stocks

Reducing the Risk of Stock Market Investing

2008-11-20T00:02:00.001-08:00

You finally have money to call your own. Now that you have your own money, you naturally want to see it grow. Maybe saving money in a bank simply doesn't entice you because there is so little growth potential. You want something with more risk so you have the potential to realize a far greater financial return. You decide to turn to the stock market.

Wait a minute! Are the risks involved in investing in today's volatile stock market worth your hard-earned cash? Investing can be an effective tool to grow your money, but you must have an open mind and know exactly what to look for.

As everyone knows, investing in the stock market is a risky endeavor. There are certain risks you simply cannot control.

One example is to exercise caution when investing in "hot" stocks. Of course there are some people that get wealthy investing in "hot" stocks, such as the "dot com" bubble that happened in the 1990s. However, when the initial buzz about these "hot" stocks starts to slide, so does your investment in them.

Once these stocks fall, they tend to fall really hard in a short period of time. Your money and the money of others like you falls along with the stocks. If you really feel the need to invest in "hot" stocks, you must keep a constant eye on them and sell them right away as they start to level off or drop.

To avoid risks such as these, diversify your investment portfolio. Buy a little bit of a lot of different types of stocks and bonds. By doing this, if one stock goes down another is likely to go up so you can attempt to recover some of your losses. It is always a wise idea to have a few stocks in the technology sector, biomedical, consumer corporations and telecommunications.

Over time, add to your portfolio with diamond and precious metal indexes and some general investment funds. A diverse portfolio increases your chances of profiting from the stock market.

There are companies that exist offering "safety stocks" to investors. It is a solid decision to have several shares of these type of "safe" companies in your investment portfolio. These types of stocks rarely fluctuate and usually offer steady, slow growth so you have some level of assurance in your investments.

Never rely on tip that says a stock is "going to be really big" or other related hype. These tips are usually unfounded and the stocks are often almost worthless. When you invest in these stocks you may get a higher return at first but in the long run, these stocks will be your greatest concern.

Take time to carefully read the Wall Street Journal or read the latest stock report on the news networks to find out more about your investments. Check relevant websites to verify how your stocks have been performing in the past few weeks. Lastly, keep up to date with the current stock market to make sure your investments are still smart.

Create Wealth In The Stock Market

2008-11-17T09:31:00.001-08:00

First and foremost, an opportunistic strategy for creating wealth in the stock market is needed. And the opportunistic strategy for creating wealth in the stock market must have two ingredients, a plan and a goal. The plan must be a definite, concrete plan of investing that would profit you and your family for the rest of your lives.

This opportunistic investment plan you begin should not profit anyone else – not a stockbroker, a mutual fund or a financial advisor. This means you have to have confidence in yourself and in your own judgment as to whether the investment plan you begin has merit. And this means that the investment plan would and should have already been proven to you!

This definite, concrete plan you begin for creating wealth through opportunities in the stock market must also have a goal. The goal should be clear and specific, and once your have made up your mind to achieve that goal, then go forward and make that goal a reality.

What are the opportunistic traits of a strategic investment plan built on a concrete foundation that would actually allow the shareholder to profit through all the turmoil of an up and down stock market? The secret for creating wealth in the stock market; no matter what direction the market is heading?

As in what appears to be the most difficult investment question of all to answer, the answer lies in simplicity itself – investing in those companies that have a historical record of raising their dividend every year. Whether or not you can take this statement of fact to heart is your own judgment call. But it is this opportunistic trait that can and will create wealth for you and your family for the rest of your lives.

A company’s ability to raise its dividend every year, coupled with stock appreciation is a very powerful wealth creating formula!

I’m going to provide you with two examples, though there are many more, some with even better results. The two examples are from my book, published by American-Book Publishing – ‘The Stockopoly Plan – Investing for Retirement’ (where an investment plan and a goal are written in stone).

The first example would be a stock purchased in 1990, Comerica (CMA). What led to the purchase of CMA? – In 1990 CMA had a 21 year history of raising their dividend every year. Today’s CMA has a 35 year history of raising their dividend every year. This opportunistic trait in CMA stock has garnished a little better than a 15 percent return a year, compounded annually (just by having the dividends reinvested back into the stock each quarter through those years – I prove this to you in The Stockopoly Plan), for the past 14 plus years. Today’s CMA stock just recently touched a new high at $60 dollars a share, with a dividend yield of around 3½ percent. In April of 2003 the stock was selling around $37.50 a share, paying a dividend yield of around 5% a year. Am I tempted to sell my position in CMA? Do I care if the stock drops from this lofty price back to $37 a share? Why should I? If the stock drops back to $37 a share, my dividends being reinvested back into the stock each quarter purchases more shares, and my dividend income from CMA simply and dramatically accelerates. I am also already prepared that if a buy-out offer is ever made for the company to reap the profits of owning the stock (as well as the possibility of another stock split).

The second example is (unfortunately) in my book, also. I say unfortunately because my book is in the final copy edit stage, so no one has had a chance to read and benefit from it, and since a buy-out offer was made for the stock last week or so, the stock will no longer exist (this means a rewrite for me, before publication). The company in question is the Rouse Co. (RSE), which was just purchased by General Growth Properties (GGP). Oddly enough, you’ll find GGP in my book, also – if you bother to pick it up. Anyway, that’s neither here nor there - RSE, on the takeover bid jumped over $16.00 a share in one day! Whew! Why couldn’t they have waited a couple of months until my book was released? RSE had the opportunistic trait of raising their dividend every year since 1993 and I was quite content with its performance through the years.

Well, that last paragraph blew my train of thought on this article. All I can think about at the moment is my rewrite.

I would like to take this time to explain something to you. I have never considered myself a writer nor am I a stock market professional. I am simply a man with 39 years of experience and a passion for the stock market, trying to share what wisdom those years have given me. When I sit down to write an article, I seldom have an idea on what I’m going to say. It was the same way when I sat down to write my book. I just meant to put down a few words on paper for my 18-year old son so he would have a sound, concrete plan for investing in those companies that make up the stock market (quite frankly – I didn’t want him to blow his inheritance). Whether you find merit in what I say, I have no idea. What I do know is that life is just too short to learn everything you need to learn by yourself, without the help of others.

There, now I’m satisfied with that ending!

Stock Marketing and Investing Mistakes To Avoid

2008-11-14T02:39:00.000-08:00

Investing in the stock market is probably one of the riskiest ventures you can delve into with your money. It is also one of the most profitable. So it is only normal that you may have reservations about actually trying your luck in the stock market.

There are two people that you need to find and make friends with to get started investing in the stock market. If you are a brand spanking new beginner then first find a friend that invests in stocks. Preferable you want to find someone you have known for a while and someone that you can trust as a friend. You can use your friend to bounce ideas off of and get help from. Also you want to find a good stockbroker to begin trading. You might ask your friend who he or she uses as a stockbroker. Later on once you have gotten your feet wet you will want to strike out on your own but have a safety net in place before doing that.

One of the worst stock moves you can make is with variable annuities using the premium of your insurance. A variable annuity is an insurance contract that allows you to invest your premium in mutual fund-like investments. This sounds good in paper, but if you look at it a little harder, you will find that they are bad investments in the long run for the following reason:

Some other things that you want to watch out for and be carefully when considering investing follow.

Tax cuts
Ordinary investments in stocks and mutual funds qualify for low capital gains treatments, thus smaller taxes. Your gains from investing your premium, on the other hand, get taxed as income as soon as you withdraw the money.

Early withdrawal penalties
Insurance plans are designed for retirement. Taking out money from your premium entails a certain amount of penalty from both the insurance company as well as the government. So if you withdraw your profits, you will be penalized.

Death benefit
If your stocks are down upon your death, your beneficiaries can get as much as the investments you put in. Unfortunately, if your stocks are up, they get taxed as a regular income.

Costs
Annuities with insurance features are actually more expensive than ordinary mutual funds. The more insurance features your annuity has, the more annual feels are heaped against it, which naturally eats up your profits.

Timing
There are specific times as well, when to and when to not make an investment. For example times of natural calamity may drive prices of stocks down but there are no insurance these would recover to make a good profit.

Of course investing money in the stock market is inherently risky and you will lose some money at some point in your stock investing career. It is natural and a part of the learning process. The important thing is don't give up and stop just because you have a lost a little money. Take the loss as a learning experience and move on. Now if you find all of your trades end up losing money then you might decide to take a different route. However by following the advice and tips above along with your own knowledge you will end up profitable int he long run.

Rules for Successful Tax-free Income Investing

2008-11-12T00:15:00.000-08:00

Do you sometimes question the performance of your investment portfolio? If you are like most investors you have your income producing assets thrown in together with your equity portfolio. You look at the total mix of dividend paying stocks, bonds, mutual funds and equities, and you’re confused as to why they’re not producing enough income or growing your portfolio value sufficiently.

I have found that part of the reason is the nearly universal propensity of investors to ignore the long-term implications of their income investment decisions while they focus on short-term effects.

Because fixed income investing simply isn’t regarded as being as exciting as other stock market investing, it has often been relegated to the “ho-hum” category by writers and not as much ink has been devoted to its ins and outs as has been expended on other types of investing. I think that’s a disservice to those interested in this type of investment.

Investing for income, be it taxable or tax-free, -- and, for the record, my preference for generating tax-free income for clients is the use of CEETBFs (Closed End Exchange Traded Bond Funds) as described in my free e-book “How to earn 5% - 6.5% tax-free income.” -- has some common denominators, which I have broken down into 10 rules. These will help you make better decisions and, at the same time, view income oriented investments with the correct mindset, so that you don’t constantly try to second guess yourself.

1. It’s important to consider the performance of the Fixed Income portion of a portfolio separately from the equity portion. Why? Because the objectives are entirely different.

Equity investments are for growth, while the primary purpose of owning fixed income securities is to generate a secure cash flow—either for spending or reinvesting until it is needed. For most people, the long-term goal of an Investment program is to generate enough income to live on, without having to touch the principal.

To most effectively analyze and manage your investments, keep your equity account separate from your income generating account.

2. All fixed income securities are “interest rate sensitive.” Because of this their market price will always “vary inversely” with the anticipated direction of interest rates. Interest rates on the rise, prices will fall. Interest rates thought to be headed south, investment prices will move higher.

This applies to all Bond, Preferred Stock, & REIT prices. Accept it and live with it! The variables for the movement in price are the quality rating of the issuer, the length of time until Maturity, or the Call Date.

Do remember that price changes in Fixed Income Securities are not an indicator of, and have little impact on, the ability of the issuer to pay interest. So instead of beating yourself up when interest rates start to rise, take advantage of higher yields.

3. Because of what they are, Fixed Income Securities are generally held for the long term. The factor to consider is the amount of income being received. There is no benefit in trying to predict the future direction of interest rates, and I strongly suggest you avoid that—along with constant monitoring of changes in portfolio value.

Remember, fixed income investing works in a way like your day-to-day personal finances. You pay your expenses from your income, not from your net worth.

4. Buy only fixed income instruments where the costs are transparent. In other words, many new issues sold by brokers can carry hidden costs. While commissions have to be disclosed mark-ups don’t.

There are often extremely large mark ups—3% or more is not uncommon—on new issues. Buyer beware.

5. Seek out instruments with the longest duration and only those that are Investment Grade. If you’re conservative, you can find many closed end funds that are insured and use no leverage, though they offer a slightly lower yield.

6. All Interest Rate Sensitive Securities follow the same rules! This means the value of everyone’s bonds will be going in the same direction as yours at any given time. Don’t submit to temptation. Emotions, fear, or other non-objective motives are not good reasons to switch from one Fixed Income fund to another.

