Stocks

Universal trading terms live in General Education. This list covers words you'll see when trading stocks specifically.

A stock is a small piece of ownership in a company. Buy one share and you own a tiny slice of that business. The rest of this chapter covers where shares trade and how you actually buy them.

1.1What is a Stock?

A company starts private. To raise money to grow, the owners sell pieces of the business to the public through an IPO (Initial Public Offering). Each piece is a share.

Quick example: a company splits into 100 million shares and sells them at $10 each. The whole company is now worth $1 billion — that total is the market cap (more on that in the next chapter).

1.2What is the Stock Market?

The stock market is a giant marketplace where shares of public companies are bought and sold. It's not one building — it's a network of exchanges like the NYSE and the Nasdaq, connected to every broker.

During market hours, millions of buyers and sellers post what they'll pay and accept. The market matches them up nonstop, and that's what sets a stock's price in real time.

1.3Buying and Selling

Every time you buy, someone else is selling. The market pairs you up. Three words to know:

• The bid is the highest price a buyer will pay.
• The ask is the lowest price a seller will accept.
• The spread is the gap between them.

Click buy, your order gets matched with someone selling, and that match is called a fill. The trade is done. Selling works the same way in reverse.

1.4Stocks vs ETFs

A stock is a piece of one single company. An ETF (exchange-traded fund) is a basket of many stocks bundled into one — buy a single ETF share and you instantly own a slice of everything inside it.

• Stock: all-in on one company. Bigger upside, bigger risk. If that one company tanks, you feel it.
• ETF: instant diversification. One bad company barely matters because you own dozens or hundreds. Smoother ride, smaller swings.

A common beginner move: park the core of your money in a broad ETF (like one tracking the S&P 500) for safety, then trade individual stocks with a smaller slice. ETFs are the calmer, lower-stress way to be in the market.

1.5The Power of Compounding

Here's the single best reason ETFs matter. The S&P 500 is a basket of about 500 of the biggest U.S. companies, and you can own the whole thing through one index ETF. Historically it has averaged roughly 10% per year over the long run (before inflation). You don't have to pick winners — you own all of them.

The real magic is compounding: your gains start earning their own gains. Put in a fixed amount every month, leave it alone, and it snowballs — slowly at first, then dramatically.

Time invested	You put in	Ends up worth
10 years	$60,000	~$102,000
20 years	$120,000	~$380,000
30 years	$180,000	~$1,130,000

Look at the 30-year row: you contribute $180,000 but end with over $1.1 million — over $950,000 of that is growth you never deposited. Notice the curve bends upward: most gains land in the later years, when your returns are earning returns on top of returns. That's compounding, and all it needs is time. Starting five years earlier beats trying to pick the perfect stock.

Returns aren't guaranteed — the market doesn't hand you a smooth 10% every year, and some years it falls. The 10% is a long-run historical average used here to show the math. One trader's view — do your own research.

1.6Where Do You Buy Stocks?

You can't buy stocks directly from the exchange — you need a broker. A broker is an app or platform that connects you to the market. You open an account, add money, and place trades.

Which broker you pick matters: fees, available markets, and ease of use all differ. We break down the best ones — for stocks, options, and crypto — in the Exchanges guide.

Compare Brokers → 1.7Tickers

Every public company has a short code you use to look it up on your broker, charts, and alerts:

• Apple = AAPL
• Tesla = TSLA
• Nvidia = NVDA
• Microsoft = MSFT

Some tickers are a single letter (F = Ford). Some are five or more. The length tells you nothing about the company.

A stock's price isn't set by the company. It's set by buyers and sellers in real time. Strip away the noise and every move comes down to one thing: supply and demand.

2.1It All Comes Down to Supply and Demand

If more people want to buy a stock than sell it, the price goes up. If more people want to sell than buy, the price goes down. That's the entire mechanism.

Everything below — earnings, news, rates — matters only because it changes how many people want to buy versus sell. Demand is the engine. The rest is just fuel.

2.2The 5 Real Drivers

Five things move demand more than anything else:

Sales going up means the business is getting bigger. Growing revenue pulls in buyers.

