stock market mechanics

  • Posted: 15 June 2012 11:35 AM

    I’ve noticed many people misunderstand mechanics of stock market which sometimes move prices and cause different behaviors. There are rules which are in place or and there’s lingo not well understood among non professionals.

    I wanted to start a topic to discuss these and here are few questions to kick it off: 

    What was an uptick rule and why was it important?
    What is sophisticated investor?
    Does stop loss guarantee execution at set price?

    I welcome new questions, copy paste answers, or anything else as long as it’s dealing with mechanics of the trading execution.

    Thank you all!

         
  • Avatar

    Posted: 15 June 2012 11:49 AM #1

    I’ll fire up my catalytic converter.

    Sophisticated investors have access to and knowledge of
    a. trading schemes such as option spreads and even derivatives
    b. read the financial news daily
    c. have a network of other sophisticated investors
    d. have at least one prime connection to a Wall Streeter.

    Uptick rule importance ?  Helps to slow down a stock crash.

    passing the torch

         
  • Posted: 15 June 2012 01:31 PM #2

    Tetrachloride - 15 June 2012 02:49 PM

    I’ll fire up my catalytic converter.

    Sophisticated investors have access to and knowledge of
    a. trading schemes such as option spreads and even derivatives
    b. read the financial news daily
    c. have a network of other sophisticated investors
    d. have at least one prime connection to a Wall Streeter.

    Uptick rule importance ?  Helps to slow down a stock crash.

    passing the torch

    Wow! I didn’t realize I was a sophisticated investor.grin

    The uptick rule kept traders from massively and serially shorting a stock.  It required at least a slight increase in the price of a stock before it could be shorted again.  It prevented gaming of particularly volatile stocks, like Apple.  Since it was done away with it has been much easier for traders to manipulate the price of a given stock in the downward direction, thus making their own short sales more profitable.

         
  • Posted: 15 June 2012 02:08 PM #3

    Zeke - 15 June 2012 04:31 PM
    Tetrachloride - 15 June 2012 02:49 PM

    I’ll fire up my catalytic converter.

    Sophisticated investors have access to and knowledge of
    a. trading schemes such as option spreads and even derivatives
    b. read the financial news daily
    c. have a network of other sophisticated investors
    d. have at least one prime connection to a Wall Streeter.

    Uptick rule importance ?  Helps to slow down a stock crash.

    passing the torch

    Wow! I didn’t realize I was a sophisticated investor.grin

    The uptick rule kept traders from massively and serially shorting a stock.  It required at least a slight increase in the price of a stock before it could be shorted again.  It prevented gaming of particularly volatile stocks, like Apple.  Since it was done away with it has been much easier for traders to manipulate the price of a given stock in the downward direction, thus making their own short sales more profitable.


    I wish I was one, at least based on this definition:

     
    Definition of ‘Sophisticated Investor’
    A type of investor who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity.

    For certain purposes, net worth and income restrictions must be met before a person can be classified a sophisticated investor. The distinction makes an investor eligible to buy into certain investment opportunities, such as pre-IPO securities, that are considered “non-disclosure” or “non-prospectus” issues. Typically, a sophisticated investor must have either a net worth of $2.5 million or have earned more than $250,000 in the past two years to qualify.

    Read more: http://www.investopedia.com/terms/s/sophisticatedinvestor.asp#ixzz1xsmWj7AY