Focus on diversification and avoid investments with yields that seem too good to be true. In that aspect, Fixed Income investing and Equity investing share a couple common guidelines: (1) if it seems too good to be true, it probably is, and, (2) no matter how good the hype, you can’t make a silk purse out of a sow’s ear.

7. Income production is the primary reason to purchase Fixed Income Securities. Once you truly understand that you will realize that the only thing you need to pay attention to on your monthly statement is the “Income Received” number. I suggest you ignore the others.

8. To become a successful Income investor, you must also understand the following points and agree with them:

* Higher interest rates are a boon to the Fixed Income Investor; they put more money in your pocket.
* Lower interest rates also offer benefit for the Fixed Income Investor; they give you the chance to add Capital Gains to the total spending money your investments generate.
* Changes in the market value of Investment Grade Fixed Income Securities should have absolutely no meaning to you 95% of the time.

9. Open Ended Income Mutual Funds will not serve your objectives. It is no secret that the fixed income variety almost never go up. As interest rates cascaded downward over the last several years, Open Ended Income Mutual Funds did not show the same degree of gains enjoyed by individual securities—while Closed End Funds did respond to these factors.

10. There are a number of reasons why it’s to your benefit to primarily use Closed End Exchange Traded Funds: Low acquisition costs, complete liquidity, professional fund management and monthly predictable cash flow. Additionally, you’re offered the opportunity to buy more when prices fall and to realize capital gains when interest rates are on the downturn.

Why haven’t you heard about these funds from your financial professional before? Especially now when many are yielding around 6% tax-free? For the simple reason that there is no money to be made for the financial professional recommending them. While these funds may increase your monthly income, they won’t do a thing for the commission hungry salesman.

If you manage your portfolio, hopefully these 10 points will assist you in more profitable investing. If you’re unsure about putting an income portfolio together by yourself, find a professional who works with these types of funds and is aware of the principles I have described, and let him or her assist you in creating the income you need to enjoy a dignified retirement.

Stocks Are Your Best Friend

2008-11-10T03:38:00.000-08:00

History suggests that stocks are the best investment you can make when you're in it for the long haul. No matter the investment vehicle, be it bonds, cash, diamonds, silver, gold, in the long run stocks give the best returns. I read in a lot of places that stocks returns are higher than real estate returns but I don't personally agree. Real estate returns are calculated on the basis of the property's appreciation, but if you want to calculate your personal return on a real estate investment, you have to account for the fact that only part of your investment was financed with your own money... But I digress...

What happens if you compare stocks to cash over the long term? A good example of a cash investment is money invested in three-month Treasuries or a first-rate money market fund. A cash investment is NOT the emergency savings fund that is recommended you keep on hand for a rainy day. Over the past 60 years, cash has turned out to be a loser. After accounting for inflation, cash has returned an average 0.5% per year since 1926, compared to 6.9% for the S&P 500.

If you want to invest in financial instruments but don't think you can handle the short term volatility of stocks, you might consider bonds. But how to they fare? Together, returns on large and small-company stocks averaged 11.3% a year since 1926. Long-term Treasury bonds did significantly less wel, averaging a 5.02% return over the same period. In all fairness, it has to be pointed out that bond yields don't generally match stock returns in the long run, but investing in bonds doesn't come with the wild swings that are a given with stock investing.

As for other investment vehicles like precious metals, diamonds, oil, collectibles, there are times when they indeed return much higher yields than run-of-the-mill stocks. As a rule, stashing your cash in such vehicles is considered smart in times of high inflation, where stocks and bonds tend to underperform, but not in the long run. Returns on those assets vary wildly from year to year, and what is hot this year can be the biggest loser next year.

It's undeniable that investing in the stock market requires a strong stomach, not only to stay in the market when stock values are going south, but to keep investing in those troubled times. But 80 years of financial data have shown us that the market has always rebounded from downturns, reaching higher levels each time. If the past is indicative of the future (and most analysts seem to think so), if you're considering investing, stocks may be your best friends. Just make sure you don't panic when there's a crash. How you allocate your portfolio among broad categories is probably more important than what specific stocks or bonds you buy.

Best Stock to Invest In

2008-11-10T03:37:00.000-08:00

So, you’re looking to secure your future, huh? And the best way you thought how to do so is by investing in the stock market. Well, let me tell you something… good choice! The business of stock trading and stock investing is a very rewarding one indeed, but only if you dedicate enough discipline and hard effort is put into understanding it. I guess your immediate question would be, which is the best stock to invest in?, right?

I could talk to you about all the popular and good stocks to buy out there, but that’s just the problem… their too popular. From my own experience I can say that one of my best stock picks was of a small company back in ’89… now one of the – if not the most – powerful multinational corporations in the world. I’m not going to reveal the company’s name though, but at the time I bought them, is was selling penny stocks. It cost be around $0.70 to buy one stock, so I bought a bunch of them. It was risky but, then again, I only spent around $400 bucks.

The Early Years

The first year, my little NASDAQ penny stocks went up around +0.30. That means they were up to $1.00! that was good knows! But I wanted them to go up a little further and then sell them so I could make the difference… To my surprise they dropped to $0.90 – something like that. But this wasn’t a bad surprise for me, somehow I ended up buying a whole bunch more… spent around $2,000! To this day I don’t know why, but I took the risk!

For the next 10 years the stocks skyrocketed and I was selling and buying and selling and buying… From a bunch of day trading penny stocks, I made a great deal of money, but the thing is… by 1999 they weren’t penny stocks anymore! Their price had gone up to a whopping $50 per stock! How about that! Life was good! And still is… Thanks to that moment!

In Short

What I’m trying to say here is, the best stock to invest in isn’t always the one that’s worth hundreds of dollars. Sometimes you just have to go for it and take the risk with penny stocks, and sometimes with enough research you know the penny stocks are going to explode some day and make you a real fortune!

Guide To Choosing A Stock Broker

2008-11-06T09:15:00.000-08:00

There are many types of brokerage services available. Even the average investor will use a broker to handle his stock market transactions. Some brokers will even give advice about which stocks to buy and sell based on their market trend research.

Obviously these tips are not free. In fact, full service brokers will charge the highest commission rate in the industry. Your choice of broker should depend upon your knowledge of the stock market and how regularly you trade.

Going to "discount brokers" will help you save on commission fees while still using a brokerage. The commission rates are so low because these brokers do not offer advice or analysis. Using a discount broker is perfect for investors that like to make their own trading decisions.

The cheapest brokerages will be online companies. Some of these operate exclusively online, so it helps them offer you lower rates. Some full-service and discount brokers even offer discounts for placing orders online. The process is the same, regardless of which broker you choose. The first step is opening an account. You need to be familiar with all the fine print and understand all the fees involved.

Typically, you are required to maintain a certain account balance, which varies from broker to broker. Some brokers charge when your account balance falls below the minimum. Others charge an annual maintenance fee regardless of the balance.

There are two types of brokerage accounts, and the one you choose depends upon your goals. "Cash accounts" offer no credit. So when you purchase stock, you are paying the full amount of the stock price. On the other hand, the "margin account" allows you to buy stock "on margin.

Margin fluctuates between brokers, but it always has to be protected by the value of the client's portfolio. Unfortunately, if the portfolio falls between a certain amount, the investor would have to add more funds or sell some stock. These margin accounts are desirable because they allow people to buy more stock with less cash. This creates great gains but unfortunately greater losses, as well. Obviously, these margin accounts can be extremely risky, so they are not recommended for inexperienced traders.

The broker that you choose depends on your needs as an investor. Specifically, it depends on if the investor wants to receive advice about stock to purchase and whether or not the investor is comfortable making trades on the Internet. If the investor is nervous about trading, going with a full-service broker would make it much easier. Otherwise, if you are technology savvy and have the knowledge and confidence in your stock trading, a discount broker will surely save you money.

Make sure to compare a few competitors after you choose. There can even be significant cost differences between the same type of broker. You also need to make some final decisions on your account. After you choose a brokerage type, it is important to shop competitors of a few brokerage firms. But first you need to gather some information to take them. You need to estimate how often you will be trading and how much cash you will deposit into your account. You also need to decide between a cash account and a margin account. Deciding on all of this information early will allow you to accurately compare competitor's pricing.

Direct Access Stock Trading

2008-11-03T06:20:00.000-08:00

Online trading of stocks offered many more advantages than traditional stock trading such as faster trade execution, updated market information and sophisticated market research tools. But for some stock traders, like day traders, online trading were not so enough, which is why direct access stock trading has its existence. In direct access trading, DAT or EDAT, the trades are executed in real-time with real-time market information. The process is very simple and is fully automated with minimum/no human interfere.

The major benefit of direct access stock trading is that it does not require any broker assistance. The trades are executed by the trader himself, giving him the full control of his money; also full risk. Direct access stock trading usually involves much less commission fees than online trading, is also offer liquidity rebates and slippage control. But this style of trading is not recommended for long-term investors or position trades and part-time traders, as the traders have to satisfy account minimums and trading minimums; other wise will result in penalties and inactivity fees.

Direct access stock trading is carried out through specialized stand alone trading platforms, the direct access or level2 trading systems. These systems are installed on computers connected to high-speed communication networks. Today most direct access stock traders trade from their home. With the level2 or even level3 market access they can monitor real-time market data like ask and bid prices, market makers involved in trading, and order sizes. He can begin his purchase by just clicking on his choice of price and entering his order size. Direct access stock traders, unlike online traders, can route his order to his choice of market maker. The market maker then matches this order and transfers the stock. The results can be seen instantly.

As trades are executed in real-time, direct access stock traders can react quickly to any profit making situation and also can limit their loss when market goes down. Most direct access brokers offer much more leverage to day traders and thus the trader can increase his buying power considerably. There are a variety of direct access trading platforms available, and one broker offering more than one platform, of different levels, is common. These platforms may have a monthly usage fee, which is decreased by the increase in number of trades as well as increase in volume per trade done by the trader. Most direct access stock brokers offer paper trading accounts for a limited period to test drive their software.

Lastly, direct access stock trading is not recommended for novice traders as well as doubtful traders. As most trades are margin trades, you are always on the risk of losing your money. Remember it is a broker independent trading procedure – so there is little chance of getting advices.

Important Features Of Stock Trading System

2008-11-03T06:19:00.000-08:00

Investors as well as traders, are greatly interested in the stock market. It has revealed itself as the best platform to help one's capital grow, provided the person is in tune with current market trends and knows where to put his/her money. The popularity of this method has prompted people from the trading community to go in for an efficient stock trading system.

Another reason for the demand to have a good stock trading system in place is the rise in global stock markets. As a matter of fact, traders/brokers as well as investors/shareholders are finding that the task of trading in equities or shares or stocks is proving to be extremely complicated, considering that newer companies and institutions are being launched all the time. And the Internet has not helped by bringing the world closer to home!

What are the features of a stock trading system?

(1) What is meant by a stock trading system? It is a tool to enhance the success of investments, especially if it works effectively and efficiently. It includes strategies related to investments, market guides and trading schemes.

There are experienced analysts and professionals to guide the trader or investor as needed. This is achieved by providing a constant flow of information and analysis regarding market trends and movements in the stock market arena. Without this in place, it would be difficult for smooth functioning of the stock market.

Lastly, there is a timing system included in the package. Thus, every investor is aware of the time limits for investing in a particular stock.

(2) A stock trading system is not something that can be just bought at any marketplace! There are special individual distributors or operators available--they can be found locally too. These dealers offer a customer much more than just a system. They are truly worth it because they can lessen your headaches! All the more better to go to them if you have linked up with other business partners.