It's not just about sales — it's about keeping more of them. Rising profit shows the company is getting more efficient, not just bigger.

Stocks trade on the future, not the past. If the market expects huge growth ahead, the price rises now — before the results even arrive. This is why a stock can drop on good news: the good news was already expected and priced in.

When rates are low, money is cheap and investors pile into stocks chasing returns. When rates rise, safer options (like bonds) get attractive and money flows out of stocks. Rates move the whole market at once.

How people feel. Fear and greed move prices even with no real news. A scared market sells everything; a greedy market buys everything.

2.3Market Cap Is What Matters — Not the Price

This is one of the most important ideas for a beginner, and most people get it wrong. Market cap is the total value of the whole company: share price times the number of shares.

The price of a single share, on its own, tells you nothing. A $5 stock is not "cheap" and a $500 stock is not "expensive."

• A $5 stock with 10 billion shares = a $50 billion company. Huge.
• A $500 stock with 2 million shares = a $1 billion company. Small.

So we never judge a stock by its share price. We track the market cap and where it's moving. When you hear "this stock doubled," what actually doubled is the market cap — the market decided the whole company is worth twice as much. That's the move that matters.

The single biggest reason people blow up their stock portfolios isn't bad picks. It's bad sizing. They go too heavy on one name, the news turns, and they can't recover.

3.1The 10% Rule

Never put more than 10% of your total stock portfolio into a single name.

Doesn't matter how good the thesis is. Doesn't matter how high the conviction is. 10% max.

Because even great companies can drop 50% on bad news. If you have 10% in one name and it halves, you lose 5% of your portfolio. Painful, but survivable.

If you have 30% in one name and it halves, you lose 15%. Now you need a 17%+ gain across the rest just to break even.

3.2Sizing in Real Numbers

Pick a number that's a percentage of your stock portfolio, not a dollar amount. As your account grows, your position sizes grow proportionally.

3.3Conviction Levels

Not every trade deserves max size. Adjust based on how strong the setup is:

• Light conviction: 1–3% — testing a thesis, new sector, unfamiliar name
• Standard conviction: 3–5% — solid setup, clear catalyst, good R/R
• High conviction: 5–10% — strong thesis, strong technicals, strong catalyst alignment

You almost never need to go above 5%. The 10% is a ceiling, not a target.

A chart is a picture of buyer and seller behavior over time. You don't need to be a chart expert to follow trades. You just need two ideas: where price tends to stop, and which way it's heading.

4.1Support and Resistance

Support is a price level where buyers usually step in. It acts like a floor — the stock drops to it and bounces.

Resistance is a price level where sellers usually step in. It acts like a ceiling — the stock rises to it and gets pushed back.

These levels matter because traders remember them. If a stock bounced off $50 three times, everyone watches $50 — and that attention makes the level hold.

4.2Trend

The general direction the price is moving:

• Uptrend — higher highs and higher lows. The stock is climbing.
• Downtrend — lower highs and lower lows. The stock is falling.
• Sideways — stuck in a range, going nowhere.

The simplest rule in trading: go with the trend, not against it. Buying dips in an uptrend works. Buying dips in a downtrend is called catching a falling knife — and it cuts.

4.3That's Enough to Start

Support, resistance, and trend are all you need to follow most alerts. The deeper toolkit — chart patterns, moving averages, RSI, candlesticks — lives in the Technical Analysis guide, and the upcoming video will walk through it visually. Don't feel like you need to master charts before you start. You don't.

Before you buy, it helps to know if the company actually makes money — or if it's just hype. You don't need to be an accountant. A handful of numbers tells you most of the story.

5.1Why Financials Matter

When you buy a stock you're buying a piece of a company. Financials are the report card that shows whether that company is healthy and growing or shrinking and struggling. You don't have to read full reports — the numbers below cover most of what a beginner needs.

5.2Revenue — The Money Coming In

Revenue is total sales before any costs — the top-line number. You want to see it growing year over year. More revenue usually means more customers and more demand. Shrinking revenue is a warning sign.

