US Market Tutorials

Welcome to Foxorox’s US Market Tutorials. This series is designed to educate both new and seasoned investors on the mechanics, patterns, and probabilities driving the American capital markets.

1. How the Capital Market Works

The U.S. capital market allows companies to raise funds through the issuance of stocks (equity) and bonds (debt). Investors buy and sell these securities on exchanges like the NYSE and NASDAQ.

2. Candlestick Charts

Candlestick charts display price movements using four data points: Open, High, Low, and Close (OHLC).

• Doji: Suggests market indecision.
• Hammer: Indicates possible bottom reversal.
• Shooting Star: Indicates potential top reversal.

3. Common Chart Patterns

• Head and Shoulders: Trend reversal pattern.
• Double Top / Double Bottom: Signals exhaustion.
• Triangles: Indicates consolidation before breakout.

4. Moving Averages

Moving averages help smooth out price data. Common types:

• SMA – Simple Moving Average
• EMA – Exponential Moving Average

Use them for identifying trends and crossovers (e.g., Golden Cross and Death Cross).

5. Futures and Options

Futures: Contracts obligating the buyer to purchase an asset at a future date and price.

Options: Contracts giving the buyer the right (but not obligation) to buy/sell assets.

Black-Scholes Formula (for European Call Options)

C = S0N(d1) - Xe-rtN(d2)
where:
d1 = [ln(S0/X) + (r + σ²/2)t] / (σ√t)
d2 = d1 - σ√t

6. Portfolio Optimization: Markowitz Model

The Markowitz model seeks the optimal portfolio by balancing expected return and risk:

Objective: Minimize variance (σ²) for a given expected return.

σ2portfolio = w12σ12 + w22σ22 + 2w1w2ρσ1σ2

7. Interpreting Stock Charts

• Use trendlines to spot support and resistance.
• Look for volume confirmation on breakouts.
• Combine RSI, MACD, and Bollinger Bands for momentum signals.

8. Trading Psychology & AI Integration

Understanding crowd psychology (FOMO, panic selling) is key. AI can process these signals at scale, learning from historical data to forecast future behavior through probabilistic models and neural networks.