(3) Another option is to check out those special companies offering to sell systems that are dependable and have already been well promoted.

(4) Traditional or conventional methods of transactions are giving way to more modern methods. So there is the automatic/electronic stock trading system which is faster and more interactive in nature.

Since trading in stocks has become a global activity, it is difficult for investors to be present physically at all locations. He/she need not attend auction venues or trading places for the express purpose of buying or selling shares or trading stocks. Hence, the launch of electronic transactions.

This sort of a stock trading system is quick and convenient since it is supported by wireless Internet and wireless telephone. More advanced technology is sure to evolve in future.

The Stock Market Puzzle

2008-10-31T09:31:00.000-07:00

I have been hunting around for the best places to invest my money for some years now. You see, I'm not an impulsive person. If anything, I am a little bit obsessive compulsive. I'm moreover a PhD. level student of mathematics. As such, I am interested in the mathematical reasons that underlie investment decisions. I'm also as interested in the mathematical basis behind stock market trends as I am with actually making money from them. Don't get me wrong, once I figure out what the best investments actually are, even if that means high risk stocks and shares, I will go out and make a killing. So it's not that I'm not that interested in making money, it is just that I have this innate desire to discover the underpinnings of the financial products that I am looking at, before I choose to invest in them. It's just the way my mind functions.

For sure, there is no one best spot to invest forever, however there are several reasonable ones. The finest place to invest your money depends on what you're aiming to do. You may perhaps invest in stocks for a variety of assorted reasons. And, if you do happen to get a hot tip, it might even be very sensible to invest in stocks. Though, I ought to point out that if you received some of those email hot tips that appear in a spam-like way in your inbox, just ignore them. The people who've sent them have only bought that stock themselves and are trying to get others to buy it too, after them, so that the share price rises and they can make a quick buck.

Anyway, what few people understand regarding the stock market is that the win-it-all or lose-it-all phenomenon is much rarer than the media makes it seem. Most people who invest in the stock market actually are fairly careful. They've usually placed a lot of cash into a stock, and are in it for the long term. They don't want to be reckless with their futures, so they make conservative investments.

My investigation of where are best places to invest demands me to come up with a definition of what "best" actually means. Since I'm a mathematician, I undertake to define it mathematically. The top spots to invest must possess a mishmash of characteristics. They must provide an investment opportunity that is money-making but, at the same time, as safe as possible. Usually, these attributes work in opposition.

For example, day trading on the stock market is extremely profitable if done right, but also really dangerous. Investing in land, on the other hand, may perhaps take a great deal longer to turn a profit however it tends to be much less risky. Hence, the overall best places to invest are a bit difficult to find. It is hard to find something that combines all of the favorable ingredients equally.

The most important thing to figure out is that the best spots to invest actually change from day to day. One week, the securities market may be in top condition. The next week, it might be the real-estate market. The finest places to invest money in the short-term change weekly, sometimes daily. And even the value of long term investments is subject to frequent change. It has to be said that if you want to invest your money wisely, you really need to do your homework.

Timing in Stock Market Investing

2008-10-28T20:02:00.001-07:00

When it comes to stock market investing, timing is everything. The only option that exists for a successful stock market investor is to aim for the best timing for maximum profits and fewer losses.

Companies issue their stocks to raise capital and invest in the business. Stocks are made available to the public so they can buy and sell them. The price of stock depends on the supply and demand involved, much like the cost of any other item. The stock market takes full advantage of the concept of supply and demand.

Getting into the business of stock market trading often yields more significant profits to investors as opposed to entering into an ordinary stock enterprise. There are a wide variety of stocks to choose from when any investor embarks upon stock trading. Among thousands of registered stocks, there is also always a moving stock out there.

Those who go about carelessly proceeding into the stock market are certain to have undesirable results. Large losses may be incurred if the market trend is not properly predicted. On the other hand, small profits are frustrating to the purpose of stock market trading and earning major money. Uninformed stock traders can wind up waiting around for a decisive moment that might not ever arrive.

Timing The Market

Investors use market timing to predict when the market will change its course. By using market timing, investors seek to avoid the negative effects of poor stock market trading. When using market timing, it is automatically presumed
that the decisive point can be predicted ahead of time. By examining pertinent economic data and the price, the direction of the market is predicted to encourage more lucrative stock trading.

Having The Best Timing

The aim of those seeking to be successful at stock investing is to have the best timing. The consistency of such trend prediction is subject to a variety of factors. While market timing sounds like a certain way to make big money, it is not without serious effort. Serious exertion is required involving persistence in studying various market factors and ongoing effort to remain knowledgeable about current market trends. Mere speculation must be avoided. Speculating is a desperate move used when a stock investor has not done the proper homework.

Sometimes investors purchase stocks based on a hot tip they got from someone else. Unfortunately, the majority of these hot tips wind up being false since they are usually offered by parties with their own vested interests.

To have effective market time, investors must get actively involved in research about the company’s history so they can calculate the trend by charting the movement of the stock’s price. The value of the stock must be analyzed to make a fairly accurate prediction about the market trend. By using this method, investors develop standards for when to purchase and when to sell so they can accurately time their investments.

Other considerations as a stock investor include when to resell the stock purchased when it reaches peak value. With analytical research and knowledge, investors can realize maximum profits by taking calculated risks.

Stock Split Essentials

2008-10-28T20:01:00.000-07:00

Stock splits present one of the most misunderstood aspects of the stock market. Psychologically stock splits feel like you have gained value, but in reality you just own twice as much paper. Much the same as if you changed a ten-dollar bill for two five-dollar bills. Once a stock splits 2-for-1 you have twice as many pieces of paper (shares) as you did before. But your shares still represents the same percentage of the total outstanding shares of the company as it did before.

Why do companies split their stock? Investor psychology motivates the issuing company to do this. Stocks are generally sold in lots of 100. When a stock splits it’s more likely to the needs of a small investor. For instance suppose a stock is selling for $60 a share. A lot of 100 shares would cost $600. If this stock splits 3-for 1, the price of a share goes from $60 to $20; and the cost to 100 shares goes from $600 to $200. Suppose a small investor has $400 he would like to invest. A hundred shares for $600.00 is out of his reach, but 200 shares for $400.00 meets his needs exactly.

Although there are many ratios a stock could split, the most common splits are 2-for-1, 3-for-2, and 3-for-1. Also possible is a reverse split where a company reduces the outstanding shares. A reverse split results in each holder being issued less shares than before. A reverse split gives you less paper but you still own the same percentage of the company. One reason a company might decide to do a reverse split is that price per share is so small it looks like a poor investment. If the price of a share becomes too low it might
get de-listed by the stock exchange. Other reasons for a reverse split could be to push out minority stockholders, or as a way to go private.

What are the advantages of a Stock split? The biggest advantages of a stock split is greater liquidity. As mentioned before stocks are sold in lots of a hundred. So the lower the price of the stock, the more likely they will meet the criteria of a small investor’s budget. The bid/ask spread is the difference between buying and selling prices. Typically the smaller the price of a stock the smaller the bid/ask spread. A high bid/ask spread can put off larger investors.

Psychologically, a split is perceived as bullishness. The spit is seen as a sign that the company is doing well. A stock split generally sets off a short-term rally, although the market usually normalizes shortly.

One of the disadvantages is that a split raises investor expectation about the company’s performance. If these expectations are not met, there is a rebound effect and the investor’s lose confidence which may result in falling share prices.

When all is said and done a stock split doesn’t change the value or performance of a company. The investor may own twice as many shares, but the total value is unchanged. Probably the most important thing is that you now own more shares. This will, of course, benefit you if the price of the stock continues to rise.

Free Stock Market Tickers

2008-10-28T20:00:00.000-07:00

Stock market ticker is used to keep track of the share price of the companies that are listed in that particular exchange. Earlier stock market tickers were only put up in the exchanges and brokerage houses. As technology evolved, the stock market ticker started appearing on TV and soon these tickers were available on the internet provided as a service by various firms. Initially these tickers were available at a price to those who trade over the internet. Now it is a free service by various news channels and the websites of brokerages and exchanges. The power of technology has truly revolutionised the way things work.

Stock market tickers now come with other advanced features that you can use as you use the ticker. You can keep track of the prices of the shares of stocks that you have in your portfolio in real time. These tickers also give you information about the highs and lows of the share price during the day and the volume of shares traded during the day. You can keep track of the networth of your investment in the stock market. There are also portfolio management features in these stock tickers that will help manage you your portfolio so that you can make maximum returns in the stock market. There is also a stock watch feature in which you can add all the stocks whose prices you want to keep track of. As and when the stock enters
your buy range, you can buy the stock and reap the benefits of technology.

The tickers that are used these days are judged on the speed with which they relay the information to you and the ease of use. It has to be quite user friendly and the prices of any share of stock should be easily accessible by you. This has to happen quickly too as these days the stock prices move up or down in a matter of minutes.

Any service is judged on the customer service that it provides. There are a lot of tickers out there that are really easy to use and that provide good speed. But if you develop a problem with your ticker then you will be banking on the customer service of the firm to bail you out. Customer service can be gauged only by experiencing it firsthand. If you are new to the stock market and you are just learning to use the ticker, then it is better to use the ticker of your brokerage firm if it provides one or the ticker of a reputed firm. As you get used to the various terms and get used to the stock market functioning, you can try out the various free tickers that are available on the internet.

As you can see, the stock market ticker is a useful tool if you are an avid investor or trader in the stock market. Your work will definitely become easier as stock prices become easily accessible for you. This will definitely increase your efficiency which will directly increase the profits you make in the stock market.

Stock Option Trading Millionaire Principles

2008-10-23T19:36:00.000-07:00

Having been trading stocks and options in the capital markets professionally over the years, I have seen many ups and downs.

I have seen paupers become millionaires overnight...

And

I have seen millionaires become paupers overnight...

One story told to me by my mentor is still etched in my mind:

"Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful and decided to share their insights with others by selling their stock market forecasts in newsletters. Each charged US$10,000 for their opinions. One trader was so curious to know their views that he spent all of his $20,000 savings to buy both their opinions. His friends were naturally excited about what the two masters had to say about the stock market's direction. When they asked their friend, he was fuming mad. Confused, they asked their friend about his anger. He said, ‘One said BULLISH and the other said BEARISH!'"

The point of this illustration is that it was the trader who was wrong. In today's stock and option market, people can have different opinions of future market direction and still profit. The differences lay in the stock picking or options strategy and in the mental attitude and discipline one uses in implementing that strategy.

I share here the basic stock and option trading principles I follow. By holding these principles firmly in your mind, they will guide you consistently to profitability. These principles will help you decrease your risk and allow you to assess both what you are doing right and what you may be doing wrong.

You may have read ideas similar to these before. I and others use them because they work. And if you memorize and reflect on these principles, your mind can use them to guide you in your stock and options trading.

PRINCIPLE 1

SIMPLICITY IS MASTERY

When you feel that the stock and options trading method that you are following is too complex even for simple understanding, it is probably not the best.

In all aspects of successful stock and options trading, the simplest approaches often emerge victorious. In the heat of a trade, it is easy for our brains to become emotionally overloaded. If we have a complex strategy, we cannot keep up with the action. Simpler is better.

PRINCIPLE 2

NOBODY IS OBJECTIVE ENOUGH

If you feel that you have absolute control over your emotions and can be objective in the heat of a stock or options trade, you are either a dangerous species or you are an inexperienced trader.