5.3Profit — What's Left Over

Profit (net income) is what's left after all costs. A company can have huge revenue and still lose money. Some young growth companies aren't profitable yet because they're spending to grow — not always bad, but know it before you buy.

5.4Margins — How Much They Keep

Margin is the percentage of each sale the company keeps as profit. If a company makes $100 in sales and keeps $30, that's a 30% margin.

Higher margins mean a more efficient, more powerful business. A software company might keep 80 cents of every dollar; a grocery store keeps pennies. Rising margins over time is a great sign — the company is getting stronger, not just bigger.

5.5Cash Flow — The Money That's Actually There

Cash flow is the real cash moving in and out of the business. It matters because profit on paper isn't always cash in the bank — a company can report a profit while actually burning through cash.

Positive, growing cash flow means the business funds itself and isn't relying on borrowing or selling more shares to survive. Many experienced investors trust cash flow more than reported profit because it's harder to fake.

5.6The P/E Ratio — Are You Overpaying?

The P/E ratio (price-to-earnings) is the most common valuation number. It's the share price divided by earnings per share — how much you pay for each $1 of profit. A P/E of 25 means you pay $25 for every $1 the company earns a year.

• High P/E — expensive. The market expects fast growth. If growth slows, it can fall hard.
• Low P/E — cheap. Either a bargain or a sign of trouble.

Only compare P/E between similar companies. A software firm and a bank have totally different normal ranges.

5.7Growth — Is It Getting Bigger?

Growth is how fast revenue and profit climb, shown as a percent versus last year. The market pays a premium for fast growth and punishes slowdowns. This is why a high P/E can be justified — a company growing 40% a year deserves a higher price tag than one growing 3%.

5.8The Three Financial Statements

Everything above comes from three reports every public company files. You don't need to master them, but know what each one is:

• Income Statement — shows revenue, costs, and profit over a period. Answers: did they make money?
• Balance Sheet — what the company owns (assets) versus what it owes (debt) at a point in time. Answers: are they financially solid?
• Cash Flow Statement — tracks the actual cash in and out. Answers: is real money coming in?

Learning to glance at these three is the single biggest upgrade you can make as an investor. Your broker and free sites show them for every stock.

5.9Going Deeper: DCF Valuation

A DCF (discounted cash flow) is how pros estimate what a stock is truly worth. The idea: a company is worth all the cash it will generate in the future, converted into today's dollars.

You estimate future cash flows, then "discount" them — money in ten years is worth less than money today — to get a fair value. If that value is well above the current price, the stock may be undervalued.

DCF is advanced and easy to get wrong (small assumption changes swing the answer wildly), so treat it as a "going deeper" tool once the basics above feel natural. We may cover a full walkthrough in a video.

You don't need a finance degree to research a stock. Run through these seven questions. They turn "I have a good feeling" into an actual decision you can defend.

6.1What Does the Company Do?

If you can't explain what a company does in one plain sentence, don't buy it. Know how it actually makes money. "They sell ads," "they make chips for AI," "they run a payments network." Simple and clear.

6.2Is There Demand?

Are people actually buying what they sell, and is that demand growing? A great company in a shrinking market is still a bad bet. You want a rising tide — a product or service more people want every year.

6.3Do They Have a Competitive Advantage?

This is the moat — the thing that stops competitors from crushing them. Brand, technology, scale, network effects, or switching costs. Ask: why can't a rival just copy this and steal their customers? If there's no good answer, be careful.

6.4Is It a Monopoly (or Close)?

The strongest businesses dominate their space. A near-monopoly has pricing power — it can raise prices without losing customers because there's nowhere else to go. Dominant market share is one of the best signs a company can defend its profits for years.

6.5What's Their P/E vs Competitors?

Pull up the P/E ratio and compare it to direct competitors, not the whole market. If a company trades at a much higher P/E than its rivals, you're paying a premium — make sure faster growth justifies it. If it's much lower, ask why: a bargain, or a problem the market sees?

6.6Is It Uptrending or Downtrending?

