"Buying on Margin" is a phrase often thrown around in the financial industry, but what exactly does it mean?

When you buy a security on margin - you borrow up to half of the purchase price from Scottrade.  To be able to borrow this money from Scottrade, you must open a "margin account" with a minimum of $2,000 in cash or securities.  When you sell the stock, you repay the loan, but get to keep the remaining profit. 

Using margin is usually a short-term trading strategy, that can increase your profit substantially, but only if the stock price rises more than the cost of the transaction.  This sounds great, doesn't it?  Beware, there is always a downside too.  Becuse of the loan expenses (such as interest charged) and potentially falling stock prices, you could end up losing much more than you would have if you had bought the stock outright. 

If you want to learn more about margin - there is a lot of great information in the Knowledge Center including articles on marginable equity, margin calls, fees & interest, and risks associated with trading on margin.  Click here to go straight to the margin section of the Knowledge Center.

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Scottrade's margin agreement, available at scottrade.comor through a Scottrade branch office, contains the Margin Disclosure Statement and information on our lending policies, interest charges and the risks associated with margin accounts.

Free Riding.  It sounds so fun - but it is not.  Free Riding is actually a violation of the Federal Reserve Board's Regulation T (Reg T).  Reg T governs how you pay for transactions in cash accounts (this does not apply to margin accounts). 

When you sell a stock, those funds that you receive from the sell, don't actually settle for three business days.  You are allowed to purchase stock with unsettled funds, as long as the funds you used for the purchase are settled prior to selling the stock.  Confused yet?  Let's take a look at an example: 

On Monday (Day 1), you sell stock ABC for $100.  On the same day, you turn around and buy XYZ with that $100.  

On Tuesday (Day 2), XYZ goes up to $115 and you sell.   

You are in violation of Reg T.  Why?  The $100 from your sell of ABC takes 3 business days to settle.  So, you are allowed to buy XYZ with that money, but you can't sell XYZ until the $100 settles.  The $100 you used to buy XYZ were not settle before you sold XYZ.

Remember, Free Riding only concerns cash accounts.  If you happen to violate Reg T, you will receive a warning the first and second time. However, the third time can result in a 90-day restriction on your account - and you don't want that!

Watch the Regulation T webcast to learn more.

Order types seem to be a continual hot topic among traders.  How does this order type work? What type of order do you use?  How can I get the fill I want?  Every type of order from market to advanced orders have their own intricacies and understanding how each order type works is the first step in utilizing different order types properly. 

First, let me remind everyone that you BUY at the ASK and SELL at the BID.  One more time...you BUY at the ASK.  You SELL at the BID.  This is one of those details you don't want to forget!

For example:  Stock ABC last traded at $13.51. The current BID is $13.49.  The current ASK is $13.50.  If you enter a market order to BUY the stock at market, you would get filled at $13.50.  However, if you entered a market order to SELL the stock at market,you would get filled at $13.50. 

We created a great tutorial that goes over every type of order - market, limit, stop, stop limit, trailing stop, conditional, one cancels other and one cancels all.  In the tutorial, each order type is reviewed and then we show you how to place that order on the platform that you select (either the trading web site, Scottrader, or ScottradeELITE).  View the Order Type Tutorial.

Once you master the different types of orders, you can take even greater control over your account and maximize opportunities that might occur in the future!

Click here to read more about order types in the Knoweldge Center.

Since we rolled out the new Knowledge Center, we have the ability to track the most popular search terms.  Can you guess what the most searched term is?  Trailing Stops.  Trailing stop orders can be confusing and complicated, but once you get the hang of them, they can actually make managing your account easier. 

With a trailing stop order, you set a "trail amount" a certain percentage or dollar spread away from the market price.  As the stock price changes, your stop price adjusts - making your stop price "trail" the market price. 

Trailing Sell Stop Orders

• The stop price (trigger price) adjusts upward as the stock price increases.
• The trigger price does not move when the stock price decreases.

Trailing Buy Stop Order

• The stop price (trigger price) adjusts downward as the stock price decreases.
• The trigger price does not move when the stock price increases.

Trailing Buy to Cover Stop Orders

• The stop price (trigger price) adjusts downward as the stock price decreases.
• The trigger price does not move when the stock price increases.

You can enter trailing stop orders on the trading web site, Scottrader and ScottradeELITE. 

Click here to learn how to enter Trailing Stop Orders on the trading web site.

AIG has seen volatility in the market recently. Sanford Berstein downgraded the stock and set a price target of $10 per share, which would be a correction of more than seventy percent from the current price.  A reverse split earlier this summer reduced the number of shares available to trade, making it a more thinly traded stock, and AIG lost a third of its value.  Others think the federal money provided to AIG has made it overly aggressive.  80% of AIG is owned by the US government and recently senior House Republicans requested an audit of the way AIG’s public stake is being managed. 

