By Peter Grofik
In business news we often hear about stock market going up or down. But what causes this action and how truly does the stock market work?
For accurate answering the question how does the stock market work, it's important to explain what is the stock market. When people hear words like stock market or stock trading, most of them imagine wall street or people on the trading floor yelling at each other. And all these things are part of the stock market. Simpy said, the stock market is a place where stocks are traded. And as for every market, there must be buyers and sellers. Buyers represent demand and sellers stand for supply.
The price of any stock is determined by relationship between supply and demand, by market participants willing to buy or sell at a certain price. If demand surpasses supply, price should go up. If supply surpasses demand, typically price goes down. This is famous principle from economy and it works in almost all markets.
From this results that for a deeper understanding of what makes the price of a stock change, it is important to know what affects supply and demand. There is a lot of aspects that influence price movement and their weight is relative because only buyers and sellers know why they bought or sold any given stock. Between these factors belongs news about company, industry or the whole economy. If good news comes out on a company, the price and demand for the stock mostly go up. When bad news appears, the price and demand mostly drop. Next factor is information about company's performance like sales growth, earnings, production and so on, next element is the market psychology, what is topic itself, and generally there is countless amount of other factors that influence actions of market participants.
And why companies offer their shares to the public? There is one main simple reason and that's money. When company offers their shares through the stock exchange via IPO, what stands for Initial Public Offering, company can obtain more capital by selling its shares.
At the present time the stock market is very organised and coordinated by computers in stock exchanges. Barriers for entry into the stock market for common people are relatively low and stock trading is becoming still more popular.
Peter Grofik is trader who is willing to share his knowledge and experiences at his blog Stock and Option Trading Strategies.
Article Source: http://EzineArticles.com/?expert=Peter_Grofik
Tuesday, September 30, 2008
Monday, September 29, 2008
Dealing With Stock Price Drop After Purchase
By Ye Cheng Yuan
Buy low, sell high. It's obviously good advice. In practice, it's not as easy as it sounds. How do you know tomorrow the price will not drop another 10% or 30% for that matter? If you bought today with all the cash at hand and it drops another 50% tomorrow, no amount of self-kicking would relief the pain inflicted.
Take Leucadia for example. It first revealed its stake in AmeriCredit (NYSE: ACF) early in January 2008. By May, it has acquired approximately 26% of outstanding shares at an average price of $13/share. When Fitch affirmed AmeriCredit's negative outlook, its shares promptly went into a free fall and didn't stop until it lost about 37% of its market cap. All the while, Leucadia stayed on the sidelines. Recently, Leucadia finally bought the last 4% of the outstanding shares (at an average of $7.63/share), hitting the maximum of outstanding shares it can own based on its agreement with AmeriCredit.
No one could have anticipated that significant a drop. So that begs the question, "How do you know if you are buying at the bottom?"
The truth is nobody knows. To quote the Fidelity Magellan Fund phenom, Peter Lynch, "When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom."
The best defense against such devastating drops is to ensure you have a big margin of safety. Sure, even with a big margin of safety you might still face a huge drop after the purchase. However, if you are confident about your analysis, you can take comfort in the fact that the drop is nothing but a temporary paper loss.
Given that we don't know the bottom, how much should we invest when we have sufficient margin of safety? Should we go all out? Should we hold back some just in case it drops further? Looking at Leucadia's transactions, it doesn't seem like there's a formula to determine how much to invest when you hit a certain price point. I'm sure Ian Cumming wished he could have bought all the shares at a 37% discount. Clearly, he didn't expect the price to drop that much. Had he known, he would have waited.
Institutional investors like Leucadia and Berkshire usually buy shares in chunks instead of all at once. The sheer volume of shares being bought would cause the price to jump. When you are buying a $50 million stake, an increase of 1% in price will cost you an extra $500k. Not exactly chump change.
For us individual investors, the lack of such buying power is in fact a blessing in disguise. The volume we deal with is so small it barely affects the price. So, we don't have to buy in chunks. But, could buying in chunks help reduce the average cost?
Buying in chunks is a double-edged sword. It can only reduce the average cost if the price is falling. If the price moves in the other direction, it ends up increasing the average cost. Also, don't forget the frictional cost of commissions. The greatest risk of buying in chunk is you may not realize the price is already at its bottom. When the tide rises, it may continue to rise and never return to that lowest price point. And 25 years from now, you would spend the rest of your life lamenting to your friend how you could have been a billionaire had you bought that stock with all $10,000 you had.
Buying stocks is really a tough decision. Spend all your cash and you risk not having cash to spend if the price drops further. Spend too little and you risk missing the chance to dethrone Warren Buffett on the Forbes 400 Richest.
Looking at both sides of the coin, the risks may seem well balanced. The truth is the former is less painful should it materialize. In fact, Buffett has made the mistake of the latter and considers it one of his biggest mistakes in his investment career. He admitted sucking on his thumb when Wal-Mart was selling on a discount back in 1999. He estimated the error cost him $8 billion. If you miss the ride, the inflicted pain could get worse as the price rises. On the other hand, if you bought as much as you could, there is a floor for how much the price could fall.
So, to avoid future heartaches, I would rather buy with all the cash at hand when the opportunity presents itself. When the price falls further (Yes, this has happened to me numerous times.), I usually find that I have some cash at hand because like everyone else, my income produces some incoming cash flow. So I buy more.
Am I completely off base here? What is your strategy in buying stocks?
I'm Ye, a Principal of Qovax. Qovax is a small web development company that builds beautiful websites and thoughtful applications from sunny California. Read more articles like this on my blog.
Article Source: http://EzineArticles.com/?expert=Ye_Cheng_Yuan
Buy low, sell high. It's obviously good advice. In practice, it's not as easy as it sounds. How do you know tomorrow the price will not drop another 10% or 30% for that matter? If you bought today with all the cash at hand and it drops another 50% tomorrow, no amount of self-kicking would relief the pain inflicted.
Take Leucadia for example. It first revealed its stake in AmeriCredit (NYSE: ACF) early in January 2008. By May, it has acquired approximately 26% of outstanding shares at an average price of $13/share. When Fitch affirmed AmeriCredit's negative outlook, its shares promptly went into a free fall and didn't stop until it lost about 37% of its market cap. All the while, Leucadia stayed on the sidelines. Recently, Leucadia finally bought the last 4% of the outstanding shares (at an average of $7.63/share), hitting the maximum of outstanding shares it can own based on its agreement with AmeriCredit.
No one could have anticipated that significant a drop. So that begs the question, "How do you know if you are buying at the bottom?"
The truth is nobody knows. To quote the Fidelity Magellan Fund phenom, Peter Lynch, "When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom."
The best defense against such devastating drops is to ensure you have a big margin of safety. Sure, even with a big margin of safety you might still face a huge drop after the purchase. However, if you are confident about your analysis, you can take comfort in the fact that the drop is nothing but a temporary paper loss.
Given that we don't know the bottom, how much should we invest when we have sufficient margin of safety? Should we go all out? Should we hold back some just in case it drops further? Looking at Leucadia's transactions, it doesn't seem like there's a formula to determine how much to invest when you hit a certain price point. I'm sure Ian Cumming wished he could have bought all the shares at a 37% discount. Clearly, he didn't expect the price to drop that much. Had he known, he would have waited.
Institutional investors like Leucadia and Berkshire usually buy shares in chunks instead of all at once. The sheer volume of shares being bought would cause the price to jump. When you are buying a $50 million stake, an increase of 1% in price will cost you an extra $500k. Not exactly chump change.
For us individual investors, the lack of such buying power is in fact a blessing in disguise. The volume we deal with is so small it barely affects the price. So, we don't have to buy in chunks. But, could buying in chunks help reduce the average cost?
Buying in chunks is a double-edged sword. It can only reduce the average cost if the price is falling. If the price moves in the other direction, it ends up increasing the average cost. Also, don't forget the frictional cost of commissions. The greatest risk of buying in chunk is you may not realize the price is already at its bottom. When the tide rises, it may continue to rise and never return to that lowest price point. And 25 years from now, you would spend the rest of your life lamenting to your friend how you could have been a billionaire had you bought that stock with all $10,000 you had.
Buying stocks is really a tough decision. Spend all your cash and you risk not having cash to spend if the price drops further. Spend too little and you risk missing the chance to dethrone Warren Buffett on the Forbes 400 Richest.
Looking at both sides of the coin, the risks may seem well balanced. The truth is the former is less painful should it materialize. In fact, Buffett has made the mistake of the latter and considers it one of his biggest mistakes in his investment career. He admitted sucking on his thumb when Wal-Mart was selling on a discount back in 1999. He estimated the error cost him $8 billion. If you miss the ride, the inflicted pain could get worse as the price rises. On the other hand, if you bought as much as you could, there is a floor for how much the price could fall.
So, to avoid future heartaches, I would rather buy with all the cash at hand when the opportunity presents itself. When the price falls further (Yes, this has happened to me numerous times.), I usually find that I have some cash at hand because like everyone else, my income produces some incoming cash flow. So I buy more.
Am I completely off base here? What is your strategy in buying stocks?
I'm Ye, a Principal of Qovax. Qovax is a small web development company that builds beautiful websites and thoughtful applications from sunny California. Read more articles like this on my blog.
Article Source: http://EzineArticles.com/?expert=Ye_Cheng_Yuan
Friday, September 26, 2008
How to Get Rich on the Stock Market!
By Mike Meyers
Want to make money on the stock market? In that case you must plan wisely and execute the plan carefully. No doubt about it - stock trading is an option for the wise investor to make fast money. Financial institutions use stock trading to maximize profits, but as an individual you really need to take care. The stock market and the stock trading system is made for large financial players, but with constant care you too can make money on the stock market.The following advice will help you to make a profit while not being too risky. Obviously you could contact an investment firm, who can help you analysing stock, but the following advice will set you off to a good start.
-Analyze one stock at the time thoroughly. In what industry does the company belong? Is this industry in growth or in crisis as a general? How does the company make its money? Require and read the company's press releases, financial news and reports. Check the competitors in the market and the general trend in the industry.
-Keep a journal. Whether you decide to sell, buy or hold a particular stock make a note about the reasons for doing so. Analyze your notes and learn from them. Which decisions were good, which were bad and which were absolutely brilliant?
-Analyze and analyze again the stocks you have chosen the same way. Compare and contrast the stocks and you will gain important and valuable knowledge about the stock market.
-Build and use a brain trust. A group a like-minded friends with whom you can share ideas and thoughts. Explain why you reached certain conclusions and how you expect the stock to perform. Very often the brain trust will keep its rationale when you are not.
-Forget about emotions and loyalty (when it comes to trading). You need to be platonic and rational in your decisions, while the stocks are volatile. Review your buy, sell, hold decisions whenever new information hits the market. Are your reasons still valid?
-Reevaluate you portfolio on a weekly basis. Are you exposed to the risk you have decided to accept? Observe market trends - how do they correspond with your portfolio?
-Do not rely on media quoted rates - do not expect to be able to buy or sell at the same price.
-Remember that high valuations entail high risks.
Tools that will help you in the stock market
Information is the most valuable asset when trading stocks and for that the desktop stock ticker is excellent. The desktop stock ticker will provide you with the latest trading prices and in many cases also the latest data on the company. For real time stock quotes you need to have a paid subscription to a broker, the free desktop stock ticker does not have real time quotes, only near real time quotes, which mean a delay of 15 to 20 minutes.
The desktop stock ticker is available for both Windows XP and Windows Vista.
The Free Desktop Stock Ticker Online will give you lots of advice when explore the world of trading stocks. Whether you are a beginner or an experience stock trader you will find lots on information on tools for online stock trading
Article Source: http://EzineArticles.com/?expert=Mike_Meyers
Want to make money on the stock market? In that case you must plan wisely and execute the plan carefully. No doubt about it - stock trading is an option for the wise investor to make fast money. Financial institutions use stock trading to maximize profits, but as an individual you really need to take care. The stock market and the stock trading system is made for large financial players, but with constant care you too can make money on the stock market.The following advice will help you to make a profit while not being too risky. Obviously you could contact an investment firm, who can help you analysing stock, but the following advice will set you off to a good start.
-Analyze one stock at the time thoroughly. In what industry does the company belong? Is this industry in growth or in crisis as a general? How does the company make its money? Require and read the company's press releases, financial news and reports. Check the competitors in the market and the general trend in the industry.
-Keep a journal. Whether you decide to sell, buy or hold a particular stock make a note about the reasons for doing so. Analyze your notes and learn from them. Which decisions were good, which were bad and which were absolutely brilliant?
-Analyze and analyze again the stocks you have chosen the same way. Compare and contrast the stocks and you will gain important and valuable knowledge about the stock market.
-Build and use a brain trust. A group a like-minded friends with whom you can share ideas and thoughts. Explain why you reached certain conclusions and how you expect the stock to perform. Very often the brain trust will keep its rationale when you are not.
-Forget about emotions and loyalty (when it comes to trading). You need to be platonic and rational in your decisions, while the stocks are volatile. Review your buy, sell, hold decisions whenever new information hits the market. Are your reasons still valid?
-Reevaluate you portfolio on a weekly basis. Are you exposed to the risk you have decided to accept? Observe market trends - how do they correspond with your portfolio?
-Do not rely on media quoted rates - do not expect to be able to buy or sell at the same price.
-Remember that high valuations entail high risks.
Tools that will help you in the stock market
Information is the most valuable asset when trading stocks and for that the desktop stock ticker is excellent. The desktop stock ticker will provide you with the latest trading prices and in many cases also the latest data on the company. For real time stock quotes you need to have a paid subscription to a broker, the free desktop stock ticker does not have real time quotes, only near real time quotes, which mean a delay of 15 to 20 minutes.
