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| TEACHER & INSTRUCTOR
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| STUDENTS & TRADERS |
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| OTHER INFORMATION |
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Frecuently Asked Questions
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Please click on the links below to skip down to a specific FAQ or just scroll down.
Teachers FAQs
Student Trading FAQs
General Stock Market FAQs
| Q1. If my teams didn't make any trades by a certain date, will they still be eligible to compete? |
| This is answered by reading your rules. There is usually a rule marked competition eligibility. We stress that everyone needs to be aware of these rules. It would not do to post a competition eligibility rule and then not enforce it. No one?s account will be turned off unless they are found cheating or if we are asked to remove it by the Council. If a team does not meet the competition eligibility rules then they will not be able to claim a prize but they will still be allowed to use the SMS.
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| Q2. What are my team numbers and passwords? |
| This information is provided to you upon registration in most cases. However if you do not have your team numbers and passwords, please contact the SMS Help Desk so that you may obtain this information.
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| Q3. How do I register for the SMS? |
| Registering for the SMS is different for each state. Registration can be made from the web page in most states. Team numbers and passwords can be issued directly by the web page or later by direct mail from the council. If the SMS Coordinator is responsible for issuing the team numbers for the teachers based on email registrations then teachers should receive their information via regular mail.
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| Q4. Do I receive an invoice or do I just mail a check to you? |
| This depends on the type of registration. Most states will mail the teacher an invoice for the number of teams they register. If your registration page lets you know that it is okay to send a check to the council then payment may be made in this fashion.
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| Q5. What do I do if I registered too many teams? |
| If a teacher requested too many teams while filling out the registration form then she needs to let the SMS Coordinator in the state know immediately. Extra team numbers are not a problem to deal with and can be easily corrected, but communication between the teacher, the SMS coordinator, and the SMS is imperative. If the SMS coordinator is responsible for issuing the team numbers via web page and an error occurs then a correction may be made by contacting the SMS Help Desk and reporting the error.
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| Q6. What do I do if my team numbers aren't working? |
| The problem with your team numbers if they are not working is probably that they have not been activated. Calling the SMS coordinator will alert her/him to the problem but then they will need to call the SMS help desk to have the team numbers activated. This question should be asked directly to the SMS help desk. Prior to the beginning of the trading period, the team numbers and passwords will not work. Usually the teams will begin working on the web the weekend before trading begins.
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| Q7. How long does it take after I register for my team numbers to become active? |
| Registrations are usually opened and updated on the web page every 24 hours. During the beginning of the simulation, teams are opened and updated to the page several times a day. If you are having trouble with your teams not working, please contact the SMS Help Desk and alert them to the problem. |
| Q8. Does the SMS offer any lesson plans to help coordinate the SMS into my curriculum? |
| Of course! We have many different lesson plans broken down into grade levels on our Lesson Plans page which can be accessed by a link on the left hand navigation bar. The lessons plans given to teachers are provided by the National Council on Economic Education.
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| Q9. Why did my trade go through? |
There could be several reasons why trades will not go through. We have changed the web page to recognize most of these and they will alert the student right away that the trade will not be placed. However, there are still sometimes when a trade will not go through. Before contacting the Help Desk, ask yourself these questions regarding your trade:
- Position Limit: If you have a set position limit and you place a trade that will make your investment exceed that position limit, then your trade will be reduced to fit within the set position limit.
- Buying Power: If you do not have enough buying power to purchase all shares that you requested, then your trade will be reduced to what you can afford.
- Ticker Symbol: In order for the trade to go through, you must trade a valid ticker symbol, otherwise the trade will be rejected. Indices are not allowed to be traded, if you trade an index stock, the trade will be rejected.
- Trade Limit: You are given a certain number of trades to use during the simulation, if you have reached that trade limit, your trades will be rejected.
- Volume Limit: Teams are only allowed to trade the volume of the stock for the day. If you make a trade for 1000 shares and the volume of the stock is only 500, then your trade will be reduced to 500 shares.
- Shorting Against the Box: If you place a short sell for a stock that you currently have an open long position in, then the trade will be rejected. You can't be long and short in the same stock at the same time.
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| Q10. Why did I only get X number of shares when I asked for more? |
If your trade is reduced in the number of shares, there could be 3 different reasons for the reduction. These reasons are:
- Position Limit: If you have a set position limit and you place a trade that will make your investment exceed that position limit, then your trade will be reduced to fit within the set position limit.