No trader can be absolutely objective, especially when market action is unusual or wildly erratic. Just like the perfect storm can still shake the nerves of the most seasoned sailors, the perfect stock market storm can still unnerve and sink a trader very quickly. Therefore, one must endeavor to automate as many critical aspects of your strategy as possible, especially your profit-taking and stop-loss points.

PRINCIPLE 3

HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES

This is the most important principle.

Most stock and options traders do the opposite...

They hold on to their losses way too long and watch their equity sink and sink and sink, or they get out of their gains too soon only to see the price go up and up and up. Over time, their gains never cover their losses.

This principle takes time to master properly. Reflect upon this principle and review your past stock and options trades. If you have been undisciplined, you will see its truth.

PRINCIPLE 4

BE AFRAID TO LOSE MONEY

Are you like most beginners who can't wait to jump right into the stock and options market with your money hoping to trade as soon as possible?

On this point, I have found that most unprincipled traders are more afraid of missing out on "the next big trade" than they are afraid of losing money! The key here is STICK TO YOUR STRATEGY! Take stock and options trades when your strategy signals to do so and avoid taking trades when the conditions are not met. Exit trades when your strategy says to do so and leave them alone when the exit conditions are not in place.

The point here is to be afraid to throw away your money because you traded needlessly and without following your stock and options strategy.

PRINCIPLE 5

YOUR NEXT TRADE COULD BE A LOSING TRADE

Do you absolutely believe that your next stock or options trade is going to be such a big winner that you break your own money management rules and put in everything you have? Do you remember what usually happens after that? It isn't pretty, is it?

No matter how confident you may be when entering a trade, the stock and options market has a way of doing the unexpected. Therefore, always stick to your portfolio management system. Do not compound your anticipated wins because you may end up compounding your very real losses.

PRINCIPLE 6

GAUGE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY

You know by now how different paper trading and real stock and options trading is, don't you?

In the very same way, after you get used to trading real money consistently, you find it extremely different when you increase your capital by ten fold, don't you?

What, then, is the difference? The difference is in the emotional burden that comes with the possibility of losing more and more real money. This happens when you cross from paper trading to real trading and also when you increase your capital after some successes.

After a while, most traders realize their maximum capacity in both dollars and emotion. Are you comfortable trading up to a few thousand or tens of thousands or hundreds of thousands? Know your capacity before committing the funds.

PRINCIPLE 7

YOU ARE A NOVICE AT EVERY TRADE

Ever felt like an expert after a few wins and then lose a lot on the next stock or options trade?

Overconfidence and the false sense of invincibility based on past wins is a recipe for disaster. All professionals respect their next trade and go through all the proper steps of their stock or options strategy before entry. Treat every trade as the first trade you have ever made in your life. Never deviate from your stock or options strategy. Never.

PRINCIPLE 8

YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE

Ever followed a successful stock or options strategy only to fail badly?

You are the one who determines whether a strategy succeeds or fails. Your personality and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki says, "The investor is the asset or the liability, not the investment."

Understanding yourself first will lead to eventual success.

PRINCIPLE 9

CONSISTENCY

Have you ever changed your mind about how to implement a strategy? When you make changes day after day, you end up catching nothing but the wind.

Stock market fluctuations have more variables than can be mathematically formulated. By following a proven strategy, we are assured that someone successful has stacked the odds in our favour. When you review both winning and losing trades, determine whether the entry, management, and exit met every criteria in the strategy and whether you have followed it precisely before changing anything.

In conclusion...

I hope these simple guidelines that have led my ship out of the harshest of seas and into the best harvests of my life will guide you too. Good Luck.

Ultimate Stock Market Trading Survival Guide

2008-10-23T19:35:00.000-07:00

Stock market trading is often touted as something so simple anyone can do it and do it better themselves than if they used a broker. While this is true, it's important to keep an eye out for some of the common mistakes people make.

People are always advised never to invest money they can't afford to loose in the stock market. Even with the best decision, there's still a chance that things can go wrong, especially when emotions are involved. Pay attention to all the information you can find. Choosing a stock because its symbol is your initials might be a good sign that you need to double check how rational you're prepared to be about investing.

A rational investor has a plan. Knowing when to get out is as important as when to get in for a given stock. Planning your work and then working your plan isolates you from more volatile emotions and emotional responses. You're taking an active role in the stewardship of your finances; remember the long term goals you have.

But no plan, no matter now good will work all the time. Invest your money in discrete lots and never invest all your money in one stock. Yes, you're giving up the potential for gains but you're also providing a hedge against things going tragically wrong.

Understand that you're learning in this and set up a mock portfolio first to allow you to gain experience. The more experience you have the better you'll do at trading stocks. Getting better means you can make more profitable trades, trade more stocks - but you have to earn that experience. There is no substitute for it.

When we learned how to drive we didn't start off driving a Formula One car or a drag racer. Most of us learned with something that wasn't so dangerous to us and more forgiving of mistakes. The stock market should be treated like that. While it's possible to having amazing returns and success with the stock market, handled inappositely can lead to disastrous results. Before you play with your entire budget and exercise more complex options, be careful that you know how the basics work.

Like driving, investing in the stock market can become second nature and allow you to take into consideration more factors and produce better results. While you might feel out of your depth when you first start investing, you'll build up the experience to jump onto the highway with cars traveling 70 miles an hour and feel comfortable.

Keep in mind that it's a learning experience and don't be afraid to make mistakes. Also remember that it is game and the stakes are very real. When you do something, know why you're doing it.Rright down a log of your activities and your decisions and read and understand your environment. Darwin said that it's not the strongest species that survives, but the most adaptable. Survive and overcome the initial learning curve and you can succeed.

Stock Market Trading Tutorial

2008-10-23T19:34:00.000-07:00

There's nothing more exciting than playing the stock market. Playing is the key word here. When you can invest $1000 and within 24 hours make it become $1500, then you develop a hunger for the game. If you dream of doing this, but are afraid to take your first step into the world of stock trading, don't worry. Here's a little stock market trading tutorial that should whet your appetite enough to open a brokerage account.

Every stock market trading tutorial needs to begin with the language of the trade. Of course, you know what the stock symbol is; it's the letters that represent the company. You should know what stock shares are. If you don't, it's actually part ownership in a company.

When you make a trade, there are two types. The first type is the market trade; you buy or sell the stocks for the going rate, whatever it is at the moment. The second is a limit trade and one of the most important types in the stock market trading tutorial. Here you set the price to you'll buy or sell the shares. When you trade penny stock, you ALWAYS use a limit order. If you remember nothing else from this share market education, remember that. If you want to buy shares for .001 per share and have $1000 to do that, plus the cost of the trade, and order 1,000,000 shares but use the market price you find out very quickly that you don't always get what you think you'll get. Market makers, the men that control the shares of specific companies, can decide that they really want .01 a share and suddenly you owe $10,000. Even if there is no foul play, the market moves swiftly and a tenth of a penny can make the difference between a profit and a loss. So, lesson one of the stock trading tutorial is use the limit order and decide ahead of time how much you want to pay and what price you want from the stock.

Lesson two of the stock market tutorial goes with the limit order. You don't need to be a slave to the market. Look for stocks with trends. Some prices go up and down in regular intervals. They volley between two prices. If you find one that does, pick a number close to its bottom price and put in a limit order. You can then go about your business and when it hits that price, you automatically bought it. If the price is lower, you got it for the lower price. The share trading education doesn't end there. As soon as you find you bought the stock, put in a sell limit order for the upper end of the cycle, and go watch television or eat lunch. The transaction takes place when it hits that price. Do you always make as much as you can? Absolutely not, but you didn't have expend all the effort either. This stock market trading tutorial gives some share trading education that doesn't require a lot of effort.

Lesson three of the stock market trading tutorial involves knowing how much you want to make on the trade. "What a silly lesson for a stock market trading tutorial." You say. "I want to make as much as possible." Sorry, wrong answer. You need to find a comfortable profit and not get greedy. Remember, much of the money you make is in just a few days if you're a short-term investor. If you made $50 the first day and then added it to you investment and made $60 on that the second day and kept adding and increasing your return, the numbers grow geometrically and just like the penny doubled every day for one year, you soon make a huge sum. If you try to guess at exactly when to trade, you often end up losing all profit. Investing shares for beginners quote, "A profit, like cash, makes no enemies." Keep that in mind from this stock market trading tutorial.

A quick review of the three lessons from the stock market trading tutorial:

1. Use a limit order particularly with penny stocks.

2. Look for trends and set buy and sell limits with them and don't be a slave to the market.

3. Know how much profit is comfortable and sell when you reach it.

Stocks on Margin

2008-10-18T10:32:00.001-07:00

Buying on margin means that you are buying your stocks with borrowed money.

If you are buying stocks outright, you pay $5,000 for 100 shares of a stock that costs $50 a share. They are yours. You've paid for them free and clear.

But when you buy on margin, you are borrowing the money to purchase the stock. For example, you don't have $5,000 for those 100 shares. A brokerage firm could lend you up to 50% of that in order to purchase the stock. All you need is $2,500 to buy the 100 shares of stock.

Most brokerage firms set a minimum amount of equity at $2,000. This means that you have to put in at least $2,000 for the purchase of stocks.

In return for the loan, you pay interest. The brokerage is making money on your loan. They will also hold your stock as the collateral against the loan. If you default, they will take the stock. They have very little risk in the deal.

One way to think of buying on margin is that it is often comparable to buying a home with a mortgage. You are taking out the loan in the hopes that the value will go up and you will make money. You are in control of twice the amount of shares. All you have to see is the additional profit exceed the interest you have paid the brokerage.

However, there are risks to buying stock on margin. The price of your stock could always go down. By law, the brokerage will not be allowed to let the value of the collateral (the price of your stock) go down below a certain percentage of the loan value. If the stock drops below that set amount, the brokerage will issue a margin call on your stock.

The margin call means that you will have to pay the brokerage the amount of money necessary to bring the brokerage firms risk down to the allowed level. If you don't have the money, your stock will be sold to pay off the loan. If there is any money left, you will be sent it. In most cases, there is little of your original investment remaining after the stock is sold.

Buying on margin could mean a huge return. But there is the risk that you could lose your original investment. As with any stock purchase there are risks, but when you are using borrowed money, the risk is increased.

Buying on margin is usually not a good idea for the beginner or normal, every day investor. It is something that sophisticated investors even have issues with. The risk can be high. Make sure that you understand all of the possible scenarios that could happen, good and bad.

High Growth Stock Purchase

2008-10-18T10:29:00.000-07:00

As a highly rated stock both in terms of fundamentals and technicals, True Religion (TRLG), the high end denim jeans retailer, recently surfaced as a top buy candidate in my database of high growth stocks.

As I do with all stocks that appear at the top of my database screens, I pulled up the chart of TRLG in order to get a better read on the health of the stock and to see if there may be a better buy point than what could be had by purchasing at the formal break out (.10 above the high of the handle formation). In this case, the chart looked good with a surge in price and volume in the right side of the base followed by healthy consolidation. The stock consolidated into a bullish triangle continuation pattern where prices converge to a point (forming a triangle) in conjunction with a dry up in trading volume. It's called a continuation pattern because typically the end of the convergence leads to a continuation in the direction of the previous movement (in this case up!!). Of course these patterns aren't ALWAYS successful, but more often than not they are. In the chart of TRLG below (link to image in about author section) you can see today's "continuation" out of this bullish pattern, offering a better buy point then the formal pivot of 17.70.