The desktop stock ticker is available for both Windows XP and Windows Vista.
The Free Desktop Stock Ticker Online will give you lots of advice when explore the world of trading stocks. Whether you are a beginner or an experience stock trader you will find lots on information on tools for online stock trading
Article Source: http://EzineArticles.com/?expert=Mike_Meyers
Thursday, September 25, 2008
A Brief Intro To 5 Important Candlestick Formations That Will Help With Your Stocks Trading
By Ian C Jackson
Bar charts are usually the first tool traders use to represent price movement for their chart analysis, and stand for a single time frame period. Japanese candlesticks are one of the biggest storytellers of all the price bar configurations. At first glance they can seem no more interesting than looking at stick people with two dimensional bodies, but when you start to investigate their characters, there's so much information they hold within their simple forms.
In the first instance, you have a hollow or solid body. The hollow body represents a price fall during a time frame and a solid body, a price ride. That is the usual convention anyway. If there are top and or bottom wicks, they demonstrate the extent of price fluctuation during the time frame.
Here are the meanings of 5 Japanese Candlestick forms:
1. A candlestick that appears just like a new candle, without any upper or lower wick to be seen is a sign of a strong bull market - if it is of solid appearance. One with a hollow or empty appearance is a strong sign of a bear market. A continuing trend in other words.
2. Sometimes you will see a flat horizontal line with no candlestick body at all. I thought it was an error in my software the first time I saw it, but it shows nothing more complicated than a day when there has been no price movement at all.
3. Dragonfly dojis have no body, but just a long wick hanging down from a horizontal line, rather like a long, narrow letter T. In trending markets they are a strong signal for a reversal of trend.
4. Gravestone dojis are the opposite way round from their dragonfly counterparts, also a signal for a trend reversal, but in the other direction.
5. All of the above have a significantly more profound meaning when viewed and used with adjacent candlesticks. One on its own tells a story, but several in a line, over a few days tell the story - with pictures too.
How would you like to discover more about the techniques successful traders use to make profitable trades?
Download them free here: Day Trading Course
Ian Jackson is an authority on Day Trading information, learning the hard way - and now he reveals how you can learn the business too, without all the growing pains.
Article Source: http://EzineArticles.com/?expert=Ian_C_Jackson
Bar charts are usually the first tool traders use to represent price movement for their chart analysis, and stand for a single time frame period. Japanese candlesticks are one of the biggest storytellers of all the price bar configurations. At first glance they can seem no more interesting than looking at stick people with two dimensional bodies, but when you start to investigate their characters, there's so much information they hold within their simple forms.
In the first instance, you have a hollow or solid body. The hollow body represents a price fall during a time frame and a solid body, a price ride. That is the usual convention anyway. If there are top and or bottom wicks, they demonstrate the extent of price fluctuation during the time frame.
Here are the meanings of 5 Japanese Candlestick forms:
1. A candlestick that appears just like a new candle, without any upper or lower wick to be seen is a sign of a strong bull market - if it is of solid appearance. One with a hollow or empty appearance is a strong sign of a bear market. A continuing trend in other words.
2. Sometimes you will see a flat horizontal line with no candlestick body at all. I thought it was an error in my software the first time I saw it, but it shows nothing more complicated than a day when there has been no price movement at all.
3. Dragonfly dojis have no body, but just a long wick hanging down from a horizontal line, rather like a long, narrow letter T. In trending markets they are a strong signal for a reversal of trend.
4. Gravestone dojis are the opposite way round from their dragonfly counterparts, also a signal for a trend reversal, but in the other direction.
5. All of the above have a significantly more profound meaning when viewed and used with adjacent candlesticks. One on its own tells a story, but several in a line, over a few days tell the story - with pictures too.
How would you like to discover more about the techniques successful traders use to make profitable trades?
Download them free here: Day Trading Course
Ian Jackson is an authority on Day Trading information, learning the hard way - and now he reveals how you can learn the business too, without all the growing pains.
Article Source: http://EzineArticles.com/?expert=Ian_C_Jackson
Wednesday, September 24, 2008
How To Determine The Value Of A Stock
By Tim M C
Stock prices are driven by a company's earnings and the information impacting the prospects of a company's future earnings. It is the single most important factor when valuing a stock. I cannot stress this enough; determining what a stock should be trading at is completely dependent on a company's earnings and its ability to sustain or increase its earnings in the future.
Background
Companies release earnings reports on a quarterly basis typically in January, April, July, and October. These reports provide essential information for valuing the price of a stock, and it is common to see major movements in a stock's price immediately following an earnings release. Also at this time most companies will provide forward guidance indicating what the company expects to earn during the next quarter.
Several key statistics can be easily derived from a company's earnings report, including a company's net income and a company's earnings per share.
Definitions
A company's earnings per share is equal to the company's net income over the total number of shares outstanding.
Earnings Per Share = (Net Income - Dividends on Preferred Stock) / (Average Outstanding Shares)
The P/E ratio (price-to-earnings ratio) commonly referred to as the multiple and is equal to the stock price over the company's annual earnings per share.
P/E Ratio = Current Stock Price / Annual Earnings Per Share
Conversely, the F P/E ratio (forward price-to-earnings ratio) refers to the current stock price over a company's forecasted next years annual earnings per share
F P/E Ratio = Current Stock Price / Forecasted Annual Earnings Per Share
Valuation
The PE ratio is a key metric, which indicates how much investors are willing to pay for a company's current earnings. At a basic level the higher the PE ratio is the more expensive the stock is. However, stocks are not traded based on their current earnings, but based on their forecasted future earnings. In other words, a company's worth is not equal to what it is making today, but what it is making tomorrow.
Value Stocks
Value stocks are simply stocks traded at low PE ratios. These stocks typically have much lower growth rates meaning that their earnings are expected to increase at a much slower rate, typically less then ten percent annually. It is important to note that value stocks have outperformed growth stocks over the last ten years. One example of a value stock is Exxon Mobil Corp, which currently trades at 12.3 times earnings.
Growth Stocks
Growth stocks trade at high PE ratios because they are trading entirely on future earnings and not on current earnings. These are companies whose earnings are expected to grow substantially in the future. Investors are willing to pay more for companies who can generate higher returns in the future. As growth stocks are very much driven towards future earnings, a growth company who reports lower then expected earnings may drop substantially on the news. One of Jim Cramer's rules is to never buy a stock which trades above twice its growth rate. This means that if a company is only expected to grow at 10 percent and is trading at a multiple of 20 then he considers the stock expensive. One example of a growth stock is Transoceans who currently has a 205 percent growth rate; however, Transoceans may also be considered a value stock as it only trades at 10.8 times current earnings.
Stocks with Accelerated Revenue Growth
Stocks whose future earnings are increasing, meaning the company's earnings are expected to not only grow but to continually grow faster, deserve a very high PE ratio. These are very risky stocks, but can provide huge returns if their growth rate continues to increase.
Conclusion
When valuing stocks it is important to remember not only current earnings but future forecasted earnings. We want to acquire stocks that have low multiples compared to their future projected earnings. This means we want to always be on the look out for stocks, which have forward growth rates above their current multiples. Also it is important to keep up with the news, looking for things that may impact a company's current or future earnings.
Disclaimer
It is not enough to acquire a stock in a company based solely on earnings. There are many factors that may impact a company's performance. This is just one of the many key metrics I use to value a company's current stock price.
Source
http://strumors.com - Strumors is a community driven web site with a focus on market data and its effect on equities, ETFs, and mutual funds. Strumors is designed to promote the most critical information as decided upon by our community. Every news article is submitted by users, promoted by users, and actively commented by its users.
Article Source: http://EzineArticles.com/?expert=Tim_M_C
Stock prices are driven by a company's earnings and the information impacting the prospects of a company's future earnings. It is the single most important factor when valuing a stock. I cannot stress this enough; determining what a stock should be trading at is completely dependent on a company's earnings and its ability to sustain or increase its earnings in the future.
Background
Companies release earnings reports on a quarterly basis typically in January, April, July, and October. These reports provide essential information for valuing the price of a stock, and it is common to see major movements in a stock's price immediately following an earnings release. Also at this time most companies will provide forward guidance indicating what the company expects to earn during the next quarter.
Several key statistics can be easily derived from a company's earnings report, including a company's net income and a company's earnings per share.
Definitions
A company's earnings per share is equal to the company's net income over the total number of shares outstanding.
Earnings Per Share = (Net Income - Dividends on Preferred Stock) / (Average Outstanding Shares)
The P/E ratio (price-to-earnings ratio) commonly referred to as the multiple and is equal to the stock price over the company's annual earnings per share.
P/E Ratio = Current Stock Price / Annual Earnings Per Share
Conversely, the F P/E ratio (forward price-to-earnings ratio) refers to the current stock price over a company's forecasted next years annual earnings per share
F P/E Ratio = Current Stock Price / Forecasted Annual Earnings Per Share
Valuation
The PE ratio is a key metric, which indicates how much investors are willing to pay for a company's current earnings. At a basic level the higher the PE ratio is the more expensive the stock is. However, stocks are not traded based on their current earnings, but based on their forecasted future earnings. In other words, a company's worth is not equal to what it is making today, but what it is making tomorrow.
Value Stocks
Value stocks are simply stocks traded at low PE ratios. These stocks typically have much lower growth rates meaning that their earnings are expected to increase at a much slower rate, typically less then ten percent annually. It is important to note that value stocks have outperformed growth stocks over the last ten years. One example of a value stock is Exxon Mobil Corp, which currently trades at 12.3 times earnings.
Growth Stocks
Growth stocks trade at high PE ratios because they are trading entirely on future earnings and not on current earnings. These are companies whose earnings are expected to grow substantially in the future. Investors are willing to pay more for companies who can generate higher returns in the future. As growth stocks are very much driven towards future earnings, a growth company who reports lower then expected earnings may drop substantially on the news. One of Jim Cramer's rules is to never buy a stock which trades above twice its growth rate. This means that if a company is only expected to grow at 10 percent and is trading at a multiple of 20 then he considers the stock expensive. One example of a growth stock is Transoceans who currently has a 205 percent growth rate; however, Transoceans may also be considered a value stock as it only trades at 10.8 times current earnings.
Stocks with Accelerated Revenue Growth
Stocks whose future earnings are increasing, meaning the company's earnings are expected to not only grow but to continually grow faster, deserve a very high PE ratio. These are very risky stocks, but can provide huge returns if their growth rate continues to increase.
Conclusion
When valuing stocks it is important to remember not only current earnings but future forecasted earnings. We want to acquire stocks that have low multiples compared to their future projected earnings. This means we want to always be on the look out for stocks, which have forward growth rates above their current multiples. Also it is important to keep up with the news, looking for things that may impact a company's current or future earnings.
Disclaimer
It is not enough to acquire a stock in a company based solely on earnings. There are many factors that may impact a company's performance. This is just one of the many key metrics I use to value a company's current stock price.
Source
http://strumors.com - Strumors is a community driven web site with a focus on market data and its effect on equities, ETFs, and mutual funds. Strumors is designed to promote the most critical information as decided upon by our community. Every news article is submitted by users, promoted by users, and actively commented by its users.
Article Source: http://EzineArticles.com/?expert=Tim_M_C
Tuesday, September 23, 2008
How to Trade Stocks a Beginners Guide
By Mark Crisp
This kind of trading is traditional and no longer practical especially that large volume of transactions happens almost every second from across the country and throughout the world.
Stock markets or exchanges facilitate the trade or exchanges of securities, including stock. There are two kinds of stock market, the primary and secondary. Primary market is where an initial public offering of stock is made. During an IPO, the company with which the stock is named is involved in the trading. Secondary market is where the issued or sold stock is re-sold, bought and sold again.
Stock trading involves large amounts of money and risks. It is important therefore that buyers and sellers of stock are well-informed about the standing of the stock before they make a transaction. They also have to investigate the reliability of the broker firm and other participants of the trading to ensure that the transaction is valid and offers the optimum result for the parties.
Because of the Internet and computers, informed decision-making regarding stock trading is possible. Online resources about stock movement and other essential factors influencing the stock are readily accessible and available.
Publicly traded companies trade their stock at different exchanges. These exchanges compete with one another in order to attract more stock enlistment. Their revenue comes from stock enlistment.
Company stocks are assigned ticker or trading symbol, usually three or four letters to distinguish them from other traded stock.
The different stock exchanges are good sources of information regarding the different publicly traded stocks. The exchanges in the U.S. are The American Stock Exchange; The Nasdaq Stock Market; The New York Stock Exchange; The Pacific Exchange; and The Philadelphia Exchange. These sites also give tips and guides about stock trading. To protect traders and investors, the U.S. Securities and Exchange Commission was established to oversee and regulate the trading of securities. Other stock exchanges in different countries are also set up where stocks of foreign companies and multi-national companies can be traded. Each country also has their own regulatory agency that oversees stock trading.
In the United States, the SEC is currently partnering with other government agencies like the Federal Bureau of Investigation, Federal Reserve, and the General Attorney Offices in different states to investigate and sanction fraud and company theft. Corporate fraud and theft has become rampant and currently, more than several company executives and officials have been charged and sentenced.
The famous Bear Stearns Companies, for example, experienced financial crisis due to unprecedented downturn in the mortgage, housing, and financial markets. Two of Bear Stearns former executives were already found guilty of fraud and charged with several years of imprisonment. They were found defrauding clients and giving misleading information to investors.
Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com.
Article Source: http://EzineArticles.com/?expert=Mark_Crisp
This kind of trading is traditional and no longer practical especially that large volume of transactions happens almost every second from across the country and throughout the world.