- Buying Power: If you do not have enough buying power to purchase all shares that you requested, then your trade will be reduced to what you can afford.
- Volume Limit: Teams are only allowed to trade the volume of the stock for the day. If you make a trade for 1000 shares and the volume of the stock is only 500, then your trade will be reduced to 500 shares.
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| Q11. Why did it take 3 days for my trade to show up in my account? |
| Accounts are updated daily at 7 p.m. but only for trades that are placed before 4 p.m. The only time when it would take 3 days is if the trade was placed on a Friday after 4 p.m. This trade will not be processed and show up in the account detail until 7 p.m. on Monday. Trades placed after the market closes must be placed at the next market day?s open price.
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| Q12. How does the position limit work? |
| Each simulation has a set position limit that teams must remain within throughout the simulation. This means that you can't invest more than the set position limit in any one stock at one time. For example, if you have a position limit of $25,000, this means that you can't invest any more than $25,000 in any one stock at one time. If you purchase $10,000 worth of stock ABC for example, then you can only invest another $15,000 because of your position limit. If you original investment of $10,000 goes up in value to $11,000, then you will only be able to invest another $14,000 in that stock. However, if you invest your full $25,000 in a stock and the value goes up, we will not sell off your shares to keep within the position limit. You originally invested within the position limit and the value went up, which makes it ok but you can't invest any more into that stock.
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| Q13. How do I trade mutual funds? |
| If your web page allows you to trade mutual funds, then you must invest in them in lots of $500. Mutual funds are not traded using shares, they are invested in dollar amounts. To trade a mutual fund all you need to do is go to the Trade Funds tab on the web page and fill in the information. You will need to have the 5 letter ticker symbol which will usually end in X.
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| Q14. When do I see my stock split? |
| If a stock that you are holding in your account splits you will see the increase in shares that evening when your account is updated.
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| Q15. When will I see my dividend payment? |
| Dividends are recorded to your account on the ex-date given when the company decides on the dividend. A list of ex-dates for dividend payments can be found at yahoo.com.
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| Q16. How much interest do I earn? |
| Interest is earned at a rate of 3% annually with daily compounding. Interest is charged to any loan you have at a rate of 8% annually.
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| 17. Should I buy on margin? |
| This is a question of opinion. In the opinion of the SMS, buying on margin is a good thing. We encourage all teams to take advantage of the margin for their account.
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| Q18. Should I short sell? |
| This is also a question of opinion. Short selling is just another type of transaction you can make with your SMS account. Short selling is done when you feel the price of the stock is going to drop. If you are comfortable with this idea then short selling is just as important as buying.
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| Q19. What does shorting against the box mean? |
| Shorting against the box is a term given by the SEC to a trader trying to buy and short the same stock. This is not allowed in the SMS.
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| Q20. Am I allowed to day trade? |
| As of now, no SMS state is allowed to day trade. This is looked on by some as gambling and we feel that it encourages too much speculation and not enough research.
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| Q21. What price did I get on the trade I just placed? |
| If you trade at 15-20 minute delayed prices, then you will receive the price of the stock from 15-20 minutes ago. If you trade at the end-of-day prices then you will always get the price that the stock closes at. You should always print your confirmation sheet when prompted to keep track of prices received and the number of transactions made for the day.
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| Q22. When is my trading period over? |
| This is answered by looking at the start and end date for the trading period which can be found on the SMS Home Page. The trading period will usually start on a Monday and end on a Friday. The trading period end date is also found on each team?s Account Summary page on the web.
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| Q23. How do I find a specific ticker symbol? |
| Ticker symbols can be found for a specific company by going to the SMS Home Page and clicking on Ticker Symbol Lookup. This will prompt you to enter the company name of the ticker symbol needed. If no ticker symbol is found for this company then you should then try to find out if that company has a parent company. The Wall-Street Journal is also another good place to find ticker symbols. You can look those up alphabetically in the paper.
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| Q24. What is my team number and password? |
| If you have lost this information you should see your teacher. If you are participating as and adult and are working alone, then contact the SMS Help Desk to obtain this information. Team Numbers and Passwords will not be given to students unless a teacher calls and verifies this with us.
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| Q25. What are the prizes for winning the simulation? |
| The prizes for winning the SMS are different for each state. Some states give gift certificates, some trophies, some give cash, and others give a plaque. The prizes for your state can usually be found on the web page. If the prizes are not listed on the web page then the SMS coordinator for the state needs to be able to answer this question.