Once I've located the stock in the SelfInvestors.com database, looked over the chart and determined where an entry point might be, I'll set a real time alert around 1% below the potential buy price. In this case I figured the stock would initially break out of this pattern around 16, so this is where I set my alert. Once I'm alerted to the price, I know the stock may be on the verge of the move I've been waiting for, so I'll begin to watch it closely in real time and have the order information entered, so that all I have to do is click submit once the price is met.

I make buy and sell decisions by looking at a real time intraday 5 minute chart. Below you'll see today's intraday chart of TRLG and the buy point around 16.30 (link to image in about author section).

Yes, bases work on the intraday charts too! See the breakout from the cup base with handle today at around 2:30PM EST? I never make a purchase if a stock has run up in the first half hour to hour of trading and will often wait for the stock to clear the high of the first hour of trading. What the run up early this morning did was trigger my alert at 16, indicating this was one to watch closely throughout the day. Since I now had my high of the day I could set another alert just below that so that I'm not watching it all day (usually I have much better things to do!). I set another alert at 16.20, which it triggered at 1:30PM EST.. and at that point it was time to watch closely for a breakout above the high of the day, which it finally did. I had the order ready and pulled the trigger on the buy.

Hopefully I haven't made this sound more complicated than it is! Do yourself a favor and subscribe to a real time charting service with real time alerts (your broker or trading platform may include this), but a separate program may be best. Esignal and TCNet are popular real time charting systems. I'd also recommend investing in another monitor so you don't have to minimize windows left and right. You can just throw in another video card into your existing computer and pick up a very good CRT monitor for cheap these days. The more computers and monitors, the better! Good Luck!

Make An Intelligent Stock Investment

2008-10-18T10:27:00.000-07:00

There's a big difference between buying a stock for a quick trade, and making a true stock investment. With so many friends and neighbors focused on the quick profits of day trading, people have forgotten that making a stock investment makes them part-owners of real, live businesses.

If you view stock investments from this perspective, you need to be concerned about things beyond MACD, support and resistance, and other technical indicators. You have to be certain that the business is one you can entrust with your hard-earned money, for the long term.

Review the Company's Income Statement Before Making a Stock Investment

Day traders almost never bother with financial data, but true investors should always review both the income statement and balance sheet of a company before making a stock investment.

Start by looking at the past three to five years of income sheet data. Is the company's income growing? If so, is the growth accelerating or decelerating?

Always look at the company's gross margins before making a stock investment. Gross profit is the company's total sales minus its cost of goods sold. Gross profit as a percentage of sales is gross margin - is this number going up or down? Once you evaluate all of this information, you will be better prepared to make a stock investment.

If a company's income statement is erratic, income growth is decelerating, and its gross margins are being cramped, it can still be a good stock investment.

This is because other investors have probably abandoned the company, pushing the price of the stock down. Generally, companies that have consistently accelerating growth and improving gross margins are pricier stock investments. You have to evaluate all of the data and determine what you think the stock is really worth.

Don't Forget the Balance Sheet When Making Stock Investments

Reviewing the income statement is never enough when making a new stock investment. The balance sheet is always at least equally important, and in the case of companies with weak income statements, the balance sheet is even more important.

Consider the liquidation value of a company before making a stock investment. This is most important for companies under distress. What would happen in the worst case scenario and the company went bankrupt?

Look at the balance sheet and subtract intangible assets and total liabilities from total assets. What's left are the items that could be sold if the company ceased operations. If the liquidation value per share is close to the trading value of the stock, then you have downside protection on your stock investment.

If you think the company has a chance to turn things around, then it could be a great buy.

Should You Only Look For Damaged Companies When Making a Stock Investment?

No! While the balance sheet is most important when considering a stock investment in companies under distress, the income statement is paramount when making a stock investment in growing firms. Growth stocks aren't just for traders, they can be for investors too!

Consider Hansen Natural (HANS). This stock quadrupled from $7 a share in April of 2004, to $28 per share a year later. This would have been great for a trade, but traders would have really missed out if they sold for $28.

Over the next 15 months, the stock went all the way to $200 per share! Investors who took a look at the company's financial statements and carefully considered its tremendous growth prospects, could have turned a $10,000 stock investment in 2004 into more than $285,000 today.

It pays to buy and hold when you do the homework and you're confident that you're right.

Role Of Stock Trading Company

2008-09-21T08:47:00.001-07:00

Unlike traditional brokerage house, today, stock trading process has completely changed. The new Internet based trading is much easier, more reliable and hassle free than ever before. Though technology has played a very crucial role in making the trading process much easier, stock trading companies on the other hand are also responsible for such a big change. Trading industries are booming and also creating awareness in people who still consider trading as a gamble.

Trading companies are mushrooming like anything and also creating a more competitive atmosphere in the market. In such a situation, consumers are getting maximum benefits, as more and more features are being added to the company's website. In addition to an online account, online traders are provided with advanced trading tools, superior execution, lower commission rates, and superior trading technology as well.

Online trading companies lure new investors with superior services and hence, traders get excellent services from these industries. Many people doubt whether online trading is safe or not - it is absolutely safe, as the user account information and all transaction information are kept secret. Websites with advanced security tools help secure your account information in the best possible way. In addition, you can also access a wealth of information from the website such as complementary stock news and stock charts, scheduled investments and fractional shares, etc.

However, a comprehensive market research is important while searching for an online trading company. You should know what are the things you need to consider while choosing an industry - look at the company service, previous market records, terms and conditions, commission rates, etc. First choose four to five companies and then pick the best one as per your requirement. Though there are many companies who promise to offer excellent services, but fail to do so. Therefore, a complete market survey is needed in the whole process.

No doubt, online trading today is one of the easiest investment options, but without stock knowledge, one cannot gain substantial profits from the investment plan. Therefore, comprehensive market knowledge is a must. There are many open resources available on the Internet; however, you can access a wealth of information from the company website as well. Learn to read stock charts, keep you updated with latest market news and use trading tools for market analysis - all these and more are offered by stock trading industries. And, if you follow the instructions given on the Website, you are bound to get success in your stock market trading process.

With so much available online, what else you need to start trading. However, it is always said that well begun is half done, so if your planning is good, you can definitely reap the benefits from your trading. To start with good investment plan, you can consult with online financial experts. These financial experts will assist you in your financial planning in the best possible way. There are few more things that actually help in successful trading: your decision-making quality, positive attitude and thought process. So, keep these things in your mind and invest intelligently. Build a secured future financial backup and also earn profits now.

The Role Of Online Stock Brokers

2008-09-21T08:46:00.000-07:00

In this ever-fluctuating financial world, it is very difficult to know the best way to go about making your money work for you. For generations the stock exchange has given consumers the opportunity to invest their money into companies that they felt would perform solidly, thus increasing the worth of their stock. In essence, the stock market acts as a facilitator between buyers and sellers, as they exchange stock that they hold in companies.

These companies use the money they receive from their investors to further their business and increase profits; increased profit means a higher worth for the stock. And round and round it goes. Traditionally, those looking to invest went to a stock broker in any number of brokerage companies who would assist the investor in the buying and selling of stock and the building of their financial portfolio.

But in this age of the Internet, investors need only turn on their computer to be linked into the stock exchange. Subsequently, to keep pace with this changing economy, online stock brokers entered into this new world of finance in order to assist virtual customers in achieving their financial goals.

Online stock brokers work within investment companies that offer online resources as either their entire service or as part of their traditional brokerage service. Some of the more commonly used online stock brokers are Ameritrade, ETrade Financial, Fidelity, and Schwab. Such brokers operate much as traditional brokers - assessing the investor's financial situation, the financial plan they want to execute, and the stocks in which they are interested.

Working through these online stock brokers, investors create an account where they can access their financial information at the click of a mouse. Online brokerage houses offer an extensive amount of information in order for investors to make informed decisions regarding their trades; stock quotes are kept scrolling at all times on the website; historical performance on each stock can be accessed; and in-depth information regarding each company's history and financial status is available for investors to perform research prior to investing.

Investors turn to online trading and online stock brokers for a variety of benefits, not the least of which is low broker fees; online broker fees generally run between $7 and $10 per trade. There is also the control investors have to make decisions on behalf of their own portfolio.

Investors are able to choose what stocks they want to buy - regardless of what the stock broker prefers. Online stock brokers - unlike traditional stock brokers - do not exert much control over the stocks of the investor. Online trading offers investors a whole new level of independence.

The world of investment has changed; no longer are investors required to physically visit their stock brokers in order to examine their portfolio, set financial goals, and buy and sell commodities. Today's savvy investors work from their computers along with online stock brokers in order to be hands-on participants in their own financial future.

Stock Market Advice - 5 of the Best Ways to Get Your Top Stock Market Advice

2008-09-16T23:16:00.001-07:00

Trading the stock market may at first seem to be quite a daunting prospect. All your family, friends, and colleagues have probably told you in no uncertain terms, that you would be foolhardy to risk your money in such a way. They tell you, in good faith, I might add, that it is not something that a non-professional should touch. Well, they are not wrong. Not wrong, but if I may be so bold, just rather misguided.

Education is such a wonderful thing when it's used; an education in stock market trading techniques is certainly no different.

Here are 5 of the best ways to become educated in trading:

1. Online downloads. This is the age of computers and with it the age of the digital download products. These products come in the form of stock market trading packages too. Every conceivable method of trading is instantly downloadable from several websites. More that, they are available instantly, most through secure server account such as PayPal, and contain some of the most highly sought after information and techniques you'll find anywhere.

2. Magazines. If you would prefer to have something a little more traditional, and would rather pay over the counter, periodical trading magazines are always right around the corner at you local news store, or if not you can place an order. In a way, magazines are the offline equivalent of a Forum, where traders, product owners, strategists and professionals offer their individual contributions.

3. Forums. Forums are a favourite of mine. They are the dynamic meeting place, everything being up to date and often where you can get your pressing question answered. Usually you'll have to sign up to contribute, and to access the more refined parts of their platform, but not to worry because they are all free, and in my experience, without exception. All you will need to do is confirm your subscription by email.

4. News. News bulletins are fed to you all day on a 24 hour rolling feed, which you can either go online to see, or switch on your television. Dedicated parts of programs such as CNN are on the satellite channels and give you an overview of the current climate. Just one word, there is much to learn through these channels but a lot of it centres on company analysis rather that technical trading.

5. Books. A book has been written on every aspect of trading you can imagine, and plenty you cannot too! So for the traditionalist, you are certainly no worse off than anyone else, in the ever-increasing age of the computer.

I have used al five of the above, and for me, a blend of each is good. Sometimes, it depends on my mood. Whatever you need to learn though, it is never far away.

How would you like to discover more about the techniques successful traders use to make profitable trades?

How To Invest In Gold - Stock Market

2008-09-16T23:14:00.000-07:00

The diversified portfolio has a small position in the gold market. For some investing in such market means holding its coins. Some speculators buy the contact futures on the commodity exchange. Future contracts are risky because you are betting that the price of the commodity will go higher in the future. The contract requires a relatively small up front payment, but there can be daily fluctuations that require you have funds to back the dips in the price of daily increases.

The reasons investors have been interested in this commodity is that the old reasoning was that if the stock market was down the commodity market was generally up. This reasoning has become a possibility, but not an axiom of the current marketplace. The weakness in the dollar generally brings a surge in the price. The current price is in the range of $670. Prices have fluctuated within a range of $664 and the current high of $672. Traders think this product could easily go as high as $1,000 an ounce.

Investing in such commodity stocks and precious metal index funds can be purchased through a stock broker. A stock broker specializing in this area is very important because the investment needs savvy investment advice. Most of the larger brokerage houses have individuals that are specialized in the area of commodities and precious metal stocks.

