LESSON 7
TRADING
PROCESS
Presented by Group 7
Mendoza, Justine Paul D. Philippine Stock Exchange
Veloso, Zsoscia Bhenita G. Role of a Stockbroker
Pascual, Erika Mae A. How to Trade Stocks
Galgo, Josephine B. Trading Process
Santos, Don Carlos Angelo Trading Cycle
De Vera, Kathleen M. Buying Transaction
Caoyong, Hiedie Antonette Selling Transaction
Philippine
stock
exchange
Reporter: Mendoza
What is trading?
Trading is the buying and selling of securities,
such as stocks, bonds, currencies and
commodities, as opposed to investing, which
suggests a buy-and-hold strategy. Trading
success depends on a trader's ability to be
profitable over time.
what is Philippine stock exchange?
The Philippine Stock Exchange, Inc. (PSE) is a
self-regulatory organization that provides and
ensures a fair, efficient, transparent and
orderly market for the buying and selling of
securities.
The Exchange also offers a convenient and
efficient venue in raising capital to support
the growth of businesses.
brief History of Philippine stock exchange
The Philippine Stock Exchange (PSE) began in 1927
as the Manila Stock Exchange (MSE). In 1963, it
officially became the Manila Stock Exchange, Inc. In
1992, it merged with the Makati Stock Exchange
(MkSE) to form the PSE.
In 2001, it changed to a shareholder-based company,
and in 2012, it even went public by listing its own
shares on its own exchange. Now, the PSE is where
people trade stocks and invest their money in the
Philippines.
Philippine stock exchange REQUIREMENTS
Just like an ordinary savings account, an investor has to
open an account and present valid identification with a
broker before he can actively trade stocks on the
Exchange. An investor would need at least the minimum
amount of investment to open a trading account which is
Php5,000.00.
Getting started in the stock market is a simple process.
1. Choose your stockbroker or trading participant (view
Stockbroker's Directory).
2. Open a trading account with your stockbroker of choice.
3. Place your buy or sell order either online or through a
phone call to your stockbroker.
4. Monitor and keep track of your investments.
ROLE OF
STOCKBROKER
Reporter: Veloso
STOCKBROKER
is a financial professional who
executes orders in the market on
behalf of clients.
the intermediaries who deal with
trading and advising activities in
capital market investment.
Also be known as:
Registered representative (RR)
Investment advisor
7 ROLEs OF a
STOCKBROKER
Trader of Stocks Researcher and Adviser
Buying and selling stocks is the primary job of Stockbrokers usually have their market research
making stock trading on behalf of its clients. team and do technical and fundamental analysis
Stockbrokers working as an intermediary make along with another form of analysis to provide
purchases and sales of their clients’ stocks; when their clients with up-to-date information and
a client wants to purchase a new stock, a advice about where to invest to achieve
stockbroker makes arrangements for that investment goals.
purchase.
Provider of Personalized Services Provider of Margin Financing
Along with basic services and functions, Margin trading allows for selling or for buying all
stockbrokers provide different personalized the stocks a client one in a day. Margin finance
services to their clients, and these services will enable clients to borrow money from a
include financial planning, insurance planning, stockbroker and use that money to buy more
retirement planning, tax services, depository stocks advised by the brokers.
service, and many more.
Investment in Other Asset Class Investment Portfolio Manager
Stockbrokers not just help to decide and invest in Portfolio management refers to the
stocks, they also advise other asset classes and management of information of invested assets.
their performances including: cash, fixed income To minimize the risk of any stock investment,
securities, equities, and derivatives and some stockbrokers suggest investing in multiple stocks
other important asset class includes real-estate and other forms of assets.
investment and crypto currency investment.
Educational Requirement to Become Stockbrokers
Becoming a stockbroker requires getting a
bachelor’s degree in the related field, and many
brokerage firms also require one additional post-
graduation degree called an MBA and two years
of experience in any other brokerage firm.
STOCKBROKER
executes your investment decisions
not investment analysts
Wealthy individuals and institutions
continue to use full-service brokers
who offer advice, portfolio
management services, and
complete transactions.
how to trade
stocks?