Stock markets or exchanges facilitate the trade or exchanges of securities, including stock. There are two kinds of stock market, the primary and secondary. Primary market is where an initial public offering of stock is made. During an IPO, the company with which the stock is named is involved in the trading. Secondary market is where the issued or sold stock is re-sold, bought and sold again.
Stock trading involves large amounts of money and risks. It is important therefore that buyers and sellers of stock are well-informed about the standing of the stock before they make a transaction. They also have to investigate the reliability of the broker firm and other participants of the trading to ensure that the transaction is valid and offers the optimum result for the parties.
Because of the Internet and computers, informed decision-making regarding stock trading is possible. Online resources about stock movement and other essential factors influencing the stock are readily accessible and available.
Publicly traded companies trade their stock at different exchanges. These exchanges compete with one another in order to attract more stock enlistment. Their revenue comes from stock enlistment.
Company stocks are assigned ticker or trading symbol, usually three or four letters to distinguish them from other traded stock.
The different stock exchanges are good sources of information regarding the different publicly traded stocks. The exchanges in the U.S. are The American Stock Exchange; The Nasdaq Stock Market; The New York Stock Exchange; The Pacific Exchange; and The Philadelphia Exchange. These sites also give tips and guides about stock trading. To protect traders and investors, the U.S. Securities and Exchange Commission was established to oversee and regulate the trading of securities. Other stock exchanges in different countries are also set up where stocks of foreign companies and multi-national companies can be traded. Each country also has their own regulatory agency that oversees stock trading.
In the United States, the SEC is currently partnering with other government agencies like the Federal Bureau of Investigation, Federal Reserve, and the General Attorney Offices in different states to investigate and sanction fraud and company theft. Corporate fraud and theft has become rampant and currently, more than several company executives and officials have been charged and sentenced.
The famous Bear Stearns Companies, for example, experienced financial crisis due to unprecedented downturn in the mortgage, housing, and financial markets. Two of Bear Stearns former executives were already found guilty of fraud and charged with several years of imprisonment. They were found defrauding clients and giving misleading information to investors.
Get your Momentum Stock Trading System and sign up for my free weekly online trading system newsletter here at: http://www.stressfreetrading.com.
Article Source: http://EzineArticles.com/?expert=Mark_Crisp
Monday, September 22, 2008
Marl the Stock Robot is My New Best Friend
By Georgia Hess
I love hanging out with my friends, we have lots of fun and do things together that we all enjoy. But how often does your friend make you money time and time again? I'd like to introduce you to my friend, Marl the Stock Robot.
Okay, I am being a bit silly here, Marl really doesn't hang out with us. Marl is the name of DoublingStock's robot that analyzes stocks and picks profitable investments. The reason I was being silly was because I can't help myself. Things have been going well financially and that gets me in a joking mood.
I have always wanted to try the stock market, but was always afraid. I didn't have the time to study stocks all day long. When I first heard about Marl of course I was skeptical, but the more I learned about it, the more it made sense.
Marl was created by two important people coming together, a stock analysis expert, and a computer programming expert. The two of them worked together to create a "robot" that could crunch incredible amounts of stock data, to make the most financially sound decisions possible.
Who wouldn't want that robot in their corner? I like how Marl doesn't allow human emotion to enter the picture. It just looks at the data, does some number crunching, and spits out the best stocks.
So does it work? Absolutely. I have been quite successful with it. Of course not every pick is a winner, but I'd say that 4 out of 5 are. Those are very good results people!
The Doubling Stock Robot is said to be the most sophisticated stock analyzing computer in existence, and has made it's members a literal fortune. Is the Doubling Stock Robot for real or a scam? Learn more here.
Article Source: http://EzineArticles.com/?expert=Georgia_Hess
I love hanging out with my friends, we have lots of fun and do things together that we all enjoy. But how often does your friend make you money time and time again? I'd like to introduce you to my friend, Marl the Stock Robot.
Okay, I am being a bit silly here, Marl really doesn't hang out with us. Marl is the name of DoublingStock's robot that analyzes stocks and picks profitable investments. The reason I was being silly was because I can't help myself. Things have been going well financially and that gets me in a joking mood.
I have always wanted to try the stock market, but was always afraid. I didn't have the time to study stocks all day long. When I first heard about Marl of course I was skeptical, but the more I learned about it, the more it made sense.
Marl was created by two important people coming together, a stock analysis expert, and a computer programming expert. The two of them worked together to create a "robot" that could crunch incredible amounts of stock data, to make the most financially sound decisions possible.
Who wouldn't want that robot in their corner? I like how Marl doesn't allow human emotion to enter the picture. It just looks at the data, does some number crunching, and spits out the best stocks.
So does it work? Absolutely. I have been quite successful with it. Of course not every pick is a winner, but I'd say that 4 out of 5 are. Those are very good results people!
The Doubling Stock Robot is said to be the most sophisticated stock analyzing computer in existence, and has made it's members a literal fortune. Is the Doubling Stock Robot for real or a scam? Learn more here.
Article Source: http://EzineArticles.com/?expert=Georgia_Hess
Friday, September 19, 2008
So You Want to Learn About the Stock Market
By Jimmie Newell
Not so long ago, almost the only way the individual investor could trade in the stock market was by employing a stock broker to place trades for you.
With the advent of the Internet, and online stock market brokerage services this has changed. For the investor who is willing to learn how the stock market works, learn to manage stock market risk, learn stock market terminology and make good timely decisions trading stocks without the help of a broker is a good way to make a profit.
Because you are choosing and analyzing your own investments and not depending on a broker to help you, the costs or commissions are much lower. Of course when you eliminate the broker the services they used to perform are not available either, however most of the online brokers do provide a vast array of basic services.
All of them have links to quotes data bases and stock market listings, some may be delayed a few minutes and some may be live. Most have charts of the individual stocks available; some have stock market tutorials built into their sites. Most will maintain portfolios and watch lists for you; they will of course provide a method of placing orders and selling. Some will provide stock market analyst reports sector reports, earning estimates, and many other historical and technical analysis tools.
If your chosen online broker does not supply everything you need, there are a wide variety of free services available on the Internet. Most of the major portals (MSN, Yahoo, etc) have a Money or Investing section where you can obtain all of the information you are likely to need.
If you are diligent in learning how to read the stock market how to analyze a stock, how to set entry and exit rules, and follow them, playing the stock market can be a profitable replacement for a part time job.
The importance of learning to ignore the "noise" cannot be over stated. Television, print and Internet ads will bombard you with information on trading tips, and trading systems, all professing to be the "holy grail" for making a fortune. You need to learn to filter all of this information and focus on the basics of trading stocks.
There are many types of trades available, including stocks, bonds, mutual funds, options, futures, commodities, penny stocks, etc. There are also different markets to trade in, such as Forex for trading currencies, commodities markets for such things as food and crop products, gold oil and so forth. All of these trades and markets offer different levels of risk, you need to be sure that you understand the risks and rewards of whatever trades or markets you decide to focus on.
Start with learning how to trade stocks, once you are making consistent profits, explore something else. Get good information, study things like The Wall Street Journal, Investors Business Daily, The Financial Times, check the financial offering on television, and study books on investing.
And most importantly enjoy the trip, and spend your profits wisely.
Jim Newell is a writer and Internet publisher for a variety of websites, newsletters and publications. For more information on Stock Market Investing please visit http://www.sys-adsystems.com/stockmarket
Article Source: http://EzineArticles.com/?expert=Jimmie_Newell
Not so long ago, almost the only way the individual investor could trade in the stock market was by employing a stock broker to place trades for you.
With the advent of the Internet, and online stock market brokerage services this has changed. For the investor who is willing to learn how the stock market works, learn to manage stock market risk, learn stock market terminology and make good timely decisions trading stocks without the help of a broker is a good way to make a profit.
Because you are choosing and analyzing your own investments and not depending on a broker to help you, the costs or commissions are much lower. Of course when you eliminate the broker the services they used to perform are not available either, however most of the online brokers do provide a vast array of basic services.
All of them have links to quotes data bases and stock market listings, some may be delayed a few minutes and some may be live. Most have charts of the individual stocks available; some have stock market tutorials built into their sites. Most will maintain portfolios and watch lists for you; they will of course provide a method of placing orders and selling. Some will provide stock market analyst reports sector reports, earning estimates, and many other historical and technical analysis tools.
If your chosen online broker does not supply everything you need, there are a wide variety of free services available on the Internet. Most of the major portals (MSN, Yahoo, etc) have a Money or Investing section where you can obtain all of the information you are likely to need.
If you are diligent in learning how to read the stock market how to analyze a stock, how to set entry and exit rules, and follow them, playing the stock market can be a profitable replacement for a part time job.
The importance of learning to ignore the "noise" cannot be over stated. Television, print and Internet ads will bombard you with information on trading tips, and trading systems, all professing to be the "holy grail" for making a fortune. You need to learn to filter all of this information and focus on the basics of trading stocks.
There are many types of trades available, including stocks, bonds, mutual funds, options, futures, commodities, penny stocks, etc. There are also different markets to trade in, such as Forex for trading currencies, commodities markets for such things as food and crop products, gold oil and so forth. All of these trades and markets offer different levels of risk, you need to be sure that you understand the risks and rewards of whatever trades or markets you decide to focus on.
Start with learning how to trade stocks, once you are making consistent profits, explore something else. Get good information, study things like The Wall Street Journal, Investors Business Daily, The Financial Times, check the financial offering on television, and study books on investing.
And most importantly enjoy the trip, and spend your profits wisely.
Jim Newell is a writer and Internet publisher for a variety of websites, newsletters and publications. For more information on Stock Market Investing please visit http://www.sys-adsystems.com/stockmarket
Article Source: http://EzineArticles.com/?expert=Jimmie_Newell
Thursday, September 18, 2008
Economic Data That Influence the Stock Market
By Rex Morris
In this post, I explain some of the commonly used economic indicators that can influence the general direction of the market. If you are new to investing, these indicators will enhance your knowledge and affect your investments. So the next time you hear these terms in the media or financial press, you can use the information in this article to evaluate their potential effect on the economy and ultimately your trading strategy.
Beige Book
Formally called as "Summary of Commentary on Current Economic Conditions" is published eight times a year less than 2 weeks prior to the FOMC meeting on Wednesdays at 2:00 pm ET. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from banks and branch directors and interviews with key businessmen, economists, and other sources. The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings.
If the Beige Book indicates inflationary pressure, the Fed may raise interest rates. Conversely, if it indicates recessionary conditions, the Fed may lower interest rates.
Source: Website listed below in the resource section.
Chicago Purchasing Managers Index (PMI)
Released on the last business day of the month at 10:00am ET. It's based on surveys of more than 200 purchasing managers regarding the manufacturing industry in the Chicago area whose distribution of manufacturing firms mirrors the national distribution.
Readings above 50 percent indicate an expanding factory sector, while below 50 indicates contraction.
Consumer Confidence Index
Published on last Tuesday of the month at 10:00 am ET for prior month data. It's a survey of about 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.
This report can be helpful in determining the shifts in consumption patterns and giving us insights about the direction of the economy. This data can be revised monthly based on a more complete survey.
Consumer Price Index (CPI)
Released around 13th of the month at 8:30am ET for prior month. It measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. Also known as the cost-of-living index.
The variance of CPI called "core CPI" which excludes food and energy prices is primarily used to gauge the underlying inflation trend. Inflationary pressure is generated when the core CPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Producer Price Index (PPI)
Released around 11th of each month at 8:30am ET for prior month data. The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level.
Similar to CPI, there is a variance of PPI, called as "core PPI" which excludes the prices for food and energy to give a clearer picture of the underlying inflation trend. Inflationary pressure is generated when the core PPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Durable Goods Orders
Officially called as "Advance Report on Durable Goods Manufacturers' Shipments and Orders", released around 26th of the month at 8:30am ET.
This is government index that measures the dollar volume of orders, shipments and unfilled orders of durable goods. Durable goods are new or used items with normal life expectancy of 3 years or more.
This report gives information on the strength of demand for US manufactured durable goods in domestic and international markets. When the index is increasing, it indicates demand is growing, which will result in rising production and employment.
Employment Situation
Published on 1st Friday of the month at 8:30am ET for prior month data. This report lists the number of payroll jobs at all non-farm businesses and government agencies. The unemployment rate, average hourly and weekly earnings, and the length of the average workweek are also listed in this report. This report is the single most closely watched economic statistic as an indicator of economic activity. Therefore, it plays a big role in influencing the market psychology during the month.
Its obvious from the report that the greater the increase in employment, the faster the total economic growth. An increasing unemployment rate is associated with a contracting economy.
If the average earnings are rising sharply, it may be an indication of potential inflation.
Source: Website listed below in the resource section.
Existing Home Sales
Published on the 25th of the month at 10:00am ET for prior month data. This report measures the selling rate of pre-owned houses. Its considered a decent indicator of activity in the housing sector.
This provides a gauge of not only the demand for housing, but the economic momentum. The data is revised monthly for the preceding month. There can be annual revisions for the preceding 3 years.
Gross Domestic Product (GDP)
Released in 4th week of the month at 8:30am ET for prior quarter, with subsequent revisions released in the 2nd and 3rd month of the quarter. GDP measures the dollar value of all goods and services produced within the borders of the United States.
This is the most comprehensive measure of the performance of the US economy. A higher GDP growth leads to accelerating inflation, while the lower growth indicates a weak economy.
Source: Website listed below in the resource section.
Housing Starts and Building Permits
Released around 16th of the month at 8:30am ET for prior month data. It's a measure of the number of residential units on which construction has begun.
It can be helpful to predict the changes in GDP. While residential investments represents just 4% of the level of GDP, due to its volatility it frequently represents a much higher portion of changes in GDP over relatively short periods of time.
