> Paper trading and some other stuff

Paper trading and some other stuff

Posted on Friday, November 23, 2012 | No Comments

Hi guys,

As a person who wants to learn as much as possible about finance, I have taken a little interest in trading. I am going to be doing paper trading first (trading with fake money) to get the hang of it. I will be doing it on this website:  http://questrade.com/platforms/free_trial.aspx . After that, I plan on learning futures. Since many people have serious trouble with these concepts, I feel it'll definitely give me an edge of competition. As someone mentioned about finance, "It's not hard, nothing is really hard. There's just a lot to know", and this is 100% true. In order to be absolutely great in finance and make accurate and sound decisions, you have to really know how everything works. You have to know all the terms, you have to know all the different types of investment strategies. These things, in my opinion, are the fundamentals. Many people say "blahblah you need a good temperament, focus on emotions first". This helps once you know actually how the heck to invest in the first place. If you have no idea what a bond, derivative, or even a security is, then even with the perfect temperament you will still suck at investing.

In preparation for paper trading, I've been watching a few of these videos as of late.  http://www.youtube.com/user/InformedTrades It's a guy named Simit (if I recall correctly) who works as a trader and teaches you important skills in a concise way. Really informative and great.

Over the past while I've been reading a few articles on Bloomberg here and there. Some of the articles are really interesting and informative and really give you some insight on how certain industries work. For example, I was reading an article on how the Hewlett-Packard share price has dropped significantly due to a write-down of $8.8B. HP wanted to expand into the software industry due to a competitive disadvantage (Apple, Microsoft, etc are all hardware and software producers) and an attempt to reach new markets. They acquired Autonomy, a software company, and everything went great, until auditors figured out that Autonomy counted resales of Dell computers as revenue, when in fact it was Dell's revenue. Therefore, the executives at Autonomy cooked the books and let's just say they're in some deep doo-doo. Unfortunately, HP had to pay the price since it now owns Autonomy.

Recall that price per share = Total Equity ($) / (Total Shares Outstanding)

It's easy to see that if equity goes down, price goes down. If shares outstanding increase, price goes down. Simple math.

..until next time folks.

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