Even a great company can be a bad buy at the wrong time. Check the chart: is the stock making higher highs (uptrend) or lower lows (downtrend)? Buying strong businesses in an uptrend beats trying to catch a falling knife in a downtrend.

6.7What's the Sentiment?

How does the market feel about this stock right now — excited, ignored, or hated? Sentiment can hand you a great company on sale (when fear is overblown) or warn you that all the good news is already priced in (when everyone's euphoric).

The most expensive mistake new members make is chasing alerts they don't fully understand. You see "$NBIS" in the trades channel, the price is already up 30%, you buy anyway. Then it pulls back to the actual entry. You panic, sell at a loss.

7.1The Format

Every stock alert from Johnny looks like this:

7.2Breaking It Down

The stock being traded. NBIS = Nebius.

Where Johnny is buying. Not "above" or "below" — exactly here.

The price where the thesis is wrong. If it hits, get out. No questions.

Where the thesis plays out. Often there are multiple targets — TP1, TP2, TP3 for trimming in pieces.

Percentage of your stock portfolio. 3% on a $10k portfolio = $300. On a $100k portfolio = $3,000.

7.3Can I Still Enter?

The most asked question in the chat. Check how far price has moved from Johnny's entry:

• Price at $35.10 — fine, enter normally
• Price at $35.50 — slightly late, use a smaller size
• Price at $37 — too late, R/R is bad now, wait for a pullback
• Price at $40+ — don't chase, wait for the next setup

The further price is from entry, the worse your risk/reward. Don't pay 30% more than Johnny did for the same trade.

7.4What to Do After You Enter

1. Set your stop immediately. Don't say "I'll set it later." Now.
2. Don't size up if it's working. Your position is set. Adding to a winner blows the sizing math.
3. Don't average down if it's not working. The stop is the stop.
4. Watch the alerts channel for trim updates. When Johnny trims, you should too.

7.5What Not To Do

• Don't buy if you can't size properly. If 3% of your portfolio is less than one share, the trade isn't for you yet.
• Don't tweak the entry or stop. Use Johnny's numbers, not your own.
• Don't ask "did I miss it?" 50 times a day. If you have to ask, yes — wait for the next one.
• Don't buy because someone else in the chat is up. They got in earlier.

The fastest way to blow up a new account is to skip practice and jump straight into real trades. Paper trading lets you learn everything first with zero risk. Do this before you go live.

8.1What is Paper Trading?

Paper trading is trading with fake money at real, live prices. You place buys and sells exactly like the real thing, but nothing is actually at risk. Your gains and losses are pretend — your learning is real.

8.2Why It Matters

• Learn the platform — placing orders, setting stops, and reading your screen without fat-fingering a real trade.
• Test your strategy — see if your approach actually works before money is on the line.
• Build habits — practice sizing and honoring stops so good discipline is automatic by the time it counts.
• Make your mistakes for free — and everyone makes them early.

8.3How to Start

Most brokers have a paper or demo mode built in — you get a fake balance to trade with. Treat it like real money: size positions properly, set stops, and follow alerts as if your own cash were on the line. Sloppy paper trading teaches sloppy habits.

Run it for at least a few weeks across different market conditions, not just one good day.

• Webull — one of the best free paper trading accounts out there. Real-time data, a clean app, and the same order types you'll use live, so practicing stock and options entries feels exactly like the real thing.
• TradingView — paper trade right on the best charts in the game. Perfect for practicing setups, support and resistance, and following alerts on the same charts the community uses.

Open Webull → Open TradingView → 8.4When to Go Live

Move to real money only when you can place trades without fumbling, you've followed your plan consistently, and you understand why your winners won and your losers lost. Even then, start small — a fraction of what you eventually plan to trade. Real money brings real emotions that paper never will.

There are dozens of stock strategies. These are the ones that show up most often in Nefarious. Pick one to learn first, get comfortable, then add another.

9.1Breakout Trading

Buy when a stock breaks above a key resistance level with volume. The bet is that the breakout continues higher.

