Stock Trading: Frequently Asked Questions about Alternative Investment Strategies

What is a CD?

A certificate of deposit, or CD, is a safe and liquid form of investment. It requires a fixed sum of money for a fixed period of time, which could be from three months to five years. They pay a higher interest rate than savings accounts and are as safe.

What is a money market?

A money market account is similar to a savings account, but it has a higher minimum balance requirement. This is rewarded with a higher interst rate. There may be limitations on withdrawals or transfers in paper trading.

What is hedging?

Hedging is a type of strategy used to protect assets by reducing or canceling risk in a portfolio. Selling riskier stocks and replacing with more stable stocks is called hedging.

What is a stock?

A stock, or a share, is part ownership in a company that sold off parts of their company to gain capital. Paper traders buy and sell stocks to gain capital as part of their investing strategy.

What is IPO?

An IPO, or Initial Public offering, is the initial period a company offers shares of their company for purchase.

What is a secondary market?

A secondary market begins after the IPO and investors sell their shares to other traders or speculators.

What is a bull market?

A bull market is a rising trend in the stock market. It signals the rise of consumer and investor confidence, which increases investing.

What is a bear market?

A bear market is a downward trend in the stock market. It reflects investor pessimism and even fear.

What is a double bottom?

Double bottom is a term that describes a stock chart pattern. It is a reversal of a downward trend in a stock’s price. The pattern usually resembles the letter “W” in shape. The highest point in the formation is called the confirmation point.

What is a cup and saucer?

A cup and saucer is type of stock chart pattern. It is a peak followed by a gradual downward trend, followed closely by a gradual upward trend. It resembles the letter “U” on a stock chart.