Initial Claims
Published on Thursday at 8:30am for week ended prior Saturday. It's a government index that tracks the number of people filing first-time claims for state unemployment insurance.
Investors use this indicator's 4-week moving average to predict trends in the labor market. A move of 30000 or more in claims shows a substantial change in job growth. The lower the number of claims, the stronger the job market and vice-versa.
ISM Manufacturing Index
Released on the 1st business day of the month at 10:00am ET for prior month data. It's based on surveys of 300 purchasing managers nationwide representing 20 industries regarding manufacturing activities. It covers data such as new orders, production, employment, inventories, delivery times, prices, export orders and import orders.
It's considered to be a major economic indicator of all manufacturing indices. Readings of 50% or above are typically associated with and expanding manufacturing sector and healthy economy, while below 50 are indications of contraction.
ISM Services Index
Also known as Non-Manufacturing ISM is published on 3rd business day of the month at 10:00am ET for prior month data. This index is based on a survey of about 370 purchasing executives in industries including finance, insurance, real-estate, communications and utilities. It reports on business activity in the service sector.
Readings above 50% indicate expansion in the service sector of the economy. While below 50% indicate contraction.
Retail Sales
Published around 12th of the month at 8:30am ET for the prior month data. This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollars, that is, they are not adjusted for inflation. However, that data are adjusted for seasonal, holiday -differences between the months of the year.
This is considered the most timely indicator of broad consumer spending patterns. It gives a sense of the trends among different types of retailers.
For complete resource listing, visit our blog at Stock Trading Ideas.
Stock Trading Ideas
Resources:
Sorry for the inconvenience, as we cannot post more than 4 links in our article. Please visit our blog http://stock-trading-ideas.com and under "Trading Resources" section, you can get the appropriate websites for up-to-date economic data.
Article Source: http://EzineArticles.com/?expert=Rex_Morris
In this post, I explain some of the commonly used economic indicators that can influence the general direction of the market. If you are new to investing, these indicators will enhance your knowledge and affect your investments. So the next time you hear these terms in the media or financial press, you can use the information in this article to evaluate their potential effect on the economy and ultimately your trading strategy.
Beige Book
Formally called as "Summary of Commentary on Current Economic Conditions" is published eight times a year less than 2 weeks prior to the FOMC meeting on Wednesdays at 2:00 pm ET. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from banks and branch directors and interviews with key businessmen, economists, and other sources. The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings.
If the Beige Book indicates inflationary pressure, the Fed may raise interest rates. Conversely, if it indicates recessionary conditions, the Fed may lower interest rates.
Source: Website listed below in the resource section.
Chicago Purchasing Managers Index (PMI)
Released on the last business day of the month at 10:00am ET. It's based on surveys of more than 200 purchasing managers regarding the manufacturing industry in the Chicago area whose distribution of manufacturing firms mirrors the national distribution.
Readings above 50 percent indicate an expanding factory sector, while below 50 indicates contraction.
Consumer Confidence Index
Published on last Tuesday of the month at 10:00 am ET for prior month data. It's a survey of about 5000 consumers about their attitudes concerning the present situation and expectations regarding economic conditions conducted.
This report can be helpful in determining the shifts in consumption patterns and giving us insights about the direction of the economy. This data can be revised monthly based on a more complete survey.
Consumer Price Index (CPI)
Released around 13th of the month at 8:30am ET for prior month. It measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. Also known as the cost-of-living index.
The variance of CPI called "core CPI" which excludes food and energy prices is primarily used to gauge the underlying inflation trend. Inflationary pressure is generated when the core CPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Producer Price Index (PPI)
Released around 11th of each month at 8:30am ET for prior month data. The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level.
Similar to CPI, there is a variance of PPI, called as "core PPI" which excludes the prices for food and energy to give a clearer picture of the underlying inflation trend. Inflationary pressure is generated when the core PPI posts larger-than-expected gains.
Source: Website listed below in the resource section.
Durable Goods Orders
Officially called as "Advance Report on Durable Goods Manufacturers' Shipments and Orders", released around 26th of the month at 8:30am ET.
This is government index that measures the dollar volume of orders, shipments and unfilled orders of durable goods. Durable goods are new or used items with normal life expectancy of 3 years or more.
This report gives information on the strength of demand for US manufactured durable goods in domestic and international markets. When the index is increasing, it indicates demand is growing, which will result in rising production and employment.
Employment Situation
Published on 1st Friday of the month at 8:30am ET for prior month data. This report lists the number of payroll jobs at all non-farm businesses and government agencies. The unemployment rate, average hourly and weekly earnings, and the length of the average workweek are also listed in this report. This report is the single most closely watched economic statistic as an indicator of economic activity. Therefore, it plays a big role in influencing the market psychology during the month.
Its obvious from the report that the greater the increase in employment, the faster the total economic growth. An increasing unemployment rate is associated with a contracting economy.
If the average earnings are rising sharply, it may be an indication of potential inflation.
Source: Website listed below in the resource section.
Existing Home Sales
Published on the 25th of the month at 10:00am ET for prior month data. This report measures the selling rate of pre-owned houses. Its considered a decent indicator of activity in the housing sector.
This provides a gauge of not only the demand for housing, but the economic momentum. The data is revised monthly for the preceding month. There can be annual revisions for the preceding 3 years.
Gross Domestic Product (GDP)
Released in 4th week of the month at 8:30am ET for prior quarter, with subsequent revisions released in the 2nd and 3rd month of the quarter. GDP measures the dollar value of all goods and services produced within the borders of the United States.
This is the most comprehensive measure of the performance of the US economy. A higher GDP growth leads to accelerating inflation, while the lower growth indicates a weak economy.
Source: Website listed below in the resource section.
Housing Starts and Building Permits
Released around 16th of the month at 8:30am ET for prior month data. It's a measure of the number of residential units on which construction has begun.
It can be helpful to predict the changes in GDP. While residential investments represents just 4% of the level of GDP, due to its volatility it frequently represents a much higher portion of changes in GDP over relatively short periods of time.
Initial Claims
Published on Thursday at 8:30am for week ended prior Saturday. It's a government index that tracks the number of people filing first-time claims for state unemployment insurance.
Investors use this indicator's 4-week moving average to predict trends in the labor market. A move of 30000 or more in claims shows a substantial change in job growth. The lower the number of claims, the stronger the job market and vice-versa.
ISM Manufacturing Index
Released on the 1st business day of the month at 10:00am ET for prior month data. It's based on surveys of 300 purchasing managers nationwide representing 20 industries regarding manufacturing activities. It covers data such as new orders, production, employment, inventories, delivery times, prices, export orders and import orders.
It's considered to be a major economic indicator of all manufacturing indices. Readings of 50% or above are typically associated with and expanding manufacturing sector and healthy economy, while below 50 are indications of contraction.
ISM Services Index
Also known as Non-Manufacturing ISM is published on 3rd business day of the month at 10:00am ET for prior month data. This index is based on a survey of about 370 purchasing executives in industries including finance, insurance, real-estate, communications and utilities. It reports on business activity in the service sector.
Readings above 50% indicate expansion in the service sector of the economy. While below 50% indicate contraction.
Retail Sales
Published around 12th of the month at 8:30am ET for the prior month data. This index measures the total sales of goods by all retail establishments in the US. These figures are in current dollars, that is, they are not adjusted for inflation. However, that data are adjusted for seasonal, holiday -differences between the months of the year.
This is considered the most timely indicator of broad consumer spending patterns. It gives a sense of the trends among different types of retailers.
For complete resource listing, visit our blog at Stock Trading Ideas.
Stock Trading Ideas
Resources:
Sorry for the inconvenience, as we cannot post more than 4 links in our article. Please visit our blog http://stock-trading-ideas.com and under "Trading Resources" section, you can get the appropriate websites for up-to-date economic data.
Article Source: http://EzineArticles.com/?expert=Rex_Morris
Wednesday, September 17, 2008
Behavior of Stock and Forex Markets and The Characteristics of a Profitable Trading System
By Uma Bhavani
Anyone who really follows these markets knows that the underlying prices fluctuate, often violently, due to changes, and equally effectively, due to rumors about changes in various factors. These factors include not only the company and sector-specific conditions, but also economic and geopolitical as well as the general market environment. Thus a nice looking trading system that promises to achieve a desired goal somewhere along the yellow brick road as long we follow the buy and sell arrows, may be totally misleading.
An example of where we are misled by some of the trading myths is the way of advertising a presumably sound method of controlling the losses. Such advertisements claim that we can never lose, for example, more than two percent in any trade when we put our stop loss limit at two percent below our purchase price. As explained in the following paragraph, the concept is not that simple in practice.
Let us say I buy one hundred shares of a stock at a price of one hundred dollars each, and put a stop loss limit of two percent below the purchase price. This means that the stock automatically sells at the market price when its price decreases to ninety-eight dollars or less. If the price gaps down to eighty dollars, which is very likely in any of the markets, it will immediately sell at a price of eighty dollars or less, resulting in a loss of at least twenty percent, and ruthlessly reducing my original investment of ten thousand dollars to at most eight thousand dollars less commissions. A similar experience is possible in the currency trading.
There are two major types of market analyses - fundamental and technical. The former analysis relies on the company's earnings per share, price earnings ratio, growth adjusted ratios, dividends, and forecasts of one or more of these measures as well as on the general market and economic conditions including the interest rate environment. The technical analysis applies both to the stock and forex markets, and examines statistics such as moving averages, relative strength indicators, cumulative distributions, price oscillators, stochastic measures and host of similar other factors. However, the market conditions may occasionally prove some or all of these measures to be somewhat irrelevant. The following paragraph briefly describes the application of moving averages.
A moving average (MA) is an average of prices over a period of time, and may be used to determine trend direction or to indicate support and resistance areas. Thus when the MA rises, it is a buy signal when prices dip near or bit below the MA. When the MA falls, it is a sell signal when prices rally towards or a bit above the MA. In addition, a rising MA tends to support the price action and a falling MA tends to provide resistance to the price action. There are two types of moving averages, a simple moving average (SMA), and an exponential moving average (EPA). EPA applies more weight to the more recent prices, and thus follows the prices more closely than SMA. Moving averages do not get us into a trade at the exact bottom and out of it at the exact top. They tend to ensure we're trading in the general direction of the trend, usually with a delay at the entry and exit, EMA resulting a shorter delay than the SMA.
A viable system for trading the markets, while based on a solid mathematical foundation, has to be dynamic enough to take into account the possibility of any of the unforeseen events. It should be designed to incorporate the latest possible information, and the support system should be flexible and continuous. There should be a provision to correct a wrong move before it becomes too expensive. It is always good to remember that past performance is not indicative of future results, and while there is potential for huge profits, it is also possible to lose money in each of these two markets.
[Source: Money and Investment page of http://onlinesalesplus.synthasite.com]
http://onlinesalesplus.synthasite.com
Article Source: http://EzineArticles.com/?expert=Uma_Bhavani
Anyone who really follows these markets knows that the underlying prices fluctuate, often violently, due to changes, and equally effectively, due to rumors about changes in various factors. These factors include not only the company and sector-specific conditions, but also economic and geopolitical as well as the general market environment. Thus a nice looking trading system that promises to achieve a desired goal somewhere along the yellow brick road as long we follow the buy and sell arrows, may be totally misleading.
An example of where we are misled by some of the trading myths is the way of advertising a presumably sound method of controlling the losses. Such advertisements claim that we can never lose, for example, more than two percent in any trade when we put our stop loss limit at two percent below our purchase price. As explained in the following paragraph, the concept is not that simple in practice.
Let us say I buy one hundred shares of a stock at a price of one hundred dollars each, and put a stop loss limit of two percent below the purchase price. This means that the stock automatically sells at the market price when its price decreases to ninety-eight dollars or less. If the price gaps down to eighty dollars, which is very likely in any of the markets, it will immediately sell at a price of eighty dollars or less, resulting in a loss of at least twenty percent, and ruthlessly reducing my original investment of ten thousand dollars to at most eight thousand dollars less commissions. A similar experience is possible in the currency trading.
There are two major types of market analyses - fundamental and technical. The former analysis relies on the company's earnings per share, price earnings ratio, growth adjusted ratios, dividends, and forecasts of one or more of these measures as well as on the general market and economic conditions including the interest rate environment. The technical analysis applies both to the stock and forex markets, and examines statistics such as moving averages, relative strength indicators, cumulative distributions, price oscillators, stochastic measures and host of similar other factors. However, the market conditions may occasionally prove some or all of these measures to be somewhat irrelevant. The following paragraph briefly describes the application of moving averages.
A moving average (MA) is an average of prices over a period of time, and may be used to determine trend direction or to indicate support and resistance areas. Thus when the MA rises, it is a buy signal when prices dip near or bit below the MA. When the MA falls, it is a sell signal when prices rally towards or a bit above the MA. In addition, a rising MA tends to support the price action and a falling MA tends to provide resistance to the price action. There are two types of moving averages, a simple moving average (SMA), and an exponential moving average (EPA). EPA applies more weight to the more recent prices, and thus follows the prices more closely than SMA. Moving averages do not get us into a trade at the exact bottom and out of it at the exact top. They tend to ensure we're trading in the general direction of the trend, usually with a delay at the entry and exit, EMA resulting a shorter delay than the SMA.
A viable system for trading the markets, while based on a solid mathematical foundation, has to be dynamic enough to take into account the possibility of any of the unforeseen events. It should be designed to incorporate the latest possible information, and the support system should be flexible and continuous. There should be a provision to correct a wrong move before it becomes too expensive. It is always good to remember that past performance is not indicative of future results, and while there is potential for huge profits, it is also possible to lose money in each of these two markets.