Best for: uptrending stocks consolidating near highs

Stop: just below the breakout level

Target: measured move (height of the previous range projected upward)

9.2Pullback Entry

Wait for a stock in a strong uptrend to pull back to support — often the 20-day or 50-day moving average — then buy the bounce.

Best for: stocks with strong trends and clean MA support

Stop: below the MA

Target: the prior high

9.3Earnings Plays

Earnings announcements are the biggest catalysts in stock trading. Two ways to play them:

• Pre-earnings runup — buy 1–2 weeks before earnings, sell into the report
• Post-earnings drift — wait for the report, then ride the trend that follows

Holding through earnings is the riskiest version — the stock can gap 10–20% in either direction overnight.

9.4Sector Rotation

Capital flows between sectors. When tech leads, energy lags. When energy leads, tech lags. Identify which sector is showing strength and look for the best names inside it.

The Nefarious sector watchlists (Semis, Aero/Defense, Photonics, Cable/Broadband) exist for exactly this.

9.5Catalyst Plays

News-driven trades. FDA approvals, contract wins, IPO-adjacent plays, regulatory shifts. The trade is positioning before a known catalyst hits.

Higher reward, but timing matters. If you're early, theta-like time decay (boredom + opportunity cost). If you're late, the news already moved the price.

9.6Second-Derivative Plays

When a primary stock runs hard, look for the suppliers, partners, or smaller competitors that benefit. They often run later and have more room.

Example: Nvidia rips → look at AI infrastructure plays, optical networking names, semiconductor suppliers like TRT or HLIT.

This is the Nefarious specialty. Most retail chases the primary name. You're looking one layer behind.

9.7Overnight / Premarket Trading

The market is officially open 9:30 AM – 4:00 PM ET. But two extra windows exist:

• Premarket: 4:00 AM – 9:30 AM ET (varies by broker)
• After-Hours: 4:00 PM – 8:00 PM ET

This is where positioning around overnight news happens — earnings, FDA approvals, contract wins, sector shifts in Asia, anything that broke while the US market was closed.

• You can position before the open if news breaks before the bell
• Big gaps move 10-30% in this window — sometimes more on small-caps
• You're trading against fewer participants, so timing matters less

• Low liquidity — way fewer buyers and sellers, hard to get filled
• Wide spreads — bid/ask gap can be 2-5% on small names
• Whipsaws — premarket can rip 5% and then completely reverse at the 9:30 open
• Market orders are dangerous — you can pay way above the recent print

1. Limit orders only. Never market orders. The spread will eat you alive.
2. Size smaller. Premarket fills are bad. Cut your normal size in half.
3. Don't chase. If the stock is already up 15% before the bell, the easy money is gone.
4. Have an exit plan for the open. What you bought at 8 AM might be down 5% by 9:35.

9.8How to Bid (Never Use Whole Numbers)

When you place a limit order, the price you pick matters more than most people realize. There's a rule almost every retail trader violates:

Round numbers ($50, $100, $150) act like magnets. Tons of orders pile up at those exact prices. If you bid $50.00, you're in line behind every other retail trader who also bid $50.00.

When liquidity arrives, the orders get filled in order. Most of those round-number bids never get filled. Yours included.

• Want to bid around $50? Bid $50.03 or $50.05 instead of $50.00.
• Want to sell around $100? Ask $99.97 instead of $100.00.
• You move ahead of the round-number queue and get filled first.

Market makers and algos park orders just inside round numbers to grab liquidity before it hits the wall. Retail bids stack at the round. By bidding $0.03-0.05 ahead, you're trading like the pros do.

• Mid-cap and small-cap stocks — thinner books, fewer fills, every cent counts
• Premarket and after-hours — liquidity is bad, queue position is critical
• Bigger orders — getting 1 share filled at $50.00 is easy, getting 1,000 isn't

On high-volume names (SPY, NVDA, TSLA at peak hours) it matters less. But the habit is free to build. Just always add or subtract a few cents from any round number.

9.9How I Pick the Names I Trade

The strategies above are how I trade. This is how I decide what to trade in the first place. Before a stock earns a spot in my portfolio, it has to clear all five of these — no exceptions.