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| Q26. Do I need to sell everything I own at the end of the simulation? |
| No, you do not need to sell off everything you own to win the simulation. In fact selling everything you own will only cause your account to loose $25 for every sell due to the commission. If you feel that the price will drop during the day and you are on the delay pricing system, then selling may lock in your profits. However, if you trade at the end-of-day prices then selling everything will not help you at all.
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| Q27. How I find ticker symbols? |
Once you have selected a stock to trade, you must know the ticker symbol of the company to trade it. The ticker symbol is a one to five digit code for a publicly traded company, which is used by investors to trade the securities of that company. There are a couple of locations where students can find ticker symbols:
- On the SMS Homepage there is a link to a Quick Ticker Symbol lookup in the upper right-hand corner of the screen.
- On the "Quotes" and "Research" pages there are links for symbol lookups
- The Wall-Street Journal is also a good source of ticker symbols. Caution: Local newspapers typically just print company abbreviations and not actual ticker symbols.
Examples of tickers: "KO" for Coca Cola, "IBM" for IBM, "MSFT" for Microsoft
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| Q28. What specific qualities should I look for in a stock? |
Seven common characterisitics of rising stocks are:
- Strong long-term and short-term earnings growth. You should look for annual earnings growth for the last three years of 25% or greater, and quarterly earnings growth of at least 25% in the most recent quarter.
- Impressive sales growth, profit margins and return on equity. The lastest three quarters of sales growth should be a minimum of 25%, return on equit at least 17%, and profit margins should be increasing.
- New products, services or leadership. If a company has a dynamic new product or service, or is capitalizing on new conditions in the economy, this can have a dramatic impact on the price of a stock.
- Leading stock in a leading industry group. Nearly 50% of a stock's price action is a result of its industry group's performance. Focus on the top industry groups, and within those groups select stocks with the best price performance. The stock's Relative Price Strength Rating should be in the 80s or 90s.
- High-rated institutional sponsorship. You want at least a few of the better performing mutual funds owning the stock. They're the ones who will drive the stock up on a sustained basis.
- New Highs. Stocks that make new highs on increased volume tend to move higher. Outstanding stocks usually form a price consolidation pattern, and then go on to make their biggest gains when their price breaks above the apttern on unusually high volume.
- Positive market. You can buy the best stocks out there, but if the general market is weak, most likely your stocks will be weak also.
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Q29. How much time should you spend per week to manage a portfolio?
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How important is your money to you? Spend a bit of time; you'll get a little bit of results. If you spend more time, your results should improve. You should spend a minimum of two or three hours a week.
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| Q30. What do the different components of a quote mean? |
- Ask: The Ask is the lowest price that a prospective seller currently indicates he will sell the security for, ie: the price at which someone has offered their security for sale.
- Bid: The Bid is the highest price that a prospective buyer has offered to pay at that time for a given quantity of the security.
- Change: The Change is how much the security's price has increased or decreased since the previous trading day's closing price. If this field is empty, there is no change.
- Last: The price at which the security most recently traded.
- Symbol: The symbol used to designate a security for trading.
- Today's High: Today's High indicates the highest price for the day in question at which the security traded as of the time the given quote was made.
- Today's Low: Today's Low indicates the lowest price for the day in question that the security traded as of the time the given quote was made.
- Volume: Volume is the sum total of shares (in hundreds) that have traded in the security for which you have requested a quote for either the current or most recent trading day on its primary trading marketplace.
- Please Note: Mutual funds only value their shares once a day after the market closes.
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| Q31. What is short selling? |
You simply borrow stock that you do not own (from your brokerage) and sell it with the obligation to buy it back at some point in time, to cover your short sell. You sell a stock short anticipating that the stock will go down and you will buy it at a lower price than you sold, thus making a profit. When you enter a sell order for stock you do not own, your brokerage will automatically consider it a short sell.
Some traders never short because of the unlimited risk involved. The SMS believes that traders will benefit from learning to use both long and short positions. But with that said, we also urge beginners to become profitable with long positions before going short. If you are on the right side of the market, it makes no difference whether the market goes up or down. Downtrends in the market frequently take place sharper and faster than uptrends. This happens because more traders play the market from the long side than do traders who trade both long and short. Bull markets don't continue forever, so learn to short.
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| Q32. What is buying on margin? |
If you plan to borrow money to buy a stock, you also need to know the terms of the loan your broker gave you. This is called margin. In volatile markets, investors who put up an initial margin payment for a stock may find themselves required to provide additional cash if the price of the stock falls.*
There are a number of risks that all investors need to consider in deciding to trade securities on Margin. One of the biggest risks is the following:
- You can lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities in your account.