[Source: Money and Investment page of http://onlinesalesplus.synthasite.com]
http://onlinesalesplus.synthasite.com
Article Source: http://EzineArticles.com/?expert=Uma_Bhavani
Tuesday, September 16, 2008
How to Trade Stocks For Money
By Michael Comeau
Having traded stocks for over 20 years I can tell you this is not a question taken lightly. If I had to think of one word that makes the difference between a successful stock trader and one that looses money it would be discipline.
You are probably asking yourself discipline what do you mean? Most people end up loosing money in the stock market, because they don't have the discipline to create a plan for any stock they may invest in, set a stop and have the discipline to take a small loss and move on. In most cases whether you make money-trading stocks or not is determined by how you handle your losses. Anyone can make a profit, although you do need the discipline to take a profit at the right time, not acting out of greed and hanging on.
Many times people will see their stocks go up whereby they have made a nice profit, hang on for more out of greed, only to end up seeing it drop back below the price they paid for it. When this happens the stock has normally gone through one or more stages where it should have been sold and will head lower. These same people will hang on, because they don't have the discipline to pull the trigger and sell it until the last minute. When they do eventually sell it the one time profitable stock has turned into a huge loss wiping out he gains of many other stocks and pulling their portfolio lower and lower until there is nothing left.
I will be writing many articles on this subject, but I decided to do some research to see if I could find a piece of software that could help people overcome some of the problems that are common to most of us and help us determine when to buy and sell.
I am happy to say that if you do your research you can indeed find software out there that will give you entry and exit points so that you have a much better chance for success.
When doing my research I came across one piece of software that I found very interesting. It offers a Revolutionary Trading Software Guaranteed To Generate Profitable Winning Trades On Autopilot In Only An Hour A Day Using State-Of-The-Art Artificial Intelligence.
The beauty of it is that the cost is minimal and you can get a demo right online. Now days with many people are looking to handle their own investment portfolios I believe this can be an invaluable asset. This program runs in the background evaluating stocks giving you the important buy and sell signals. This can saves hours of time researching data on stocks and really opens up the stock market in a very unique way to the people that may only have a minimal amount of time to trade stocks for money. Very interesting indeed. Please feel free to read both this article or one of my many others by visiting my link in the resource box below. I always enjoy getting emails pertaining to my articles or my site. Your feedback is important to me.
I wish you the very best.
Michael Comeau has been owner of many successful businesses over the years including his current online business which can be viewed at http://www.workfromhome4dollars.com/Article-How-To-Trade-Stocks-For-Money.php You may also find more articles by Michael Comeau at http://www.workfromhome4dollars.com
Article Source: http://EzineArticles.com/?expert=Michael_Comeau
Having traded stocks for over 20 years I can tell you this is not a question taken lightly. If I had to think of one word that makes the difference between a successful stock trader and one that looses money it would be discipline.
You are probably asking yourself discipline what do you mean? Most people end up loosing money in the stock market, because they don't have the discipline to create a plan for any stock they may invest in, set a stop and have the discipline to take a small loss and move on. In most cases whether you make money-trading stocks or not is determined by how you handle your losses. Anyone can make a profit, although you do need the discipline to take a profit at the right time, not acting out of greed and hanging on.
Many times people will see their stocks go up whereby they have made a nice profit, hang on for more out of greed, only to end up seeing it drop back below the price they paid for it. When this happens the stock has normally gone through one or more stages where it should have been sold and will head lower. These same people will hang on, because they don't have the discipline to pull the trigger and sell it until the last minute. When they do eventually sell it the one time profitable stock has turned into a huge loss wiping out he gains of many other stocks and pulling their portfolio lower and lower until there is nothing left.
I will be writing many articles on this subject, but I decided to do some research to see if I could find a piece of software that could help people overcome some of the problems that are common to most of us and help us determine when to buy and sell.
I am happy to say that if you do your research you can indeed find software out there that will give you entry and exit points so that you have a much better chance for success.
When doing my research I came across one piece of software that I found very interesting. It offers a Revolutionary Trading Software Guaranteed To Generate Profitable Winning Trades On Autopilot In Only An Hour A Day Using State-Of-The-Art Artificial Intelligence.
The beauty of it is that the cost is minimal and you can get a demo right online. Now days with many people are looking to handle their own investment portfolios I believe this can be an invaluable asset. This program runs in the background evaluating stocks giving you the important buy and sell signals. This can saves hours of time researching data on stocks and really opens up the stock market in a very unique way to the people that may only have a minimal amount of time to trade stocks for money. Very interesting indeed. Please feel free to read both this article or one of my many others by visiting my link in the resource box below. I always enjoy getting emails pertaining to my articles or my site. Your feedback is important to me.
I wish you the very best.
Michael Comeau has been owner of many successful businesses over the years including his current online business which can be viewed at http://www.workfromhome4dollars.com/Article-How-To-Trade-Stocks-For-Money.php You may also find more articles by Michael Comeau at http://www.workfromhome4dollars.com
Article Source: http://EzineArticles.com/?expert=Michael_Comeau
Monday, September 15, 2008
How to Find Stocks Ready to Win Olympic Gold
By Steve D. Martin
Do you own stocks worthy of winning an Olympic Gold Medal? Do your stocks have the heart of a champion? Are they poised to break new world records? If you could own a stock named Michael Phelps would you? We can take the same characteristics that make up Gold Medal Olympic Champions and apply them towards selecting Gold Medal Winning Stocks.
When we look at our Gold Medal Olympic Champions three distinct characteristics stand out. First, they have mastered the Foundations or Fundamentals of their sport. Second, they are innovators or leaders within their sport. Finally third, they are technically sound as they perform creating effortless efficiency. These 3 variables can also be used to select Gold Medal Winning Stocks.
First, choose stocks with superior fundamentals and a sound foundation. Olympians test their skills everyday against themselves and their competition. Those athletes that constantly work to improve their speed, strength, conditioning, and nutrition can usually measure this success through faster times, longer distances, and stay healthier and in the sport longer. The same can be said for a gold medal winning stock. These companies are constantly looking to improve their fundamentals. In stocks we see this through increased earnings, stronger sales, and larger profit margins. In Gold medal winning stocks you would like to see these fundamentals increasing on a quarterly basis and on a yearly basis.
Second, choose stocks that are innovators or leaders within their industry. An industry is just a way to group businesses that are alike together. Michael Phelps is in the swimming industry, IBM is in the Computer Technical Services industry. Gold Medal winning stocks will be the best in their industry. They get to the top of the industry by being innovative. These stocks may have created a new product, changed the way they do business, or have an existing product that has become more in demand. Apple computers are a great example of a company that has become a Gold Medal winning stock. Apple created the iPod, then the iPhone, and is now, for the first time, taking the lead over DELL on its computers for educational services.
Third, is the stock you choose technically sound? We can measure or see the health of a stock through a stock chart. As they say a picture is worth a thousand words. Athletes have coaches, video imaging, stat sheets, and chalk boards to continually track the progress of their athletes, to fix problems in technique, and to monitor success. To choose gold medal winning stocks you must be the coach of your stock and monitor the health and strength of the stock you are looking at through stock charts. The stock chart of a gold medal winning stock will have prices that are continuously reaching to new highs. When the stock moves up in price it will do so on strong volume. When the stock has an off day, it will do so on light volume. With the gold medal winning athlete, they are always the first one to be picked by the captains or the coaches, everybody wanted them. The same is true of a gold medal winning stock, everyone will want to buy this stock for their team (portfolio) and this action is seen on the stock chart by an increase in price and volume.
Just like the Olympics there are thousands of potential gold medal winning stocks waiting for their moment to shine. Only a few will rise to the surface, surpass all others, and cross the finish to be considered the Gold Medal Champion. Find your next gold medal winning stock by demanding superior fundamentals, industry leadership and innovative products, and ever improving technical stock charts. Stick to these three characteristics of finding Gold Medal Winning Stocks and soon you may be standing on the podium as a gold medal winning investor.
Steve Martin went from a tennis pro struggling to make ends meet, to a successful growth stock investor, and developed the F.I.T. Stock Investment System. To find out more about F.I.T. Stocks and our weekly Investment Newsletter service visit us at http://www.fitstocks.com/
Article Source: http://EzineArticles.com/?expert=Steve_D._Martin
Do you own stocks worthy of winning an Olympic Gold Medal? Do your stocks have the heart of a champion? Are they poised to break new world records? If you could own a stock named Michael Phelps would you? We can take the same characteristics that make up Gold Medal Olympic Champions and apply them towards selecting Gold Medal Winning Stocks.
When we look at our Gold Medal Olympic Champions three distinct characteristics stand out. First, they have mastered the Foundations or Fundamentals of their sport. Second, they are innovators or leaders within their sport. Finally third, they are technically sound as they perform creating effortless efficiency. These 3 variables can also be used to select Gold Medal Winning Stocks.
First, choose stocks with superior fundamentals and a sound foundation. Olympians test their skills everyday against themselves and their competition. Those athletes that constantly work to improve their speed, strength, conditioning, and nutrition can usually measure this success through faster times, longer distances, and stay healthier and in the sport longer. The same can be said for a gold medal winning stock. These companies are constantly looking to improve their fundamentals. In stocks we see this through increased earnings, stronger sales, and larger profit margins. In Gold medal winning stocks you would like to see these fundamentals increasing on a quarterly basis and on a yearly basis.
Second, choose stocks that are innovators or leaders within their industry. An industry is just a way to group businesses that are alike together. Michael Phelps is in the swimming industry, IBM is in the Computer Technical Services industry. Gold Medal winning stocks will be the best in their industry. They get to the top of the industry by being innovative. These stocks may have created a new product, changed the way they do business, or have an existing product that has become more in demand. Apple computers are a great example of a company that has become a Gold Medal winning stock. Apple created the iPod, then the iPhone, and is now, for the first time, taking the lead over DELL on its computers for educational services.
Third, is the stock you choose technically sound? We can measure or see the health of a stock through a stock chart. As they say a picture is worth a thousand words. Athletes have coaches, video imaging, stat sheets, and chalk boards to continually track the progress of their athletes, to fix problems in technique, and to monitor success. To choose gold medal winning stocks you must be the coach of your stock and monitor the health and strength of the stock you are looking at through stock charts. The stock chart of a gold medal winning stock will have prices that are continuously reaching to new highs. When the stock moves up in price it will do so on strong volume. When the stock has an off day, it will do so on light volume. With the gold medal winning athlete, they are always the first one to be picked by the captains or the coaches, everybody wanted them. The same is true of a gold medal winning stock, everyone will want to buy this stock for their team (portfolio) and this action is seen on the stock chart by an increase in price and volume.
Just like the Olympics there are thousands of potential gold medal winning stocks waiting for their moment to shine. Only a few will rise to the surface, surpass all others, and cross the finish to be considered the Gold Medal Champion. Find your next gold medal winning stock by demanding superior fundamentals, industry leadership and innovative products, and ever improving technical stock charts. Stick to these three characteristics of finding Gold Medal Winning Stocks and soon you may be standing on the podium as a gold medal winning investor.
Steve Martin went from a tennis pro struggling to make ends meet, to a successful growth stock investor, and developed the F.I.T. Stock Investment System. To find out more about F.I.T. Stocks and our weekly Investment Newsletter service visit us at http://www.fitstocks.com/
Article Source: http://EzineArticles.com/?expert=Steve_D._Martin
Friday, September 12, 2008
Researching Stock Trades
By Shaun Rosenberg
It is important to keep track of stock market events when trading. If you do not you may often encounter sudden suppresses.
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can't wait until everything is perfectly aligned before you act.
For more information about stocks visit http://www.stocks-simplified.com
Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg
It is important to keep track of stock market events when trading. If you do not you may often encounter sudden suppresses.
The first thing you want to be aware of is the federal meetings. Every now and then the feds cut or raise interest rates. This can have a big impact on the movement of the market. Stocks may rally on the news of an interest rate cut and fall on news of an increase in the interest rate. This due to the fact that lower interest rates help businesses and aid growth, higher interest rates can hurt growth.
Another thing you may want to keep an eye out for is earnings announcements. If a company has good earnings there stock is likely to go up. If they have bad earnings there stock is likely to go down. Predicting earnings can be risky, it can be a good idea to stay away from a stock announcing its earnings.
You may also want to check on the company itself to make sure that it is a good company. Every time I place a trade I take a quick look at the company itself to see how they are doing. You do not want to buy a stock that is going to go bankrupt tomorrow.
Finally you always want to check out the technicals of a given stock before you buy it. Is it up trending? Forming any chart patterns or candlestick patterns? That can be very important in deciding which way to trade the stock, or if to trade the stock at all. Checking the trend of the industry group and overall market may be helpful as well.
There is a lot of homework to be done for every trade. Just remember not to overdo it. While it is important to put the odds in your favor, you need to pull the trigger if you want to make money. You can't wait until everything is perfectly aligned before you act.
For more information about stocks visit http://www.stocks-simplified.com
Article Source: http://EzineArticles.com/?expert=Shaun_Rosenberg
Thursday, September 11, 2008
Secrets to Achieving Big Returns in the Stock Market
By W. Henry Boyett
Are you tired of losing money or perhaps only making 5% to 10% a year in the stock market? I know I was. I was so desperate I even paid one of those expensive financial advisors to show me how to retire wealthy.
My financial advisor talked about compounding my money ANNUALLY in order to grow my money. He spoke of the "Rule of 72", which tells you how many YEARS it will take you to double your money. He spoke of accounting for my profits ANNUALLY and paying taxes. He also told me what the average ANNUAL return on the stock market has been historically. His plan required forty years of investing. I just knew there had to be a better way.
After leaving his office, something just went off in my head. It was then I discovered the secret that I use today to make big returns in the stock market.
