Main Street Trading

Teaching Main St How to Capitalize on the Rapidly Changing Financial Markets

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www.MainStreetTrading.net

Education@MainStreetTrading.net

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General Disclaimer

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GENERAL DISCLAIMER:

This is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities. Any decision to invest must be based solely upon your own research and discretion and not upon the information provided above, which does not purport to be complete. There is no guarantee that any investment objective will be achieved. There is the possibility of loss and all investment involves risk including the loss of principal. This report is not registered with any regulatory authority, are offered pursuant to exemptions from such registration, and are subject to significant restrictions.

The information in this presentation was prepared by the General Partner and is believed by the General Partner to be reliable and has been obtained from public sources believed to be reliable. The General Partner makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this presentation constitute the current judgment of the General Partner and are subject to change without notice. This presentation is not intended as a recommendation to purchase or sell any security or commodity. The General Partner has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any information provided herein changes or subsequently becomes inaccurate. The information above is strictly confidential and may not be reproduced or redistributed in whole or in part nor may its contents be disclosed to any other person without the express consent of the General Partner.

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CONFIDENTIALITY: This report (including any attachments) may contain confidential, proprietary and privileged information, and unauthorized disclosure or use is prohibited. If you received this report in error, please notify the sender and delete this email from your system. Please contact team@spartaresearch.com with any further questions. Thank you.

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Clean Slate

• Wipe your slate clean of anything you have ever learned about active trading
• We prefer a trader that is a raw canvas, because it is easier for us to instill our philosophy without preconceptions getting in the way

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Philosophy

• We believe that a trading style that combines technical analysis, modern tape reading and sound trading psychology can deliver success
• We do not care about 99% of fundamentals, or even the companies that we trade. We care about psychology, technicals, and price action.

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Introduction to the Stock Market

Introduction to the Stock Market

• A Stock Market is an exchange on which parties can buy and sell equity (ownership) in a company
• Traders can speculate on price movement by both BUYING or SELLING a stock (going LONG or going SHORT)

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Introduction to the Stock Market

• Long: buying a security with the expectation that the asset will increase in value
• Short: the sale of a borrowed security with the expectation that the asset will decrease in value
• Yes, you can sell a stock you don’t own in order to make a profit from its anticipated decline!

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$10,000

$9,000

+$1,000

Trade A to Trader B

“I’ll sell you this car, you’ll have it in a week!”

Trader A buys the car and delivers it to Trader B

Introduction to the Stock Market

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• It all started in New York City in an area called "Wall Street," named after the wall the Dutch Settlers built to keep out the English settlers and Native Americans. �
• As the city grew and new businesses began to crop up many businessmen seeking capital began to look for individuals willing to take a chance on their ventures. Since there was no formal stock markets or even a central place to meet, these entrepreneurs and potential investors began to show up at commonly known coffee houses throughout the area to barter ownership shares of companies. About the same time, some individuals who knew both sides of the market began to act as middlemen, or "brokers," for a fee.�
• In 1792, a group of 24 wealthy stock brokers who were tired of outsiders coming and selling shares without paying them commissions signed a formal agreement that began the New York Stock Exchange. �

Stock Exchanges

• There are two main US exchanges where shares are listed:
• NYSE (All Sectors)
• NASDAQ (Primarily Tech)

Stock Exchanges

• NYSE Euronext
• The world’s largest stock exchange with a market capitalization of $14.242 billion and trade value of $20.161 billion
• NYSE, which trades in a continuous auction format on the floor, merged with fully electronic Euronext exchange in 2007 to create the first transatlantic stock exchange
• To be listed on the NYSE, a company must have issued at least one million shares of stock worth $100 million; and have earned more than $10 million over the last three years.
• The Tokyo Stock Exchange, the world’s third largest exchange, has a trade value less than 1/5 the size of the NYSE.

Stock Exchanges

• NASDAQ OMX
• The world’s second largest stock exchange with a market capitalization of $4.687 billion and trade value of $13.552 billion
• Founded in 1971, it was the first fully electronic stock exchange
• To be listed on the tech-heavy NASDAQ, a company must have issued at least 1.25 million shares of stock worth $70 million and have earned more than $11 million over the last three years
• The Tokyo Stock Exchange has a trade value less than 1/3 the size of the NASDAQ

Introduction to Market Players

Market Players

• There are two basic types of players in the market:
• Buyers
• Those who purchase stock, betting on it to go up
• Sellers (or short-sellers)
• Those who sell or short-sell stock, betting on it to go down

Market Players

• Additionally, there general sizes for the players in the market:
• Institutional traders/investors
• Individual/retail traders/investors
• Institutional traders move markets, and individuals should always be looking to track the footprints of big institutional money

Principles of Supply and Demand

Introduction to “Markets” Concept

• A market, whether it be a clothing market, a farmer’s market, or financial market, is a place where the principles of supply and demand interact freely
• The value of a good is determined by how much someone is willing to pay for it, which is influenced by how scarce it is

Introduction to “Markets” Concept

• Many traders over-complicate trading because they forget that the stock market is essentially just a large, electronic farmer’s market
• When tracking price action, always ask yourself the question, “what levels are investors consistently showing demand for the stock”. Where is there support and resistance.

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Introduction to “Markets” Concept

• When an investor buys a stock, they are buying the right to share in that company’s earnings – either through dividends or through reinvesting earnings in hopes of continued growth
• Growth stocks, ones that could potentially increase in price more quickly, are generally the focus of active traders because they are more volatile

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Price Action

• Price action is the result of supply and demand
• Supply and demand create support and resistance levels and chart patterns
• Our job is to figure out where the supply and demand forces are strongest (support and resistance)

Trade with the Pros: Main Street Trading E-Book Series

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Learn tips & tricks from professional highly profitable traders

Main Street Trading

Showing Main St How to Capitalize on the Rapidly Changing Financial Markets

21

www.MainStreetTrading.net

Education@MainStreetTrading.net

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CONFIDENTIAL | DO NOT DISTRIBUTE