What do you think?  Where do you see AIG headed and why?  Do you think the government money has made AIG make aggressive and/or unwise decisions?

Click here to read recent news regarding AIG.

Some traders describe themselves as purely technical or fundamental traders.  Only looking at charts or the balance sheet to help them decide how to manage their portfolio.  However, combining the two types of research will give you even more insight and knowledge and can help you make more informed decisions. 

Often times fundamental analysis is used to help decide WHAT companies you want to invest in.  Is the company's management, products and services, and financial records solid?  Is it a thriving company with a marketable product with a reasonable profit margin?  How does the price you are paying for the stock compare to the relative expenses of the company?  Fundamental analysis uses ratios and measurements such as Earnings per share (EPS), Price to Earnings Ration (P/E Ratio), and Return on Investment (ROI).  Click here to learn more about fundamental analysis in the Knowledge Center. 

So if fundamental analysis helps you decide WHAT to buy, technical analysis can  help you decide WHEN to buy, sell or hold. Technical analysis is the study of price movements and trends and can help you figure out when to enter and exit the market.  While some indicators use complex formulas and others are simpler, all of them seek to establish visual patterns that make sometimes confusing price data easier to understand and interpret.  Click here to learn more about technical analysis in the Knowledge Center.

So how about you?  Are you a purest that sticks to one kind of analysis over another?  Or do you combine the two and meet somewhere in the middle?

Recently I have been watching MTLQQ - Motors Liquidation and am surprised by the amount of volume traded on the stock.  MTLQQ is the OLD, bad assets of GM.  MTLQQ is NOT the new GM (new GM shares should be offered sometime next year). More than 800 million shares have traded since July 15th. 

The stock will someday become worthless. The company has even posted a warning on its web site saying the stock will eventually have no value - but people are continuing to trade the sock.  My guess is that people are confused and think they are buying new GM stock or people are buying the stock trying to scalp a few pennies while it is still trading. This is risky business, as the stock could become nonexistent as soon as the liquidation ends, or demand could decrease dramatically (and hence the price will fall) as investors realize this is OLD GM stock. 

So, I am interested in hearing from you.  Has anyone invested in MTLQQ?  And if so, why? 

I am just going to say it - I LOVE THE NEW COMMUNITY!  I will admit, I was one of the minority that really liked the old orange color, but I am now convinced - the new community rocks.  I like the new home page and the way recent activity is displayed.  I like the groups page - I think it is easier to scan for discussions that I might be interested in (of course I am interested in all the discussions:).  I also like the general look and feel of the overall site. 

I also am excited about the new Knowledge Center that rolled out last night (actually this morning.  I think it technically was finished rolling out around 4am CT).  Besides better content and organization -  now that the Knowledge Center is available outside login. We can actually link to help and education here in the community. 

Want to learn more about P/E ratio?  Click here.

Want to learn how to link your window together on ScottradeELITE?  Click here.

How about checking out the latest articles from the email newsletter KnowHow News?  Let me just link to it...right here.

Isn't this great?! Now, anytime you want to point another community member to an explanation or help, you can!

Many educational enhancements are coming your way.  As you all know, the Community is getting a new look and feel on Tuesday, July 28th.  I have seen the new community myself - and it looks great.  I think you all are going to like it.  It has a fresh design, that is easy to use and allows us to add functionality easier in the future. 

In addition, we have an updated Knowledge Center rolling out on the 28th as well.  The updates include rewritten content and better organization to make it even easier to find a specific topic.  The Knowledge Center has been and will continue to be available after login to your account, but it will also be available before login as well.  This means that we will be able to link to specific help and education topics directly from the community!

And finally, also on the 28th, a new look for the email newsletters will debut.  We will have a great location integrated into the Knowledge Center for you to view current and past articles from the newsletter.   And we will be renaming the newsletter to KnowHow News.  So keep an eye out in your email inbox for our first KnowHow News email going out in August. 

Mark it on your calendar!  July 28th is the big day.  New Community, enhanced Knowledge Center, and KnowHow News debut! 

Managing risk is a big part of managing your own finances.  One way to reduce risk is through diversification.  You can diversify by holding a lot of different stocks, but you can also diversify by holding various types of investments.  A diversified account may consist of not only stocks, but ETFs, Mutual Funds, Options, CDs and Bonds. 

Many use their Scottrade account to trade equities, but they don't also realize that you can buy CDs and Bonds online as well.  You have access to CDs, Municipal, Corporate and Agency bonds, Preferred stock, and U.S. Treasury Bonds and Strips.  To search for and buy bonds in your account, simply click on the Trade tab at the top of the page.  Next click "CDs & Bonds" on the left menu.  Then, use the tabs at the top to navigate to the specific type of bond you are interested in buying.