I finally figured that what my financial advisor was doing was brainwashing me. He was probably brainwashed himself and didn't know any better. Chances are you have been brainwashed too and still haven't figured out the secret.
What I had to do was to overcome my thinking and think outside the box. What if I did everything monthly instead of yearly? There was the secret. Using compounding on a monthly basis instead of yearly I could take a 10% return and double my money in 7.2 months instead of 7.2 years!
Now you are probably thinking it sounds great but making 10% monthly is hard. Not true. Just use a stock screener on any given day and list all stocks that have risen 10% or more in one day. I'm sure you'll find quite a lot. I like to look at stocks that have a price of $2 or more. This eliminates all the penny stocks and you end up with a much more manageable list.
The next step is to try and see what all these stock have in common. What Industry are they in? Are they making profits? Are they small caps or big caps? After pinpointing the common denominators you should now know where the money is flowing. That is where you want to be. Look for stocks that have liquidity (trades an average of 100,000 or more shares per day) and may currently be beaten down in price. If you get in on these before the big money gets there, you will be in a position to ride the stock up as the buyers step in.
I have developed a few stock trading systems that I personally use to make 3% to 5% weekly (comes out to 12% to 20% monthly). To get one of my systems for FREE, visit my website at http://www.stocklocater.com and sign up today.
Article Source: http://EzineArticles.com/?expert=W._Henry_Boyett
Are you tired of losing money or perhaps only making 5% to 10% a year in the stock market? I know I was. I was so desperate I even paid one of those expensive financial advisors to show me how to retire wealthy.
My financial advisor talked about compounding my money ANNUALLY in order to grow my money. He spoke of the "Rule of 72", which tells you how many YEARS it will take you to double your money. He spoke of accounting for my profits ANNUALLY and paying taxes. He also told me what the average ANNUAL return on the stock market has been historically. His plan required forty years of investing. I just knew there had to be a better way.
After leaving his office, something just went off in my head. It was then I discovered the secret that I use today to make big returns in the stock market.
I finally figured that what my financial advisor was doing was brainwashing me. He was probably brainwashed himself and didn't know any better. Chances are you have been brainwashed too and still haven't figured out the secret.
What I had to do was to overcome my thinking and think outside the box. What if I did everything monthly instead of yearly? There was the secret. Using compounding on a monthly basis instead of yearly I could take a 10% return and double my money in 7.2 months instead of 7.2 years!
Now you are probably thinking it sounds great but making 10% monthly is hard. Not true. Just use a stock screener on any given day and list all stocks that have risen 10% or more in one day. I'm sure you'll find quite a lot. I like to look at stocks that have a price of $2 or more. This eliminates all the penny stocks and you end up with a much more manageable list.
The next step is to try and see what all these stock have in common. What Industry are they in? Are they making profits? Are they small caps or big caps? After pinpointing the common denominators you should now know where the money is flowing. That is where you want to be. Look for stocks that have liquidity (trades an average of 100,000 or more shares per day) and may currently be beaten down in price. If you get in on these before the big money gets there, you will be in a position to ride the stock up as the buyers step in.
I have developed a few stock trading systems that I personally use to make 3% to 5% weekly (comes out to 12% to 20% monthly). To get one of my systems for FREE, visit my website at http://www.stocklocater.com and sign up today.
Article Source: http://EzineArticles.com/?expert=W._Henry_Boyett
Wednesday, September 10, 2008
How to Choose the Best Options Trading Strategy
By Rob Forbes
The magic of options trading is that allows for a variety of strategies to be matched with different stock trading philosophies. Each strategy has a different profitability and risk tolerance level, and using a variety of strategies can spice up a portfolio very nicely! In this article, I will outline four different stock trading strategies, and how they can be matched with corresponding options trading strategies which you can apply to your portfolio. The main idea is to first focus on an underlying stock trading strategy, and then add significant leverage and power to the trade by using options.
The most important factor when considering each of these strategies is the concept of TIME DECAY. The value of any option declines over time, until the day the option expires. This concept can be the major enemy of any option trade, eating into its profits, or it can be the key to successful and profitable option trading.
Firstly, which Strategy?
There are generally four different strategies employed by stock traders, each of which has implications when applied to options:
(i) Position Trading
Traders buy a stock and hold it for long periods of time, based on good fundamentals of the company. They will often wait for a stock to reach really good value, and then watch for institutional or insider buying before making a move. As the stock price increases, they look out for other buyers to step in and move the price even further.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which could be wiped out over time even as the stock gains in price. TIME DECAY is your enemy.
Selling covered calls each month in the option cycle on the stock you already own can significantly reduce the cost you paid for the stock in the first trade. Even if the stock goes down, you can still come out a winner!
(ii) Momentum or Trend trading
Once a stock has made clear move or breakout, the Momentum traders step in, and ride the stock up along a trend to its first major reversal. They hope to make shorter term profits from a rapid move in the price. Holding periods range from six weeks to six months.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which will be wiped out over time even as the stock gains in price. TIME DECAY is your enemy with Momentum Trading, unless you have a particularly strong and fast moving trend.
Selling Credit Spreads is a good strategy, and in fact can be very profitable, because as you sell spreads on the opposite leg from the stock's direction of momentum (e.g. selling put credit spreads in stock with a strongly bullish trend), you can repeatedly buy back the spreads for minimum cost and sell another spread closer in. This strategy can easily yield 10-15% profit per month. Time Decay is your secret weapon for trading this strategy.
Selling Naked Puts is a good strategy, and can be even more profitable than selling credit spreads. However, it leaves you a position of possibly having to buy a lot of stock if the trade goes against you, and so your broker requires you to have a lot of margin.
(iii) Swing Trading
Swing Traders buy and sell swings or oscillations within a trend. Holding times are from between 2 and ten days. This is a shorter term trading technique that is more dependent on the trend direction than it is on fundamentals or technical indicators.
APPROPRIATE OPTION STRATEGY
If you have mastered the skill of identifying reversals or swings within a trend, and know how to plan an exit strategy, you will be able to start buying calls and puts, or DITM options, which will take you to real profits! With Swing Trading, holding times are short (2-10 days) and so you minimise the effect of your arch enemy, TIME DECAY.
(iv) Day Trading
Day traders focus on the many small moves that happen during the trading day, mainly shown up by candlestick patterns. This strategy has a broker's requirement of a minimum of $25,000 to qualify, which knocks out many beginners.
APPROPRIATE OPTION STRATEGY
Option trading is not appropriate with this strategy. Broker fees for options trading are quite high, and Day Traders end up paying vast sums to their brokers.
In Summary:
If you own at least 100 units of a stock that is not particularly trending in any particular direction, sell Covered Calls each month in the option cycle. You can reduce the net price that you originally paid for the stock by between 5-12% each month.
If you have at least $1,000 in your account, and can identify a trend, you can easily sell Credit Spreads or Sell Naked Puts each month in the option cycle.
If you have mastered Swing Trading principles, especially the idea of planning entries and exits, you can start to buy Calls and Puts, or DITM options and make phenomenal profits.
To learn more, go to this site: http://www.swing-trading-options.com
Article Source: http://EzineArticles.com/?expert=Rob_Forbes
The magic of options trading is that allows for a variety of strategies to be matched with different stock trading philosophies. Each strategy has a different profitability and risk tolerance level, and using a variety of strategies can spice up a portfolio very nicely! In this article, I will outline four different stock trading strategies, and how they can be matched with corresponding options trading strategies which you can apply to your portfolio. The main idea is to first focus on an underlying stock trading strategy, and then add significant leverage and power to the trade by using options.
The most important factor when considering each of these strategies is the concept of TIME DECAY. The value of any option declines over time, until the day the option expires. This concept can be the major enemy of any option trade, eating into its profits, or it can be the key to successful and profitable option trading.
Firstly, which Strategy?
There are generally four different strategies employed by stock traders, each of which has implications when applied to options:
(i) Position Trading
Traders buy a stock and hold it for long periods of time, based on good fundamentals of the company. They will often wait for a stock to reach really good value, and then watch for institutional or insider buying before making a move. As the stock price increases, they look out for other buyers to step in and move the price even further.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which could be wiped out over time even as the stock gains in price. TIME DECAY is your enemy.
Selling covered calls each month in the option cycle on the stock you already own can significantly reduce the cost you paid for the stock in the first trade. Even if the stock goes down, you can still come out a winner!
(ii) Momentum or Trend trading
Once a stock has made clear move or breakout, the Momentum traders step in, and ride the stock up along a trend to its first major reversal. They hope to make shorter term profits from a rapid move in the price. Holding periods range from six weeks to six months.
APPROPRIATE OPTION STRATEGY
Buying calls and puts is NOT appropriate, because you pay large premiums for time value, most of which will be wiped out over time even as the stock gains in price. TIME DECAY is your enemy with Momentum Trading, unless you have a particularly strong and fast moving trend.
Selling Credit Spreads is a good strategy, and in fact can be very profitable, because as you sell spreads on the opposite leg from the stock's direction of momentum (e.g. selling put credit spreads in stock with a strongly bullish trend), you can repeatedly buy back the spreads for minimum cost and sell another spread closer in. This strategy can easily yield 10-15% profit per month. Time Decay is your secret weapon for trading this strategy.
Selling Naked Puts is a good strategy, and can be even more profitable than selling credit spreads. However, it leaves you a position of possibly having to buy a lot of stock if the trade goes against you, and so your broker requires you to have a lot of margin.
(iii) Swing Trading
Swing Traders buy and sell swings or oscillations within a trend. Holding times are from between 2 and ten days. This is a shorter term trading technique that is more dependent on the trend direction than it is on fundamentals or technical indicators.
APPROPRIATE OPTION STRATEGY
If you have mastered the skill of identifying reversals or swings within a trend, and know how to plan an exit strategy, you will be able to start buying calls and puts, or DITM options, which will take you to real profits! With Swing Trading, holding times are short (2-10 days) and so you minimise the effect of your arch enemy, TIME DECAY.
(iv) Day Trading
Day traders focus on the many small moves that happen during the trading day, mainly shown up by candlestick patterns. This strategy has a broker's requirement of a minimum of $25,000 to qualify, which knocks out many beginners.
APPROPRIATE OPTION STRATEGY
Option trading is not appropriate with this strategy. Broker fees for options trading are quite high, and Day Traders end up paying vast sums to their brokers.
In Summary:
If you own at least 100 units of a stock that is not particularly trending in any particular direction, sell Covered Calls each month in the option cycle. You can reduce the net price that you originally paid for the stock by between 5-12% each month.
If you have at least $1,000 in your account, and can identify a trend, you can easily sell Credit Spreads or Sell Naked Puts each month in the option cycle.
If you have mastered Swing Trading principles, especially the idea of planning entries and exits, you can start to buy Calls and Puts, or DITM options and make phenomenal profits.
To learn more, go to this site: http://www.swing-trading-options.com
Article Source: http://EzineArticles.com/?expert=Rob_Forbes
Tuesday, September 9, 2008
Please Tell Me Something - Does This Look At All Familiar? (Buy Stock + Do Nothing = Become Wealthy)
By Michael Collingwood
So, raise your hand if you've ever had that crammed down your gullet: Buying stock = the Holy Grail of trading...Is that the whole truth? A half truth? Less than Half?
The exact answer is somewhere in between. While there are some real gurus making millions with it and successfully showing others how, the me-too crowd who's never done it for themselves can't rehash it fast enough. Brokers never mention the "what if it goes down problem". They also never ask where you want your stop loss order placed. Or the big question "why are you buying this stock in the first place"?
Thousands of people like you will keep plugging away at dead end jobs making someone else rich with the best years of their lives while they could have been laughing it off with a Pina Colada on a tropical beach with their families. Thousands of dreams will go unfulfilled. Thousands of creators will be stifled in the egg, reduced to corporate drones and glassy eyed pencil pushers when it all could have gone oh so differently had they just gotten the right information instead of a steaming pile of bull.
Next up, I'm going to start telling you a bit about my story. How I got into this and figured it out after stupidly being slapped upside the head one too many times. I'm also going to tell you how you can start doing things in another way from now on to start experiencing other results. How you can have an entirely clean slate and hit the ground running, no matter how many times it's failed to happen before.
One thing I need you to know is that I'm NOT the hero come down from the mountain to "save" you and I don't think of myself that way in the least. I'm just being real and calling the shots how I see them, but what I do have is years of personal experience from learning to trade. And I'm willing to share with you what I have learned about the trading game.
Michael B. Collingwood - Investment Trader/Advisor
If you would like more info on this subject please go to http://TraderProgression.com
http://traderprogression.com
Article Source: http://EzineArticles.com/?expert=Michael_Collingwood
So, raise your hand if you've ever had that crammed down your gullet: Buying stock = the Holy Grail of trading...Is that the whole truth? A half truth? Less than Half?
The exact answer is somewhere in between. While there are some real gurus making millions with it and successfully showing others how, the me-too crowd who's never done it for themselves can't rehash it fast enough. Brokers never mention the "what if it goes down problem". They also never ask where you want your stop loss order placed. Or the big question "why are you buying this stock in the first place"?
Thousands of people like you will keep plugging away at dead end jobs making someone else rich with the best years of their lives while they could have been laughing it off with a Pina Colada on a tropical beach with their families. Thousands of dreams will go unfulfilled. Thousands of creators will be stifled in the egg, reduced to corporate drones and glassy eyed pencil pushers when it all could have gone oh so differently had they just gotten the right information instead of a steaming pile of bull.
Next up, I'm going to start telling you a bit about my story. How I got into this and figured it out after stupidly being slapped upside the head one too many times. I'm also going to tell you how you can start doing things in another way from now on to start experiencing other results. How you can have an entirely clean slate and hit the ground running, no matter how many times it's failed to happen before.
