that
as the stock might continue to head lower.
@pmckeough asks,
What factors make a stock a good buy in your opinion?
For the most part,
you really want to invest for a long horizon,
because, over time, the stock market does tend to go up.
However, as a trader, we take a much different approach.
As a day trader, I really want to stick to stocks in play.
What does that mean?
I wanna be trading the stocks with the most volatility,
the biggest changes in sentiment.
I wanna be trading the AMCs and the GameStops
when they're going crazy.
I wanna trade the Reddit IPO.
So what happens if a stock doesn't move?
Traders can't make money.
So you can bet that we're really looking for the excitement
and the big moves to make the big money.
@FrostAceReal wants to know,
Why the [beep] are people buying into GameStop
all of a sudden?
Why do you want to invest in mid?
All these meme stocks are amazing opportunities to trade
and make short-term bets
as long as you have the experience
to end up on the right side of it.
So many people are aware of the GameStop phenomenon,
and the whole movement of so-called meme stocks.
A meme stock is a stock
where its price is largely influenced by the whims
of social media and different memes online.
Many might even be familiar with what happened in 2021
with Keith Gill, a.k.a. @theroaringkitty,
who is a financial analyst
that really came to have the belief
that GameStop shares were undervalued,
and he almost created somewhat of a populist movement
where people wanted to buy GameStop,
where a lot of large hedge funds and institutions
were betting against the stock price performance.
It became this calling of sticking it to the trader man,
and sending that stock to the moon.
It happened again recently as @theroaringkitty
came out on Twitter for the first time in years
and tweeted a meme.
And GameStop went from $10
to as high as $80 pre-market one day
as a result of that tweet alone.
You might have heard of friends or coworkers
that have made money with bets on GameStop or AMC.
What we say in stock world is what rises really fast
so often comes crashing down just as fast,
and we saw GameStop tumbling down back to $20.
So if you're investing in making some of these trades,
you can lose 100% of your capital very, very quickly.
I highly advise against doing any of those crazy bets
unless you are a skilled trader.
@jtedscott wants to know,
Why did they choose bear and bull to describe the market?
Why not bull and scaredy cat,
or bull and chicken?
As you can see, this good old bull on my desk here,
the way a bull strikes is it strikes upwards.
And a bull market is used to refer to a stock market
when prices rise by 20% or more.
On the other side, though, a bear strikes downwards,
and by technical definition,
a bear market is when prices fall from the highs
by 20% or more.
An example of a bear market is what we saw
during the Great Recession in 2008,
and even what we saw during the early stages of COVID
in spring 2020 when markets fell precipitously
to try and price in the risk of COVID spreading
around the world.
@Fly_Bry wants to know,
What is the Warren Buffet secret to success?
I think many people have heard of Warren Buffett,
and it's because he really has one of the best track records
of investing of all time.
He has invested through every market cycle imaginable,
every boom, every bust.
That knowledge and the hours he spends
pouring over financial statements allows him
to have an informational and a psychological advantage
over the rest of the market.
It's the average person out there
who wants to follow Warren Buffett-style investing advice.
Index funds are often the way to go.
You want to invest for the long run,
you want to buy more when others are fearful,
and you wanna have the long-time horizon,
and capture the growth and success
of the American economy as a whole.
@Mitesh_Engr asks,
What is the driving force for a stock to move?
The stock price and what causes it to move
is simply whatever people are willing
to buy and sell a stock for.
What people need to realize is
so often stock prices don't reflect the true economy,
but perceptions of where the future economy is going to go.
Let's take a case study.
Everyone out there has heard about this huge AI boom.
So who will be some of the beneficiaries from this AI boom?
One of them is Nvidia, which is making a lot of these chips.
So if you were to look at the share price of Nvidia,
you're going to see that over the last couple years,
it has just absolutely exploded.
They're creating so many of the chips
that powers this AI boom.
A lot of investors want to participate in what they view
to be the future of growth and innovation.
How many chips will they sell?
What will the profit margins for this company be?
And what are we willing to pay for it today
to compensate for those unknowns?
That is what the stock market really does.
@vivbajaj asks, Do you trade stocks based on news?
Yes, yes, and yes.
Part of our job as traders is to figure out
what are the implications of that news,
and then what does it do to the stock price?
At the start of the war in Ukraine,
we saw investors rightfully start to panic
due to the increased geopolitical risk.
On one of those days, Tesla sold off
along with the rest of the stock market.
But then what happened is, later in the day,
when some of the fears settled,
people started to buy Tesla on the second implication,
which is, if oil prices shoot higher,
what might the implications be
for electric vehicle adoption over time,
and the prospects of Tesla as a company.
@AngeloTerzo2 wants to know,
Is the trend really your friend?
I would say a resounding yes.
It is so, so, so important to stay with the trend.
One way that I like to illustrate this point is
what I like to call the right side of the V.
Even though A and B are at the same price,
I wanna be on the right side of the V,
because this green line is a stock price
going down, down, down, down, down,
and at point A, when we're at $50, you still don't know
how far that stock might still have to fall.
For all we know, it could go to 40 or 30 or 20.
That's why it's so much better to buy
at the right side of the V, when you're with the trend.