Reporter: Pascual
five basic steps:
STEP 1: Open a trading account .
STEP 2: Learn to Read: A Market Crash Course .
STEP 3: Learn to analyze
STEP 4: Practice trading
STEP 5: Other ways to learn and practice trading
trading investing
involves much shorter time span years or decades because
spans, ranging from less than a the objective is long-term
day to a few month wealth accumulation
aims to generate profits by focuses on wealth
capitalizing on short-term price accumulation over the long
movements term.
trading may include long and
short positions to benefit from investing typically involves long
both higher and lower market positions only
moves
TRADING
PROCESS
Reporter: Galgo
TRADING PROCESS
STEP 1: Choose a stockbroker.
STEP 2: Open an account.
STEP 3: Give your order.
STEP 4: Pay before your settlement date.
STEP 5: Receive your proceeds/shares.
TRADING
Cycle
Reporter: Santos
TRading cycle
Clearing and settlement process
happens in 3 days (trading day + 3
working days)
SCCP - the intermediary in making
delivery upon payment of
securities
PDTC - custodian of scripless
secutiries
buying
transaction
Reporter: De Vera
What does buying mean
in trading?
Buying in trading is the act of purchasing an
asset in the hope that its value will increase,
thus potentially making the trader a profit.
How buyers have an impact on
markets
Increase the demand for More buyers in the Help increase market
an asset market, the price of the liquidity
asset increases, leading
to a positive trend
Volatility A buyer’s market is when buyers have the advantage
over sellers
Key SPREADS
It represents the transaction cost
concepts of buying or selling an asset.
in buying The spread could vary and
traders need to consider the
spread when deciding to buy an
asset.
NARROW & WIDE SPREAD
BID AND ASK PRICES
Bid and ask prices are the prices at
which buyers and sellers are willing ORDER BOOKS
to trade a particular asset.
a list of buy and sell orders for an
BID PRICE =highest price a buyer is asset on an exchange.
willing to pay for an asset
BID-ASK SPREAD = Bid - Ask Price
long position
referred to as going long or buying
means buying an asset with the expectation
that its value will increase over time.
Open a CFD trading account to take a long
position on a market
Strategies for buying
Trend following finding a price trend and
following it.
benefit: the profit potential may be very
large.
Momentum trading traders enter
based on how much momentum a CHART PATTERN CONTINUATIONS MOVING AVERAGE CHANNEL TRENDLINE BOUNCE
trend has.
PIVOT POINT
TREND-FOLLOWING
STOCHASTIC RIDING
Mr. Jaime Santos wishes to buy a stock
whose market price is P10.00. Based on
the above Board Lot Table, the number
of shares he can buy at a regular
transaction should be in multiples of
1000 shares.
P10 Market price/share
x 1000 Number of shares to be bought
10,000.00
+ 28.00 Broker's Commission
+ 0.50 SEC Fee
+ 0.56 PSE Transaction Fee
example + 1.00 SCCP Fee
10,030.06 Total Cash Outlay
selling
transaction
Reporter: Caoyong
What is sell?
The term sell refers to the process of
liquidating an asset in exchange for cash.
Liquidation is a term used to describe the
conversion of non-liquid assets, such as real
property, stocks, or bonds, into liquid
property, such as cash, through an exchange
on the open market.
In investing, especially with stocks, sell
generally refers to the act of exiting a long
position in an asset or security.
short selling
Short selling subverts the usual stock
market investment strategy of “buy
low, sell high” in order to help the
short seller profit from a drop in the
stock’s price.
example of sell
John purchases 10 shares of ABC stock for $120
a share, for a total of $1,200. Through his
research, he believes that the share price of
ABC will increase due to an upcoming
approval of the company's new
pharmaceutical drug. The drug is approved
three months after John purchased his shares,
which results in a current stock price of $135.
In a year's time, ABC has grown, made an
acquisition, and its share price is now $150.
John decides to sell his 10 shares, which brings
in a $1,500 sale. From his original purchase
price of $1,200, John has made a profit of $300.
selling transaction
Schedule of Transaction Fees and Taxes Levied on Investors:
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