One thing I need you to know is that I'm NOT the hero come down from the mountain to "save" you and I don't think of myself that way in the least. I'm just being real and calling the shots how I see them, but what I do have is years of personal experience from learning to trade. And I'm willing to share with you what I have learned about the trading game.
Michael B. Collingwood - Investment Trader/Advisor
If you would like more info on this subject please go to http://TraderProgression.com
http://traderprogression.com
Article Source: http://EzineArticles.com/?expert=Michael_Collingwood
Monday, September 8, 2008
The Mindset of a Successful Stock Investor
By S Mcleod
If you want to be a successful stock investor, it is important that you develop the proper mindset. You can learn all of the strategies and techniques involved with picking the right stocks. However, investing in stocks is just as emotional as it is fact based and if you don't have the right mindset from the beginning, the emotional aspect of investing in stocks will defeat you every time. Here are a few tips to help you develop the mindset of a successful stock investor.
To be a successful stock investor one of the first mindsets you need to develop is the mindset of a professional baseball hitter. In baseball you can strike out 7 out of 10 times and still go to the hall of fame. The stock market is very similar to baseball in this regards. You can be wrong in your stock picks most of the time and still make a lot of money. The key is to recognize when you are wrong quickly, cut your losses and reinvest in a new stock.
Suppose you had a portfolio of $10,000 at the start of the year. Your first nine trades were losing trades over a 12 month period. You cut your losses every time at 10%. Your portfolio would be down to $3487. That's a loss of over 60% of you original portfolio. Is this a complete disaster? Now let's suppose on the tenth trade you were correct. The stock runs up 1000% over the next 12 months (this has happened before on numerous occasions). At the end of that 12 month run up, your portfolio would be worth $34870. Your portfolio has increased 300% over a two year period DESPITE the fact that you were wrong NINE out of TEN times!
As a successful stock investor, you also must have the mindset of a man that is afraid of making a commitment to be in a monogamous relationship. You must never marry a stock. Successful investors always have stocks that they will sell if the stock begins to show trouble signs. For example if the company normally produces quarterly earnings increases of 100%, 200%, etc and then for two consecutive quarters, they report quarterly increases of 10%, 25%, that is a huge red flag to sell. Such a dramatic drop in earnings increases probably indicates the stock is about to take a turn for the worst. Also if you notice that the stock's 200 day moving average on the chart starts down trending instead of up trending, this is another sign that the stock may be in trouble. Unsuccessful investors hold on to their winners. Successful investors have no problems with dumping their winners.
Developing the mindset of a successful stock investor takes time, commitment and an investment in your education. Read books written by and about successful stock investors. Look for chances to practice some of the techniques that you learn. Keep track of what you are doing. Note the trades that worked out well along with the trades that failed to work out in your favor. By doing these things you will develop the mindset of a successful investor and your portfolio will thank you for it.
If you would like to get more information about investing in stocks or trying to see which stocks to buy or sell on a daily basis. Visit my site http://www.dailymadmoney.com
Article Source: http://EzineArticles.com/?expert=S_Mcleod
If you want to be a successful stock investor, it is important that you develop the proper mindset. You can learn all of the strategies and techniques involved with picking the right stocks. However, investing in stocks is just as emotional as it is fact based and if you don't have the right mindset from the beginning, the emotional aspect of investing in stocks will defeat you every time. Here are a few tips to help you develop the mindset of a successful stock investor.
To be a successful stock investor one of the first mindsets you need to develop is the mindset of a professional baseball hitter. In baseball you can strike out 7 out of 10 times and still go to the hall of fame. The stock market is very similar to baseball in this regards. You can be wrong in your stock picks most of the time and still make a lot of money. The key is to recognize when you are wrong quickly, cut your losses and reinvest in a new stock.
Suppose you had a portfolio of $10,000 at the start of the year. Your first nine trades were losing trades over a 12 month period. You cut your losses every time at 10%. Your portfolio would be down to $3487. That's a loss of over 60% of you original portfolio. Is this a complete disaster? Now let's suppose on the tenth trade you were correct. The stock runs up 1000% over the next 12 months (this has happened before on numerous occasions). At the end of that 12 month run up, your portfolio would be worth $34870. Your portfolio has increased 300% over a two year period DESPITE the fact that you were wrong NINE out of TEN times!
As a successful stock investor, you also must have the mindset of a man that is afraid of making a commitment to be in a monogamous relationship. You must never marry a stock. Successful investors always have stocks that they will sell if the stock begins to show trouble signs. For example if the company normally produces quarterly earnings increases of 100%, 200%, etc and then for two consecutive quarters, they report quarterly increases of 10%, 25%, that is a huge red flag to sell. Such a dramatic drop in earnings increases probably indicates the stock is about to take a turn for the worst. Also if you notice that the stock's 200 day moving average on the chart starts down trending instead of up trending, this is another sign that the stock may be in trouble. Unsuccessful investors hold on to their winners. Successful investors have no problems with dumping their winners.
Developing the mindset of a successful stock investor takes time, commitment and an investment in your education. Read books written by and about successful stock investors. Look for chances to practice some of the techniques that you learn. Keep track of what you are doing. Note the trades that worked out well along with the trades that failed to work out in your favor. By doing these things you will develop the mindset of a successful investor and your portfolio will thank you for it.
If you would like to get more information about investing in stocks or trying to see which stocks to buy or sell on a daily basis. Visit my site http://www.dailymadmoney.com
Article Source: http://EzineArticles.com/?expert=S_Mcleod
Friday, September 5, 2008
Position Sizing - The Key to Stock Market Success
By Ken Long
It sounds unbelievable, but trading success has little to do with selecting the right investment or even having a great system. Instead, it has everything to do with "how much" you place at risk on any given trade. Investment professionals usually call this "asset allocation" or "money management." However, they usually fail to understand that the key aspect that drives longevity and success in the market is "how much" to invest in any position.
Others work so hard to get themselves a good system, but then don't see that position sizing is the key element to getting what they really want. If you are fortunate enough to have a great trading system, it is much easier to meet your system objectives through position sizing, but even with an average system you have every reason to expect that you can meet your objectives and profit, if you understand how to position size properly. That's how important this key topic is.
One of the world's most prominent trading coaches and psychologists has observed that research has shown that there is no correlation between the confidence people have in a future trade and the likelihood of it being a success. This is especially true for traders with no proven system. In fact, there is probably a slight negative correlation between confidence level and the likelihood of success. In other words, the more confident you are, the more likely it is that the trade might go poorly. What I have seen over the years is that people are just not good at predicting success. This key insight is confirmed by a lifetime of research conducted by Nobel Prize winners Kahneman and Tversky, among others.
Do you really need to understand how markets work? No, you don't.
All you need to understand is how the concept that you are trading works. For example, if you are a trend follower, you just need to understand that the markets will occasionally move in very large trends. If you can catch the big moves, you'll make a lot of money. If you have a system that does that, then that's all that you need to understand about the markets.
If you are a value investor, then all you need to understand is why something is undervalued and be confident in your ability to determine that. The other two things you need to understand are (1) when your investments are no longer undervalued, meaning it's probably time to sell, and (2) when you might be wrong about your evaluation so you can safely abort and preserve your capital. You don't need to understand the market at all. Warren Buffett doesn't-he thinks the markets are irrational.
I highly recommend the work of Dr Van Tharp at the International Institute of Trading Mastery to look more deeply into this subject.
Ken Long, Chief of Research, Tortoise Capital Management http://www.tortoisecapital.com
Adding value through independent research, combining technical analysis and human behavioral psychology
30 day free trial of reports and live trader chatroom
Article Source: http://EzineArticles.com/?expert=Ken_Long
It sounds unbelievable, but trading success has little to do with selecting the right investment or even having a great system. Instead, it has everything to do with "how much" you place at risk on any given trade. Investment professionals usually call this "asset allocation" or "money management." However, they usually fail to understand that the key aspect that drives longevity and success in the market is "how much" to invest in any position.
Others work so hard to get themselves a good system, but then don't see that position sizing is the key element to getting what they really want. If you are fortunate enough to have a great trading system, it is much easier to meet your system objectives through position sizing, but even with an average system you have every reason to expect that you can meet your objectives and profit, if you understand how to position size properly. That's how important this key topic is.
One of the world's most prominent trading coaches and psychologists has observed that research has shown that there is no correlation between the confidence people have in a future trade and the likelihood of it being a success. This is especially true for traders with no proven system. In fact, there is probably a slight negative correlation between confidence level and the likelihood of success. In other words, the more confident you are, the more likely it is that the trade might go poorly. What I have seen over the years is that people are just not good at predicting success. This key insight is confirmed by a lifetime of research conducted by Nobel Prize winners Kahneman and Tversky, among others.
Do you really need to understand how markets work? No, you don't.
All you need to understand is how the concept that you are trading works. For example, if you are a trend follower, you just need to understand that the markets will occasionally move in very large trends. If you can catch the big moves, you'll make a lot of money. If you have a system that does that, then that's all that you need to understand about the markets.
If you are a value investor, then all you need to understand is why something is undervalued and be confident in your ability to determine that. The other two things you need to understand are (1) when your investments are no longer undervalued, meaning it's probably time to sell, and (2) when you might be wrong about your evaluation so you can safely abort and preserve your capital. You don't need to understand the market at all. Warren Buffett doesn't-he thinks the markets are irrational.
I highly recommend the work of Dr Van Tharp at the International Institute of Trading Mastery to look more deeply into this subject.
Ken Long, Chief of Research, Tortoise Capital Management http://www.tortoisecapital.com
Adding value through independent research, combining technical analysis and human behavioral psychology
30 day free trial of reports and live trader chatroom
Article Source: http://EzineArticles.com/?expert=Ken_Long
Thursday, September 4, 2008
Stock Market Analysis is About More Than Just Buying and Selling Stocks
By Isabel Reyes
When you want to begin really letting your money work for you, you will want to think about investing in the stock market. While this can be a risky venture, if you have some basic stock market education, you will be able to make smart decisions with your money. And you never know-you could hit the next big boom and have the chance to retire early.
While most people really have big dreams about hitting it big with the stock market, those are the people that will take the most risks and probably have the most money to lose. With the right stock market education, you can play it safe and still make a profit.
Firstly, you will want to consult a broker. This is your right hand man when in comes to investing in the stock market. Not only will he be able to suggest your next move, but since he works for you, you don't have to listen to him. If you want to make a move on your own, he'll do it for you. Generally though, your broker will have years of experience that will help you to decide what to need to invest in and what time to make that move.
Next, you will want to have stocks already in mind that you want to buy. You should start watching the market months before you even think about making a leap onto the market. This way, you will be able to spot trends in the stocks that you are following and this will clue you in on what time to buy. Consulting a broker before you are ready to invest is also wise so that you can get feel of how this process works.
Once you are in the stock market, don't worry about every little change. Stocks change at a moment's notice, often a dozen times or more during the day. If you think you are going to have a heart attack every time your stock drops, then maybe the stock market is not right for you.
The stock market education that you need is more than just "buy and sell" - the stock market is about patience and making the right moves at the right time. You have to be smart about the stock market in order to play it for profit. And if you worry too much, you are just going to put yourself in an early grave for no reason. Invest smart and you will be able to sit back and relax, watching the money build up.
Learn how to invest online, make money and reduce the risk while investing. Stock market information, articles and videos. Make your investment decisions based on facts. Get your Free Report called: Stock Marketing Basics at: http://www.stockmarket-exchange.com/
Article Source: http://EzineArticles.com/?expert=Isabel_Reyes
When you want to begin really letting your money work for you, you will want to think about investing in the stock market. While this can be a risky venture, if you have some basic stock market education, you will be able to make smart decisions with your money. And you never know-you could hit the next big boom and have the chance to retire early.
While most people really have big dreams about hitting it big with the stock market, those are the people that will take the most risks and probably have the most money to lose. With the right stock market education, you can play it safe and still make a profit.
Firstly, you will want to consult a broker. This is your right hand man when in comes to investing in the stock market. Not only will he be able to suggest your next move, but since he works for you, you don't have to listen to him. If you want to make a move on your own, he'll do it for you. Generally though, your broker will have years of experience that will help you to decide what to need to invest in and what time to make that move.
Next, you will want to have stocks already in mind that you want to buy. You should start watching the market months before you even think about making a leap onto the market. This way, you will be able to spot trends in the stocks that you are following and this will clue you in on what time to buy. Consulting a broker before you are ready to invest is also wise so that you can get feel of how this process works.
Once you are in the stock market, don't worry about every little change. Stocks change at a moment's notice, often a dozen times or more during the day. If you think you are going to have a heart attack every time your stock drops, then maybe the stock market is not right for you.
The stock market education that you need is more than just "buy and sell" - the stock market is about patience and making the right moves at the right time. You have to be smart about the stock market in order to play it for profit. And if you worry too much, you are just going to put yourself in an early grave for no reason. Invest smart and you will be able to sit back and relax, watching the money build up.
Learn how to invest online, make money and reduce the risk while investing. Stock market information, articles and videos. Make your investment decisions based on facts. Get your Free Report called: Stock Marketing Basics at: http://www.stockmarket-exchange.com/
Article Source: http://EzineArticles.com/?expert=Isabel_Reyes
Wednesday, September 3, 2008
Managing Your Investment Risk
By Ugochukwu Stanley Nwachukwu
We will be discussing risk as it relates to investing. Risk is a household name in the investment world. You hardly talk about the stock market without mentioning risk. As a result, people have developed erroneous conclusions about risk and risk tolerance in the investing world. Many a time, it is discussed without understanding what it really means.