There are certain international commodity stocks that are noteworthy. A Canadian based international player in this type of commodity market is Agnico-Eagle Mines. It trades on the New York Stock Exchange and the Toronto Stock Exchange under the stock ticker AEM. The stock is also sold on the Frankfurt Stock Exchange. This company has more than thirty year history in the production of this kind of commodity Since the year 1970s AEM has produced over four million ounces. The company is international and has operations in Canada, United States, Mexico, Sweden and Finland.

Other noteworthy of such stocks include; Barrick Gold Corp, Goldcorp Inc., Kinross Gold Corp., and Newmont Mining. All of these commodity stocks are currently trading on the upside, but it is advisable for all investors to make sure these stocks fit your investment risk potential.

In recent years the price of this commodity has been as low as the $450 an ounce range. Since the late 1970s it has made huge profits for holders of this commodity. The key to owning it, is to know the various resistance points and to assess the global market for the use of such. It is used primarily in jewelry manufacturing and other types of manufacturing. Currently in India there is a small slow down in the use of this commodity for jewelry making. The same applies to a degree in China. Whether it is enough of a slow down to effect the price of this commodity is uncertain.

Investors who trade in such commodity should seek the advice of an analyst that can factor in all the various aspects that affect the price of this commodity. If you own it as a hedge against a weak dollar you should look for any strengthening in the dollar. The important thing to remember is to guide your investment in it to a level that you are comfortable. If you bought spot of this commodity at $600 an ounce, you might consider a rise to $720 a good profit. The rise to $1,000 an ounce may be bumpy and there is no telling when it will reach that level if it does as speculators have gambled.

There are numerous mining stocks of this product in the market and if you are interested in a small investment you can find these stocks in the $5 to $12 range. The smaller mining stocks of this product do carry a risk because a great deal of overhead goes into making a mining company profitable.

The range of risk and amount you decide to invest in this product is a personal choice. It is always advisable to seek the expert advice of a stock expert or commodity expert before leaping into this market. Another sage piece of advice I learned is to trust my sense of cashing out before the price drops significantly due to outside pressures.

Stock Market Timeline

2008-09-13T10:59:00.003-07:00

The history of stock market is very rich and the efficient system that you use now for trading and investing in companies has evolved over centuries. All the policies and regulations have evolved through time as and when the policy makers felt the need for them. Wall Street was laid out as early as in 1685. The investment market was born after a century in 1792 when five securities were traded. These included three government bonds and two bank stocks.

The Buttonwood Agreement was the historic pact that around twenty four brokers and merchants signed agreeing to trade securities for commission. It is said that the New York Stock Exchange began as a result of this pact. Slowly the market started gaining prominence and securities such as bank stocks, insurance stocks and government bonds had begun to trade. As the market gained prominence, the requirement of rules and regulations for the proper conduct of trading and investing was felt. The New York Stock & Exchange Board was formed at wall street. In 1853, the board required the companies which were listed on the exchange to produce complete statements of shares outstanding and capital resources.

The first stock market crash happened in 1853 when the market lost up to 45% of value. The reason was the collapse of the Ohio Life Insurance & Trust Company. In 1866, the first transatlantic cable was laid which enabled instant communication between New York and London. In 1867, the first stock ticker was invented and this brought the current prices of the companies to all the investors. In 1872, the specialist was created. The specialist is a trader who trades only in one stock because of which he sits in one location on the trading floor. In 1895, it was suggested that companies start providing annual reports of their performance to their shareholders. Then in the subsequent year, there was another development in the form of the wall street journal publishing the Dow Jones Industrial average for the first time.

The Federal Reserve System was created in 1913 to bring structure to the control credit and to structure the banking system. The market price was quoted as a percentage of the par value. This was changed to prices quoted in dollars. In 1929 the largest crash in terms of the volume of shares takes place. This marked the beginning of the great depression. The Dow Jones reached the lowest value from its 1929 peak in 1932. It was quoting 89% down at that point of time. The Securities and Exchange Commission is established to provide full disclosure to investors and to prevent fraudulent activities in connection with the sale of securities. Women enter the trading floor in 1943 ending the reign of men. In 1966, several important developments took place. The Securities Investment Protection Corporation was set up to provide protection to the clients of brokerage firms that collapse. The New York futures exchange was formed in 1979. In 1996, real time tickers were launched in CNBC and CNN thus bringing the stock prices to investors and traders instantly.

As you can see, the rich history is incomparable to the history of any other stock market in the world. NYSE is the biggest stock exchange in the world and it will continue to remain so for some time to come.

Solid Tips For Reducing the Risk of Stock Market Investing

2008-09-13T10:59:00.001-07:00

You finally have money to call your own. Now that you have your own money, you naturally want to see it grow. Maybe saving money in a bank simply doesn’t entice you because there is so little growth potential. You want something with more risk so you have the potential to realize a far greater financial return. You decide to turn to the stock market.

Wait a minute! Are the risks involved in investing in today’s volatile stock market worth your hard-earned cash? Investing can be an effective tool to grow your money, but you must have an open mind and know exactly what to look for.

As everyone knows, investing in the stock market is a risky endeavor. There are certain risks you simply cannot control.

One example is to exercise caution when investing in “hot” stocks. Of course there are some people that get wealthy investing in “hot” stocks, such as the “dot com” bubble that happened in the 1990s. However, when the initial buzz about these “hot” stocks starts to slide, so does your investment in them.

Once these stocks fall, they tend to fall really hard in a short period of time. Your money and the money of others like you falls along with the stocks. If you really feel the need to invest in “hot” stocks, you must keep a constant eye on them and sell them right away as they start to level off or drop.

To avoid risks such as these, diversify your investment portfolio. Buy a little bit of a lot of different types of stocks and bonds. By doing this, if one stock goes down another is likely to go up so you can attempt to recover some of your losses. It is always a wise idea to have a few stocks in the technology sector, biomedical, consumer corporations and telecommunications.

Over time, add to your portfolio with diamond and precious metal indexes and some general investment funds. A diverse portfolio increases your chances of profiting from the stock market.

There are companies that exist offering “safety stocks” to investors. It is a solid decision to have several shares of these type of “safe” companies in your investment portfolio. These types of stocks rarely fluctuate and usually offer steady, slow growth so you have some level of assurance in your investments.

Never rely on tip that says a stock is “going to be really big” or other related hype. These tips are usually unfounded and the stocks are often almost worthless. When you invest in these stocks you may get a higher return at first but in the long run, these stocks will be your greatest concern.

Take time to carefully read the Wall Street Journal or read the latest stock report on the news networks to find out more about your investments. Check relevant websites to verify how your stocks have been performing in the past few weeks. Lastly, keep up to date with the current stock market to make sure your investments are still smart.

4 Deadly Reasons Why Beginners Fail In The Share Market

2008-09-13T10:58:00.001-07:00

1. Don't know how to choose the right share to buy
2. Don't know when to bail out of a losing share
3. Don't know when to take profit on a winning share
4. Don't Know how to construct a proper portfolio

1. Don't know how to choose the right share to buy...

How does beginners choose what shares to buy amongst thousands of shares? You might choose to listen to your share broker, or listen to your "experienced" relative, or listen to free "share pick" on the internet...etc... and you will end up losing money.

Because individual share behavior is very complex, only the most professional full time traders have the right technology to make proper share pick decisions. Such experience and technology is simply not available especially to the beginner trader.

2. Don't know when to bail out of a losing share...

The deadliest killer of beginner traders is not knowing when to get out of a losing share. Too many traders hold on to their shares until it is worth nothing. Most beginners will hold on hoping that the share will stage a rebound because you simply do not have the technology to tell if a share will ever rebound! The only way for a beginner to prevent losing everything is for an expert to tell them when to get out of a trade.

3. Don't know when to take profit on a winning share...

How many times have you heard stories around you of people who hold on to shares which made them a lot of money until one day, the share turned around on them into a severe loss?

Too many people keep thinking that their winning shares will keep on winning forever and never knew when to take profit... until the shares crashed on them! The problem is again that telling when a share is losing upward momentum is extremely difficult.

4. Don't know how to construct a proper portfolio...

Do you know that many shares actually move up and down together no matter what? Do you know that there are shares that totally move opposite to each other? Do you know that many shares actually move exactly opposite to the way the market is moving? Do you know that there are shares that do not ever move? Do you know that there are shares that are on the verge of getting delisted?

If you do not know the above, how would you ever be able to intelligently put different shares together so that you can make money? What if you put a share together with a share that moves exactly opposite to it? Would you ever make money?

That is why a lot of people are turning to trading a much more reliable and much more stable instrument; Market Index or Market Index ETF.

Dealing With Stock Market Corrections: Ten Do's and Don'ts

2008-09-03T00:33:00.000-07:00

A correction is a beautiful thing, simply the flip side of a rally, big or small. Theoretically, even technically I'm told, corrections adjust equity prices to their actual value or "support levels". In reality, it's much easier than that. Prices go down because of speculator reactions to expectations of news, speculator reactions to actual news, and investor profit taking. The two former "becauses" are more potent than ever before because there is more self-directed money out there than ever before. And therein lies the core of correctional beauty! Mutual Fund unit holders rarely take profits but often take losses. Additionally, the new breed of Index Fund Speculators is ready for a reality smack up alongside the head. Thus, if this brief little hiccup becomes considerably more serious, new investment opportunities will be abundant!

Here's a list of ten things to think about doing, or to avoid doing, during corrections of any magnitude:

1. Your present Asset Allocation should be tuned in to your long-term goals and objectives. Resist the urge to decrease your Equity allocation because you expect a further fall in stock prices. That would be an attempt to time the market, which is (rather obviously) impossible. Asset Allocation decisions should have nothing to do with stock market expectations.

2. Take a look at the past. There has never been a correction that has not proven to be a buying opportunity, so start collecting a diverse group of high quality, dividend paying, NYSE companies as they move lower in price. I start shopping at 20% below the 52-week high water mark... the shelves are beginning to become full.

3. Don't hoard that "smart cash" you accumulated during the last rally, and don't look back and get yourself agitated because you might buy some issues too soon. There are no crystal balls, and no place for hindsight in an investment strategy. Buying too soon, in the right portfolio percentage, is nearly as important to long-term investment success as selling to soon is during rallies.

4. Take a look at the future. Nope, you can't tell when the rally will come or how long it will last. If you are buying quality equities now (as you certainly could be) you will be able to love the rally even more than you did the last time... as you take yet another round of profits. Smiles broaden with each new realized gain, especially when most Wall Streeters are still just scratchin' their heads.

5. As (or if) the correction continues, buy more slowly as opposed to more quickly, and establish new positions incompletely. Hope for a short and steep decline, but prepare for a long one. There's more to Shop at The Gap than meets the eye, and you run out of cash well before the new rally begins.

6. Your understanding and use of the Smart Cash concept has proven the wisdom of The Investor's Creed (look it up). You should be out of cash while the market is still correcting... it gets less scary each time. As long your cash flow continues unabated, the change in market value is merely a perceptual issue.
7. Note that your Working Capital is still growing, in spite of falling prices, and examine your holdings for opportunities to average down on cost per share or to increase yield (on fixed income securities). Examine both fundamentals and price, lean hard on your experience, and don't force the issue.

8. Identify new buying opportunities using a consistent set of rules, rally or correction. That way you will always know which of the two you are dealing with in spite of what the Wall Street propaganda mill spits out. Focus on value stocks; it's just easier, as well as being less risky, and better for your peace of mind. Just think where you would be today had you heeded this advice years ago...

