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RMIT Vietnam Finance Club - Online Stock Trading Workshop

An introduction to trading for RMIT Vietnam Finance Club.

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RMIT Vietnam Finance Club - Online Stock Trading Workshop

  1. 1. Tai Tran15 November 2012
  2. 2. Agenda• Market structure• Trading – Trading techniques – Strategy• How to pick good stocks – Academic – Industry practice – Portfolio management• Case study• Q&A
  3. 3. Market Structure
  4. 4. The typical flow of order Stock StockBrokerage Stock Exchange Brokerage Firm Firm
  5. 5. How to pick a good stock broker• Track record• Network• Trading system• The company, not the broker• A practice for your due diligence skill
  6. 6. Stock Exchanges
  7. 7. Investor Trader More focused on long-term goals More focused on short-term profits Use different techniques including shorts Usually buy and hold & derivatives Usually want to participate in corporate Most likely aim at profits from stock price governance movement
  8. 8. Trading
  9. 9. Trading OrdersLimit Order B/S Ticker Price Matching priority • Price • TimeMarket Order B/S Ticker Matching priority Why do • Time people Order racing submit MO?
  10. 10. Trading costs •Brokerage commissionExplicit •Exchange fee costs •Tax •Bid-offer spreadImplicit •Market impact costs •Opportunity cost
  11. 11. Out of ninety- thousand stocks on the New York Stock ExchangeHow to pick good stocks
  12. 12. Academic• From Investment course• Multivariate models
  13. 13. Factors Correlation with index portfolio Dividend yield Momentum Size Book to market ratio Credit trustworthyAsset growth Leverage Product life cycle Industry growth Price on earning Quality of information disclosure Cash ratio
  14. 14. Fundamental Analysis• Look into the firms financial statement, management, future business prospects• Analyze macroeconomics, industry, competitors• Forecast future stock price using KPI as input
  15. 15. Technical Analysis• Believes that stock prices move in patterns. Try to identify the pattern in near future. Primarily concern price & volume.
  16. 16. High-frequency trading• Use sophisticated trade automation. Trade on rapid basis.• Monitors the market for unusual movement, then captures the opportunities.• Best for arbitrage.
  17. 17. Case study
  18. 18. Now, pick astock and well analyze together
  19. 19. Bibliography• Bodie, Kane, Marcus, Investments, 9e, McGrawHill, 2011• Frino, Segara, Trade Execution, Arbitrage and Dealing in Australia, Pearson Prentice Hall, Sydney, Australia, 2008• Lewis, The Big Short: Inside the Doomsday Machine, W. W. Norton & Company, 2011• Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, Random House, 2008• Holtahusen, R., Leftwich, R., and D. Mayers, 1987, The effect of large block transactions on security prices: A Cross sectional analysis , Journal of Financial Economics 26, 237-267• Chan, L.K.C., and J. Lakonishok, 1993, Institutional Trades and Stock Price Behaviour, Journal of Financial Economics 33, 173-199• Admati, A.R., and P.Pfleiderer, 1988, A theory of intraday patterns: Volume and price variability, Review of Financial Studies 1, 3-40• Chan, K.C., W.G. Christie and P.H. Schultz, 1995, Market Structure and Intraday Pattern of bid Ask Spreads for NASDAQ Securities, Journal of Business 68, 35-60