Topmost on investors' mind when discussing risk is how its knowledge can help to reduce or remove losses from their records. And many others will ask: How can understanding this concept help investors in diversifying their portfolios? I hope you will find this class worth your while.
An often talked about cliche is that of what I'll refer to as 'age-based' risk tolerance. It is conventional wisdom that a younger investor has a long term time horizon in terms of the need for investments and can take more risk. Following this logic, an older individual has a short investment horizon, especially once that individual is retired, and would have low risk tolerance while this may be true in general, there are certainly a number of other considerations that come into play. First we need to consider investment. When will the invested funds be needed?
If the time horizon is relatively short, risk tolerance should shift to be more conservative. For long term investments, there is room for more aggressive investing as time happens to offer more opportunity for capital appreciation even in a less responsive market.
Time is an absorber of risk when it comes to investment as long as you have not made fundamental flaws in your choice of stocks. However, I will always advice that you be careful about blindly following conventional wisdom. For example, it is often said that when you are retired, you must shift everything to conservative investments;Some sophisticated investors have long retired and are still investing in companies that look risky. They have grown to have their own investing principles to follow, which means you also have to develop your own style of investment rather than follow the conventional way of investing in what others term as 'risky or non-risky'.
RISK CAPITAL: By definition, networth is your total assets minus your liabilities. Risk capital is capital that can easily be converted into cash or money available to invest or trade that will not affect your lifestyle if lost, which should be an important consideration when determining risk tolerance. Therefore, an investor with a high networth can assume more risk. The smaller the percentage of your overall networth the investment or trade makes up, the more aggressive the risk tolerance can be because losing it at that point will not be as painful as when you lose what you have based your retirement's survival money on.
Unfortunately, those with little to no networth or with limited risk capital are often drawn to riskier your house stocks' because of the lure of quick, easy and large profits. The problem with this is that when you are trading with your house rent' it is difficult to have your head in the game. Also when too much risk is assumed with too little capital, an investor can be forced to sell his stocks too early even at a loss.
DEFINE YOUR INVESTMENT OBJECTIVES: Your investment objectives must also be considered when calculating how much risk can be assumed. If you are investing for a child's future education or your retirement, how much risk do you really want to take with those funds?
INVESTMENT EXPERIENCE: When it comes to determining your risk tolerance, your level of investing experience must also be considered. It is often said that experience is the best teacher. I think that concept is fully applicable in the investing world though it's better not to experience some things. There are many assumptions one can make if he is not yet in the stock market; or better put, if not an educated investor.
It is prudent to begin new ventures with some degree of caution and investing is no different. Get some experience before committing too much capital. Always remember the old idea behind striving for 'preservation of capital' it only makes sense to take on the appropriate risk for your situation if the worst-case scenario will leave you able to live to invest another day.
There are many things to consider when determining the answer to a seemingly simple question ;What is my risk tolerance? The answer will vary based on your age, experience, networth, risk capital and the actual investment being considered. Knowing your risk tolerance and keeping to investments that fit within it should keep you from financial ruin.
Article Source: http://EzineArticles.com/?expert=Ugochukwu_Stanley_Nwachukwu
We will be discussing risk as it relates to investing. Risk is a household name in the investment world. You hardly talk about the stock market without mentioning risk. As a result, people have developed erroneous conclusions about risk and risk tolerance in the investing world. Many a time, it is discussed without understanding what it really means.
Topmost on investors' mind when discussing risk is how its knowledge can help to reduce or remove losses from their records. And many others will ask: How can understanding this concept help investors in diversifying their portfolios? I hope you will find this class worth your while.
An often talked about cliche is that of what I'll refer to as 'age-based' risk tolerance. It is conventional wisdom that a younger investor has a long term time horizon in terms of the need for investments and can take more risk. Following this logic, an older individual has a short investment horizon, especially once that individual is retired, and would have low risk tolerance while this may be true in general, there are certainly a number of other considerations that come into play. First we need to consider investment. When will the invested funds be needed?
If the time horizon is relatively short, risk tolerance should shift to be more conservative. For long term investments, there is room for more aggressive investing as time happens to offer more opportunity for capital appreciation even in a less responsive market.
Time is an absorber of risk when it comes to investment as long as you have not made fundamental flaws in your choice of stocks. However, I will always advice that you be careful about blindly following conventional wisdom. For example, it is often said that when you are retired, you must shift everything to conservative investments;Some sophisticated investors have long retired and are still investing in companies that look risky. They have grown to have their own investing principles to follow, which means you also have to develop your own style of investment rather than follow the conventional way of investing in what others term as 'risky or non-risky'.
RISK CAPITAL: By definition, networth is your total assets minus your liabilities. Risk capital is capital that can easily be converted into cash or money available to invest or trade that will not affect your lifestyle if lost, which should be an important consideration when determining risk tolerance. Therefore, an investor with a high networth can assume more risk. The smaller the percentage of your overall networth the investment or trade makes up, the more aggressive the risk tolerance can be because losing it at that point will not be as painful as when you lose what you have based your retirement's survival money on.
Unfortunately, those with little to no networth or with limited risk capital are often drawn to riskier your house stocks' because of the lure of quick, easy and large profits. The problem with this is that when you are trading with your house rent' it is difficult to have your head in the game. Also when too much risk is assumed with too little capital, an investor can be forced to sell his stocks too early even at a loss.
DEFINE YOUR INVESTMENT OBJECTIVES: Your investment objectives must also be considered when calculating how much risk can be assumed. If you are investing for a child's future education or your retirement, how much risk do you really want to take with those funds?
INVESTMENT EXPERIENCE: When it comes to determining your risk tolerance, your level of investing experience must also be considered. It is often said that experience is the best teacher. I think that concept is fully applicable in the investing world though it's better not to experience some things. There are many assumptions one can make if he is not yet in the stock market; or better put, if not an educated investor.
It is prudent to begin new ventures with some degree of caution and investing is no different. Get some experience before committing too much capital. Always remember the old idea behind striving for 'preservation of capital' it only makes sense to take on the appropriate risk for your situation if the worst-case scenario will leave you able to live to invest another day.
There are many things to consider when determining the answer to a seemingly simple question ;What is my risk tolerance? The answer will vary based on your age, experience, networth, risk capital and the actual investment being considered. Knowing your risk tolerance and keeping to investments that fit within it should keep you from financial ruin.
Article Source: http://EzineArticles.com/?expert=Ugochukwu_Stanley_Nwachukwu
Tuesday, September 2, 2008
How to Start Investing in the Stock Market Guide
By Michael Pergrem
Many people want to start investing in the stock market but have no idea how to start investing in the stock market. They fear they will lose tons of money while learning how the stock market works. Well, with this guide, you will learn effectively how to start investing in the stock market!
The first thing you have to realize when learning how to start investing in the stock market is that you do not need a full time broker. The days of hiring a broker to buy and sell for you are over. With great and inexpensive services such as E trade and Scott trade, you can do all of the investing your self! This puts the control of your money in your hands and saves you a lot of money.
The next step in learning how to start investing in the stock market is using a budget. This is very important! Many people find a stock they think will do good and put far to much money into it. Start small and grow as you go. Start with investing maybe $25 or $50 in a stock at a time. This will save you a ton of money and help you gain valuable experience for future big investments. This is a very important step in learning how to start investing in the stock market so do not skip it...
Another important step in learning how to start investing in the stock market is to never jump in blindly. If you find a stock and have a gut feeling it is going to do good, do not rush into it! Take a little time and do some research. Many times a company may be days from releasing some news that may greatly drop your stock price. Makes sure your purchases are well thought out and planed.
The last step of learning how to start investing in the stock market is to know that sometimes things just will not go your way. The stock market is a game and sometimes you lose. With practice and patience you win much more than you lose but that is what it takes.
Learning how to start investing in the stock market is a fun adventure that will make you jump up and down joyously at times, and slap yourself in the forehead at other times. That is part of the journey and that is the really fun part!
While stock market investing can be difficult at times, it can be made much easier with the right resources. If you want to start making money as soon as possible, then please visit "Stock Market Investing" for a great resource to help you along your way!
Thank you for reading and good luck into your investing adventures!
Article Source: http://EzineArticles.com/?expert=Michael_Pergrem
Many people want to start investing in the stock market but have no idea how to start investing in the stock market. They fear they will lose tons of money while learning how the stock market works. Well, with this guide, you will learn effectively how to start investing in the stock market!
The first thing you have to realize when learning how to start investing in the stock market is that you do not need a full time broker. The days of hiring a broker to buy and sell for you are over. With great and inexpensive services such as E trade and Scott trade, you can do all of the investing your self! This puts the control of your money in your hands and saves you a lot of money.
The next step in learning how to start investing in the stock market is using a budget. This is very important! Many people find a stock they think will do good and put far to much money into it. Start small and grow as you go. Start with investing maybe $25 or $50 in a stock at a time. This will save you a ton of money and help you gain valuable experience for future big investments. This is a very important step in learning how to start investing in the stock market so do not skip it...
Another important step in learning how to start investing in the stock market is to never jump in blindly. If you find a stock and have a gut feeling it is going to do good, do not rush into it! Take a little time and do some research. Many times a company may be days from releasing some news that may greatly drop your stock price. Makes sure your purchases are well thought out and planed.
The last step of learning how to start investing in the stock market is to know that sometimes things just will not go your way. The stock market is a game and sometimes you lose. With practice and patience you win much more than you lose but that is what it takes.
Learning how to start investing in the stock market is a fun adventure that will make you jump up and down joyously at times, and slap yourself in the forehead at other times. That is part of the journey and that is the really fun part!
While stock market investing can be difficult at times, it can be made much easier with the right resources. If you want to start making money as soon as possible, then please visit "Stock Market Investing" for a great resource to help you along your way!
Thank you for reading and good luck into your investing adventures!
Article Source: http://EzineArticles.com/?expert=Michael_Pergrem
Monday, September 1, 2008
Impact of Oil Prices on the Stock Market
By Omar L. Caban
Impact of oil prices on the stock market is inversely proportional. A shoot in oil prices leads to a nose dive in the stock market. And a decrease in oil price on an average leads to a higher stock market return. So, the effect of oil prices becomes predictable in the stock market. The effect is profound when the oil prices increase in the magnitude of 50% to 100% annually. The reasons being:
1. Any movement in the oil prices results in uncertainty in the stock market.
2. Higher the oil prices, higher the transportation, production and heating costs.
Say, a decrease in the oil prices by 10% in US will result in the expected return to double up on the stock market in the following month. The waves of the impact on the world market index will make its presence felt significantly. Though the stock market moves in the opposite direction with respect to oil prices, it is basically a one way traffic. The stock market returns has no impact on the crude oil prices.
The entire stock market does not get equally or at the same time affected by the fluctuation in the oil prices. It is rather subtle. The US industrial sectors that get most affected with rise in oil prices are:
1. The cyclical Services sector gets most negatively influenced. They constitute the general retailers, support services, media, entertainment, leisure, hotels and transport.
2. The sector which follows next in order is Cyclical Consumer goods. These include household goods, textiles, automobiles and parts.
3. The next negatively influenced sector is the Financials. They comprise of investment companies, banks, life, assurance, insurance, real estate, specialty and other finance.
During an oil price rise, it is advisable to hold on to energy stocks shift focus from the mass market general retailers. It is a rather straight forward approach. Rising oil prices results in the escalation in the prices of fuels and lubricants along with passenger transport mediums either by road or air. For example, it takes a cup of crude oil in the production of the plastic for a single disposable nappy.
With the gradual fading of the interest rates and the rapid diversion of the disposable incomes in catering to the ever rising household energy bills, there is actually little scope for any discretionary expense on the high street. That is the reason why mass market retailers ought to be avoided with respect to stock investments
Best Growth Stock Market Report provides you with the best stock market picks and stock market advices
Article Source: http://EzineArticles.com/?expert=Omar_L._Caban
Impact of oil prices on the stock market is inversely proportional. A shoot in oil prices leads to a nose dive in the stock market. And a decrease in oil price on an average leads to a higher stock market return. So, the effect of oil prices becomes predictable in the stock market. The effect is profound when the oil prices increase in the magnitude of 50% to 100% annually. The reasons being:
1. Any movement in the oil prices results in uncertainty in the stock market.
2. Higher the oil prices, higher the transportation, production and heating costs.
Say, a decrease in the oil prices by 10% in US will result in the expected return to double up on the stock market in the following month. The waves of the impact on the world market index will make its presence felt significantly. Though the stock market moves in the opposite direction with respect to oil prices, it is basically a one way traffic. The stock market returns has no impact on the crude oil prices.
The entire stock market does not get equally or at the same time affected by the fluctuation in the oil prices. It is rather subtle. The US industrial sectors that get most affected with rise in oil prices are:
1. The cyclical Services sector gets most negatively influenced. They constitute the general retailers, support services, media, entertainment, leisure, hotels and transport.
2. The sector which follows next in order is Cyclical Consumer goods. These include household goods, textiles, automobiles and parts.
3. The next negatively influenced sector is the Financials. They comprise of investment companies, banks, life, assurance, insurance, real estate, specialty and other finance.
During an oil price rise, it is advisable to hold on to energy stocks shift focus from the mass market general retailers. It is a rather straight forward approach. Rising oil prices results in the escalation in the prices of fuels and lubricants along with passenger transport mediums either by road or air. For example, it takes a cup of crude oil in the production of the plastic for a single disposable nappy.
With the gradual fading of the interest rates and the rapid diversion of the disposable incomes in catering to the ever rising household energy bills, there is actually little scope for any discretionary expense on the high street. That is the reason why mass market retailers ought to be avoided with respect to stock investments
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Article Source: http://EzineArticles.com/?expert=Omar_L._Caban
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