9. Examine your portfolio's performance: with your asset allocation and investment objectives clearly in focus; in terms of market and interest rate cycles as opposed to calendar Quarters (never do that) and Years; and only with the use of the Working Capital Model (look this up also), because it allows for your personal asset allocation. Remember, there is really no single index number to use for comparison purposes with a properly designed value portfolio.

10. So long as everything is down, there is nothing to worry about. Downgraded (or simply lazy) portfolio holdings should not be discarded during general or group specific weakness. Unless of course, you don't have the courage to get rid of them during rallies... also general or sector spefical (sic).

Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view mirrors. The short and deep ones are most lovable (kind of like men, I'm told); the long and slow ones are more difficult to deal with. Most recent corrections have been short (August and September, '05; April though June, '06) and difficult to take advantage of with Mutual Funds. So if you over think the environment or over cook the research, you'll miss the party. Unlike many things in life, Stock Market realities need to be dealt with quickly, decisively, and with zero hindsight. Because amid all of the uncertainty, there is one indisputable fact that reads equally well in either market direction: there has never been a correction/rally that has not succumbed to the next rally/correction...

Stock Investment Company - The ins and outs

2008-09-03T00:32:00.000-07:00

These days, it is not at all rare for one to come across such a stock investment company that offers services with big promises. Stock investment is a serious proposition and stock market positions are very difficult to understand. It is good to do some in-depth research before you choose a stockbroker or stock investment company.

There are many stock trading companies but the choice has to be made based on research. It is important to know and consider the qualifications of the company. The company has to be competent and to ensure this the credentials of the company have to be looked into. The customer should try to get as much information as is possible about the company. There are other issues such as the fees and commissions, which the stock investment company will charge for the stock market trading. If the fees and commissions are excessive, they will take up a major part of your stock trading profits. Your investment goals will be affected. Your decisions in transactions will also be affected. The fees and commissions that the company will charge, therefore, is an important consideration.

There are three principal types of stock investment companies. Some companies just carry out your stock trades. This means that you will instruct and you will buy and sell stocks. The companies will do just this and little else. The next type of companies will carry out your trading instructions and, along with that, provide you with helpful tips and stock market quotes. A type of stock investment company also serves as your investment planner. These companies will see your resources and investment objectives and do the management of the resource on your behalf. It is up to you to decide which type of stock investment company will be the best suited for your purpose.

You may also come across such a stock investment company that does not work with the stock market. The customer has to ensure that the stock investment company operates in the market where the customer intends to invest. If this is not the case, there is a waste of money and time. The advisory services of the stock investment company to help you out should be there. When you choose your stock investment company, you should notice whether it has the right investment advisory services. In stock market investing, no two persons are the same. The capacities of investing in stock markets vary from person to person. The best services are offered by the personalized services of the stock investment company.

4 Things You Need To Know Before You Start Trading On The Share Market

2008-08-29T00:46:00.001-07:00

When you start trading in the share market it is a good idea that you have some knowledge of how it works and how you are going to make your decisions. If you do not know these things, then you are most likely going to lose much of your investments, possibly even all of them. Here are 4 specific things you need to know before you start trading on the share market.

How the Share Market Works

The first thing you need to know is how the share market works. You need to understand what is going on and how and why it works. This means that you should take some time to learn about it, and you would even want to read some books from some great investors to learn their techniques and perspective on trading.

You also need to learn the tools that are available to help you in your investing to make it as safe as possible for your money. Otherwise, you probably are simply throwing your money away - hardly a way to start investing wisely.

How Much You Want To Invest

This is another good point that you need to know before you start investing. You must determine how much you can afford to lose - just in case. Invest your other money that you must keep into safer forms, such as mutual funds or bonds. You do not want to take any money that you need for your retirement and take unnecessary risks with it. By setting a budget, or simply choosing a starting amount and investing it, you can have money invested much safer.

How to Pick Shares

Knowing how to pick shares is another must before you start. You need to know how to read the share reports and develop your own system for choosing the share you want to invest in. This will require some time in reading the reports so that you understand which market sectors are most profitable, as well as knowing how to tell which companies are making real advances.

Of course, there is another way, perhaps simpler, to select your shares. You could go with electronic trading. While this has been around for a little while, you could allow this software to indicate possible good picks. This does, however, demand that you come to trust the software and its accuracy. With a good understanding of how to make your own share picks, though, you could be just as successful.

How to Minimize Your Losses

The final thing you need to understand is how to keep potential losses to a minimum by using tools like stop losses. These will enable you to invest with a greater margin of safety on your investment. After you select the shares you want, and place your stop loss where you want, it can automatically place your shares in a sell position to prevent large losses. You can also make profits and keep a good portion of it if you learn to use stop losses correctly. You can choose how to best use these tools to your greatest benefit and profit since you can tailor them to suit your needs and plans.

Investing & Online Stock & Share Trading - The Stock & Share Markets are Booming But Be Warned

2008-08-29T00:44:00.000-07:00

I had the pleasure of being invited on a friend’s yacht to sail in a race on Sydney Harbour yesterday. On board, as one of our motley crew, I met a top ranking corporate executive from one of Australia’s largest banks, who we’ll call ‘Phil’ here for the purpose of this article. After the race ended and after being told of my trading experience, he told me he has a large stock portfolio, many of which are speculative resources stocks. He said that he’s excited by all the money he’s making and wondering how long this has been going on?

As would be expected, ‘Phil’ also asked me for some “hot tips” for more stocks to buy. He was surprised with my reply when I told him Daryl Guppy’s standard response of “Tips are for waiters” and that I thought he was asking the wrong questions. (Daryl Guppy is a well known Stock Trader and International bestselling author - see www.guppytraders.com)

Rather, I explained he should be asking:

* How much longer will this last?

* When it finishes how will I know & what will I do?

* How do I find out about Technical Analysis and Money & Risk Management?

* What’s a Trading Plan and how do I put one together and follow it?

* How and when do I add to the stocks I already own?

* How should I structure my portfolio regarding individual stock risk, sector risk and total portfolio risk?

* What’s my exit strategy for each stock I own?

* What’s my exit strategy for my whole portfolio?

* How do I keep accurate records and monitor my performance?

* What am I going to do to learn more about myself and my own psychological weaknesses (many of which I may not even realise I have) that can make all the difference as to whether I win or lose long term?

‘Phil’ was genuinely surprised that I had taken the wind out of his sails – luckily it was after our sailing race together, but hopefully before he loses his own financial race.

In January at http://www.prweb.com/releases/2005/1/prweb193459.htm I issued a worldwide press release to caution unprepared novice investors and traders of the potential pitfalls ahead in the market. My wife Angela and I lost our waterfront home on Sydney Harbour in the 'Tech wreck' of 2000, so we speak from hard personal experience.

As complete novices in the market in 1999, we doubled on paper a large stock portfolio in only six months. Then in less than a year we suffered catastrophic losses in the tech stock crash of 2000 and beyond:

* We were set back more than 15 years financially and emotionally

* We were forced to sell our waterfront home – the very same house we had set as a goal soon after arriving in Australia as new and penniless immigrants in 1979. We began renting what I called a ‘dog box’ - as the housing market then rocketed.

* Angela was working as a retail assistant

I have a First Class Honors Degree in Civil Engineering that didn’t help. In fact I have since come to understand that it actually helped to work against me. With our experience of riding some of the largest waves (up and down) in the market and having lost hundreds of thousands of dollars in the process, we know more than most stock traders in the world of the pitfalls that await unsuspecting novice traders and investors.

We have since greatly appreciated being exposed to the successful methods taught by expert traders Alan Hull, Daryl Guppy, Jim Berg, Dr Van Tharp and others to trade profitably and with better risk control.

The forum for serious investors www.stockmeetingplace.com is the only chatroom where you will find Daryl Guppy. We recently received the following response from a fellow Australian trader Nathan Unger on that site (see below):

“...thank you for sharing. Your comments on this subject are very insightful, and rightfully so considering your near trading death experience, per se. Failure is always such a difficult moniker to be branded with, for it involves us having to acknowledge that we were wrong. Of course, acknowledging our mistakes means that we must swallow our pride – an admittedly difficult feat for many traders. Grappling with our own motives amidst the psychological matrix that is the stock market is, to say the least, a bewildering struggle.

In an almost paradoxical fashion the stock market can create whelps out of us through both our losses as well as our victories. We are unnerved when we lose and must somehow muster the courage to tentatively re-enter the markets. Yet, potentially even more dangerous are the unbridled successes that often distort a trader’s perception about their ability to regulate further success – successes that work to chide the future admission of failure.

Who would have thought that winning could actually become a setup for losing – a conundrum of the worst kind? I know of no other occupation that has the ability to masquerade as both friend and foe and then make you think that you can tell the difference.

Your experience is, I believe, a treasure worth perhaps more than the sum of your losses. It reminds me of how the most seaworthy vessels have typically been known to be the ones that have weathered the most devastating storms. Yours is a stellar effort, my friend. I will most certainly be purchasing your book.

Thanks also to Daryl and Alan for their assistance and encouragement in helping to mould John’s encounter into the best trading tool of all – practical experience...”

During 2001, not long after losing our home, we made contact with Daryl and I take this opportunity here to acknowledge and thank him once again for his wisdom and support since that time and also to Alan Hull and Dr Van Tharp since then. Daryl subsequently invited me to write a short article for his regular weekly newsletter (Tutorials in Applied Technical Analysis) which became the first of many articles as my wife Angela and I began our search for education.

He made a strong point that by concentrating on the research needed to write the articles we would pick up good habits and through sharing with others, we ourselves would be more inclined to stick with the discipline involved in the subject being covered.

We have recently collated the articles I have written for his newsletter and they are now available as ‘The Atkinson - Guppy Articles - Stock Market Educational Options for Investing Online & Online Trading - Opportunity for a Home Based Business’. Most of these articles deal with concepts and trading skills which are still relevant to readers today and include the following:

* CONDITIONAL STOP LOSS ORDERS: A real life comparison between using two brokers for monitoring stop loss orders - the true cost of slippage

* DIRECTORS DEALINGS: A snapshot study of the Australian share market to determine, if by monitoring the purchases and sales of company directors with their own shares, whether it is possible to obtain an insight into the future direction of the share price and hitch a ride in the right direction - or jump ship with them.

* EXPECTANCY - the net profit or loss that you can expect over a large number of single unit trades. A series of articles with thanks to the work of Dr Van Tharp, author of 'Trade Your Way to Financial Freedom'

* TAKE-OVERS: A brief overview of some of the strategies traders apply to take-overs.

* AVALANCHE SELLING and KANGAROO TAILS: A series of articles on the recent phenomenon in the Australian share market caused by computerised automated conditional stop loss brokers savagely cascading sell orders into the market, with prices often rebounding several percent within minutes

Market Sectors - Organizing The Stock Market

2008-08-24T11:29:00.002-07:00

Market Sectors - Organizing The Stock Market
Are you a clean freak? Does it drive you crazy when things are out of place or when a picture isn’t quite level? If you are at your friend’s house, do you wipe dust from a shelf or line up the towels when no one is looking? If so, you will like today’s topic; but don’t worry, we won’t lecture you on your obsessive compulsive side! The topic is market sectors and understanding and using them will not only tidy up your stock portfolio but will also help you to strengthen your trading plan as well.
A Definition of Market Sectors
They say a problem will defined is nearly solved; this can be applied to stocks as well. An investor needs a way to sort stocks; the basis of stock technical analysis relies on this comparison. If you can find common ground between two stocks, you can find a measurement of comparison. The best form of association is market sectors. “Market sectors” is a qualification method which looks at the type of business and groups them based on generally accepted names One of the most common classifications breaks the market down into 11 different market sectors. Two are generally regarded as “defensive” and the other nine are referred to as “cyclical”. These market sectors are:

Cyclical Stocks

Transportation

Technology

Health Care

Financial

Energy

Consumer Cyclical

Communication

Capital Goods

Basic Materials

Defensive Stocks

Utilities

Consumer Staples

Defensive Stocks

Defensive investing with defensive stocks are beneficial to a portfolio because companies in these market sectors typically don’t experience as much stock volatility when the market has problems because people still use energy and eat. These are good stabilizers to use for portfolio diversification and offer protection in a falling market.
The downside of defensive stocks is that they don’t climb with a rising market. Although the market is doing well people necessarily use more energy or eat more food. Defensive market sectors follow the image that their name implies; they can be used quite well as hedge funds, stable stocks that prevent too much volatility in a portfolio.