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| Q33. What's the most important sell rule that investors should know? |
Rule No. 1 is to always protect your account by selling a stock if the price falls 7 or 8% below your actual purchase price. If you don't cut every loss quickly, sooner or later you'll suffer some very large losses. Cutting losses at 8% will always allow investors to survive to invest another day. It is nothing but an insurance policy. You can be wrong on three out of four stocks and still make a fortune in the market if you cut losses when you're wrong and add to stocks that are working.
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| Q34. What is a companies outstanding shares? |
The number of shares that are currently owned by investors. This includes restricted shares (shares owned by the company's officers and insiders) and shares held by the public. Shares that the company has repurchased are not considered outstanding stock.
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| Q35. What is the range of a stock? |
A stocks low price and high price for a particular trading period. Such as the close of a day's trading, the opening of a day's trading, or a day, month or year.
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| Q36. What is an IPO (Initial Public Offering)? |
The first sale of stock by a private company to the public. IPOs are often smaller, younger companies seeking capital to expand their business. IPO's are usually available to trade on the SMS web page within 48 hours of becoming public.
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| Q37. What is volume and why is it important? |
| The number of shares or contracts traded in a security or an entire market during a given period. Typically a large increase in volume means that some sort of news is coming out. Volume is a very important indicator in technical analysis.
Volume is a key way to measure supply and demand, and is often the primary indicator of a new price trend. When a stock moves up in price on unusually high volume it could indicate the stock is being accumulated by big institutional investors. When a stock moves down in price on unusually heavy volume, major selling could be occurring.
While most investment information services provide a stock's trading volume for the day, Investor's Business Daily gives you the "Volume % Change," which tells you how much a stock traded above or below its average volume over the past 50 days. This alerts you to unusual trading activity in a stock.
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| Q38. What is a dividend and is it important for a stock to pay dividends? |
A cash payment, using profits, announced by a company's board of directors and distributed among stockholders. Dividends may be in the form of cash, stock, or property. All dividends must be declared by the board of directors. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move all that much, but the dividend attempts to make up for this.
It is not important for stocks to pay dividends. Many of the best growth companies do not pay dividends; they reinvest their earnings back into the company. Investor's looking for growth companies should not be concerned with a stock's dividends because the greatest gains will come from price appreciation rather than dividend payouts. A stock down 30% that delivers a 4% dividend still represents a 26% loss overall.
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| Q39. What is a stock split? |
The division of a company's existing stock into more shares. In a 2-for-1 split, each stockholder would receive an additional share for each share formerly held.
This is usually a good indicator that a company's share price is doing well. But you don't get any more value, just twice as many shares.
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| Q40. What is a reverse split? |
A reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same.
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| Q41. What is the ex date? |
The first date on which a security is traded without entitling the buyer to receive dividend distributions previously declared. Sometimes referred to as the ex-dividend date.
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| Q42. What is a price-earnings (P/E) ratio and is it important? |
| A price-earnings (P/E) ratio measures the value of a stock by dividing the current price by its earnings per share over the last 12 months. When a stock's P-E ratio is high, the majority of investors consider it as pricey or overvalued. Stocks with low P-E's are typically considered a good value.
However, through Investor's Business Daily's ongoing study of the biggest stock market winners, the opposite was found to be true. The average P/E of the best winners over the last 15 years at the initial buy point prior to their huge price increases was 31 times earnings. These P/E's went on to expand more than 100% to over 70 times earnings as the stocks significantly increased in price.
If you picked stocks based solely on low P/E's, you would have missed purchasing America Online and Cisco Systems during the period of their greatest market performance.
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| Q43. What is a bear market? |
A market in which prices of a certain group of securities are falling or are expected to fall. Although figures can vary, a downturn of 15%-20% or more in multiple indexes (Dow or S&P 500) is considered a bear market.
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| Q44. What is a bull market? |
A market in which prices of a certain group of securities are rising or are expected to rise.
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| Q45. Do mutual funds influence stock market prices? |
There is no established correlation between mutual fund cash flows and stock market activity. In fact, Federal Reserve researchers have found no evidence that equity fund flows cause stock market prices to change. Funds account for only a minority of U.S. corporate stock. Households, pension funds and insurance companies hold about 80 percent of equities in the domestic stock market, while mutual funds hold about 20 percent.
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| Please contact the SMS Help Desk at 1.866.SMS.DESK for any further questions. |
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