That tends to have higher expected value,
because now that we're with the trend,
and these trends tend to continue,
that puts the odds much more in our favor,
and it's a safer way to invest or trade.
@mattryanx wants to know,
Okay, wait, a real stock market question:
how does the stock of a company in any way actually impact
the company and its well-being?
When a stock goes public for the first time,
that's called the IPO, or initial public offering.
So whatever that IPO price is at,
that's actually the proceeds that the company will get.
So if the company were to sell 1,000 shares at a $100,
they would be raising 100,000 bucks.
But if that stock then went up way, way higher
after that IPO,
they actually wouldn't directly benefit from that.
While the day-to-day price of the stock
doesn't directly influence a company,
a lot of the shareholders might own some of the stock.
So this can have implications for morale,
and also just corporate funding decisions
like whether to raise money through debt,
essentially issue bonds,
or raise money through equity by selling stock.
@Rushabh_Midas asks, Why top stocks are called blue chip?
The term blue chips comes from the fact
that back in the day when people were playing poker,
the most expensive chips were the blue chips.
That term was then adapted to refer to stocks
that were some of the biggest, most profitable, stable,
and respected companies in the economy.
In the US, we traditionally refer to blue chip stocks
like GE, or Ford, or General Motors,
but nowadays it's a different guard
made up of companies like Apple, Microsoft, and Nvidia.
@_marfii wants to know,
So I'm rewatching 'The Wolf of Wall Street',
any economics nerds on here know
how accurate it actually is?
It's definitely a classic.
That is the true story of Jordan Belfort.
What he was a part of is
what's called a pump-and-dump scheme.
People back then, and still to some degree today,
buy stocks for themselves and their company,
then try to pump the stock price up,
promote the stock, and push up the price,
and make a lot of exaggerations to potential investors
that will get them to buy the stock
at a much higher price than you bought it for.
Creating all this excitement and almost false narrative
to suck people in to buying the stock that you have
with a huge conflict of interest
in that you're often selling it to them
at a higher price.
@keepkwizing wants to know,
What are some stocks that can give 1,000% returns
in the next three years?
A lot of people in the stock market world,
especially with Instagram and TikTok,
they're going to promise you things
that are totally, totally impossible.
Much like poker, this is a probabilistic game.
I can identify situations that are in my favor,
but never ever would I be able
to promise anyone anything like,
oh, this stock will return 100%,
or let alone 1,000% in a couple years.
Anybody that's making these dramaticized claims,
a lot of that is not only not true,
but some of it might even be illegal.
@chefboyardeej_ asks, How does the stock market crash?
Just uncrash it?
If only it were that easy.
But as to why the stock market crashes,
it's because sometimes there's sudden events
that results in this feedback loop
where so many people wanna go for the exit all at once.
We have an expression in trader world,
it's okay to panic as long as you're gonna be
the first person out the door.
But if everybody's already exited,
and prices have dropped precipitously,
then it's just too late,
and you often are better off sitting tight.
One example of probably the biggest stock market crash is
in October 19th, 1987, Black Monday.
The stock market fell a whopping 22% in a single day.
That is almost unfathomable for me to imagine.
@VoltBoltTrade wants to know,
What can emotional trading or psychological pressure
do to your trading in the financial market?
The reality of being a trader is that
it is one of the most emotionally
and psychologically challenging jobs out there.
So often the average layman will be selling
during the panics when we wanna be buying.
So what a pro trader does is
we override those base-level emotions,
and we try to buy when people panic,
and then sell when people get euphoric.
Here's a scene from Billions I really love
that portrays this topic well.
You've got to be able to withstand the pressure
or it'll crush you.
Here in this scene, he's saying,
I don't lie to myself. I don't lie to myself.
I don't hold onto a loser. I don't hold onto a loser.
I let it go, get away from it.
If you have years or decades of experience,
your intuition is actually giving you very useful knowledge,
telling you that something is not acting right.
And when that happens,
I try to always listen to my intuition.
@slimmerella_ says, Imma be real for a sec.
I have absolutely no idea
how the New York Stock Exchange works.
Like I don't get why everyone is just running around
yelling in earpieces.
I just feel like there's a more calm way
we can tackle this?
I totally agree, @slimmerella_,
and a lot of that craziness, and the running around,
and the screaming and yelling has actually gone
the way of the past.
Yes, some floor trading does still exist.
The New York Stock Exchange still has their floor,
and their different areas for some of the different stocks,
but the overwhelming majority of stock trading is all done
through electronic trading using software and the internet.
That being said, it is true that
when you see those people yelling and screaming,
a lot of those people are taking in orders,
some still by phone even,
and they're trying to process them through the system
to eventually find the best way to place them in the market,
and get the best pricing for their client.
@PerceptivTrader asks,
What sets apart pro traders from amateurs?
The difference between elite and amateur is massive.
A lot of what a trader succeeds at is pattern recognition.
The more experience you have,
you can notice all these nuances
that an amateur doesn't stand a chance at noticing.
The same way that Tom Brady can read a defense,
and know where people are going to move before they do it.
It's that difference versus being a high school quarterback.
So those are all the questions for today.
Investing always involves risk,
so do your own research or consult a financial advisor
before making any investment decisions.
Thanks for watching Stock Market Support.