Cyclical Stocks

Cyclical stocks cover the remaining market sectors and they typically react to a variety of market conditions. They do move independently, however, as one may be going up while another is going down. Because of this, purchasing from the cyclical market sectors requires good stock market strategies.

Why do we care about market sectors?

There are two important concepts with market sectors. First, by understanding the different market sectors, it is possible to find relationships between different companies. If you don’t know that one company is in the health care sector and another is in the energy sector, you might compare their earnings per share and draw conclusions that don’t apply. Second, understanding market sectors allows you to add valuable protection to your stock portfolio. By investing in a number of different stock sectors, you can build a higher level of security for your investment. For example, if you invested $11,000 only in the communications sector and it dropped by 50% you will have lost $5,500 or 50% of your investment. If you invested equally in all eleven market sectors and the communications sector dropped by 50%, you will have only lost $500 or 4.5% of your investment. While the example is simplistic, the meaning is very clear; by spreading your investments over a number of market sectors you minimize your risks from a tumble by an entire sector.

Conclusion

Feel like doing a little “spring cleaning” on your portfolio now? By putting the stock market in the right baskets, you can know how to both evaluate a stock and insulate your portfolio from extreme risk. Most analysis matrixes start by comparing businesses from the same sector; as you use your trading plan to evaluate companies in similar market sectors, you will improve your decision making process. Then you can start trying to understand other important things like why those uneven towels bother you so much!

How to Use Stock Screeners For Stock Market Success

2008-08-24T11:29:00.001-07:00

Stock screeners allow traders to screen the entire market for stocks that conform to certain criteria to meet the needs of the trader. They are indispensable for modern stock traders, and can be either web-based or stand-alone tools. One of the benefits of web-based screeners is that upgrades tend to be automatically available.

If you consider how stock screening was carried out some years ago before the advent of the modern online stock screener, you will begin to understand the benefits that these systems have provided in enabling trading opportunities to be identified in seconds. Think of pouring over the stock exchange sections of newspapers, of trying to make sense of radio, real-time stock quote machines and of charting graphs by hand.

These manual procedures allowed very few stocks to be examined in a given timeframe, and you would be lucky to spot any stock to meet your criteria, let alone compile a useful Watch List. By allowing today's traders to set criteria and automatically screen out all companies that do meet these criteria, today's stock screeners can examine tens of thousands of stocks in a very short time. Results are virtually instant.

The filtering criteria used can detect stocks suitable for growth, for short or long-term earnings, or whose values will increase in a relatively short period of time. Using technical criteria to spot key reversals and breakouts can boost your stock earnings several-fold. If a trader feels a specific criterion to be important, then the stock screener will find a list of stocks that fit, and if several criteria are used in the same search, stocks with very specific properties can be identified.

There are two specific types of screening that can be carried out: by use of either fundamental or of technical criteria, and each can be made available either as end of day or real time intraday screening. Most normal stock screeners utilize fundamental criteria, although elements of technical analysis can also be included to fine tune the screening.

So how should these screeners be used? Let's have a look at the technical criteria that can be used in filtering the stocks that you want on your Watch List. You could start by trying to find trending stocks, or those that will break out above or through resistance levels. The criteria to use in your filtration in order to screen for these could include:

Stock trending up
Rising on unusual volume
Price crossed above resistance line
Price has touched support line (It is likely to climb again)
Price has reached new highs

Many of the fundamental screeners can be obtained free although if you want a real-time technical screener then you will likely have to pay a nominal fee. However, although it is normal for stock screeners to be predominantly one or the other, there are screeners available that can be used with both fundamental and technical criteria. This expands the type of screening available to you, and you should never buy a stock unless both the fundamental and technical criteria are both positive for the stock. You will achieve better results if you screen the stocks for both types of criteria, and for that you will need either a combined stock screener, or one of each type.

Stock screeners are essential for screening in today's markets because most professionals actually underperform the market due to human influences. A machine-based model can filter out human weakness, such as believing press forecasts, and produce better results assuming that the criteria, or variables uses, are those that affect the direction of stock prices in the future.

Given that is so, stock screeners are a must for the modern investment professional and novice alike.

Stock Market Analysis - Your Gateway To Successful Trading

2008-08-24T11:27:00.000-07:00

To start anything, if you do not plan well, you cannot do well. The same rule applies everywhere. So, it is inevitable to first plan and then proceed further. For example, if you want future financial security then no doubt, you need to invest. But, what kind of investment option you need to choose and even if you select an investment type, how do you proceed further?

There are several investment options available. But online trading is one of the most flexible and profitable ventures available. With more flexibility and easy investment method, more and more new investors are showing interests in this type of investment. Unlike other options, there is no lock-in period. In addition, you can start investing as per your financial strength. What's more, if you have a PC and an Internet connection - you can manage your funds right from your home. So, what else you need as far as flexibility and easiness is concerned.

However, a good planning and strategy is required for successful trading. So, if you want to reap maximum benefits from your investment option then follow certain points and enjoy making profits from the market.

• Goal: The ultimate goal for any kind of investment is to make money. However, your investment strength, planning and market knowledge will determine your success in trading.

• Length of time: Have you set a particular time period within which you want to make certain profits? If not, then set a particular time period and then work accordingly.

• Profits: How much profits you can make from your investment amount within a particular time should also be taken into consideration.

• Market risks: Though many people still consider stock market as a risky platform, but the fact is that online trading system is quite safe and easy investment method.

Moreover, stock market investing today is the most profitable option for investors who want quick returns. So, for those who are willing to start investing in stocks, it is always advisable to keep the above points in mind and then move accordingly. The key to the successful trading depends on your planning and market knowledge. So, keep these points in mind and always try to learn the changing market moods. Once you understand the basics, you can reap the benefits from trading.

You might not get overwhelming response from people who could not do well in their trading. The main cause of their failure is the lack of market knowledge. You should always keep you abreast of the market news updates. Read articles, newsletters and other resources on the web and do complete market analysis before you actually decide to buy and sell stocks. In today's stock trading company websites, you can find advanced market analysis tools - use them and then buy and sell stocks on time.

In addition, online trading system is quite easy and unlike other investment options, you can manage your funds from any corner of the world. As compared to traditional brokerage house, stock investment is not cumbersome and the best thing is that anyone can start trading online. In addition, there is no middleman and so there is no exploitation of traders in any way.

Now investors understand the real benefits of online stock trading, that's the reason why investors are opening online accounts on the company website. On the other hand, stock industries are also offering advanced tools and features to investors. Even if you do not have any computer knowledge, you can start trading easily. The websites have been designed intuitively that anyone can learn the fundamentals at the very first place. So, invest now and provide financial security to your family and kids.

Relative Market Share Profit Analysis Can Help Pick The Right Investments

2008-08-05T00:38:00.000-07:00

Market share, in strategic management and marketing, is the percentage or proportion of the total available market or industry sector that a company operates in. Market share is one of the fundamental analysis tools that many brokers use to pick stocks.

Market share can be expressed as a company's sales (revenue) in a particular industry or sector divided by the total sales revenue available in that market. Alternatively it can also be expressed as a company's unit sales volume divided by the total volume of units sold in that market (non monetary terms).

Relative market share profit is an extension of market share that takes the market share of a company (in percentage terms) and multiplies it by the revenue of that firm.

The figures required to calculate the relative market share profit of a company can usually be sourced from annual reports or in articles or market research that has been carried out. The internet is probably the best place to start this type of research.

Both increasing market share and profit are two of the most important objectives used in business. However they are not linked. Sometime to increase their market share, a company may have to forgo profits by reducing its prices. Conversely focussing on a smaller sector of the market may allow the company to charge premium prices and increase margins and profits.

When relative market share profit calculations are used as an analysis tool to aid stock picking for investing in the equity markets, they can provide more insight to a company and its competitors than many other ratios.

Other investment ratios that are of use to stock investors include return on investment (ROI), return on assets (ROA), and profit margin (gross and net).

The stock market is a place, which creates a lot of speculation, dreams and much more. How many people really make their dream a into a reality? It is actually a matter of great concern. However, it is up to you how you perceive the market from your side and experience.

The main purpose of investing has always been the same, i.e., to build a future of financial stability. Investment options provide you the opportunity to earn maximum returns from your hard earned money. Invest now and earn profits in a small time period. Yes, the Internet based stock trading has changed the whole scenario. Now, you only need to click a few mouse buttons and you are done. With the advent of the Internet, the whole world has become small and interconnected. Therefore, even if you are present in any corner of the world, you can invest in the share market and can reap the benefits in the best possible way.

Though the stock market is as volatile as before, today with advanced market strategy and online tools, anyone can trade without facing any risks. Today, with more competition in the investment world, trading industries are offering impeccable services to attract more and more investors from the market. However, consumers are enjoying the benefits from the company. So, if you also want a future financial security then start investing in stocks now.

The procedure for online trading is very simple: investors need to open an account online. And for that, they are required to search major industry so as to avail more and more services at a very low commission rate. To find the best company, a comprehensive market survey is must. Browse some of the major stock company websites and then compare their services; choose the best company as per your need. Besides this, your online broker also plays a very crucial role in trading. Your stockbroker not only does all kinds of online transactions as per your command, he also provides latest market updates such as all major marker shares that are being launched in the market; how and when to buy and sell shares so as to gain maximum profits, etc.

Online stock trading provides a clear picture about the market scenario, because there is no middleman involved and traders can access all kinds of information from the company website. You can trade at any time and this is again an added advantage of Internet based trading. The advent of easy and effortless trading system combined with intuitive stock trading company websites -- things have become much easier than ever before.

However, the key to successful trading depends on your planning, market knowledge, decision-making capacity and above all your attitude towards the market. For all those who are investing for the first time, it is always beneficial to discuss with experienced traders. And if you have no contacts with traders who are already in this business, then don't worry - consult with online financial experts. These professionals can really help you in planning and investing money in the right direction.

Another important point is your market knowledge and gaining knowledge about the market. Try to understand the market mood and then trade accordingly. You can access open resources that are available on the net. Market analysis is a must before the buying and selling of stocks. Therefore, it is inevitable to learn first and then reap the benefits from the market. There are many investors, who with their positive attitude and knowledge are making profits from the same market. So, what are you waiting for? Invest now and live your whole life happily.

Share Market Basics

2008-08-05T00:37:00.000-07:00

You can buy and sell any stock over the Internet that is online stock trading, you don't need to call up a broker. You can do online stock trading with a minimal investment you should get started today and then start learning about the stock market and choose the stocks you want to invest in.

Day Trading

Day trading is defined as the buying and selling of a security within a single trading day. It is designed to produce short-term profits. Day trading demands access to some of the most complex and sophisticated financial services and instruments in the markets. Trading with a stop-loss is extremely important for all traders to cut losses while they are still small, and to preserve their trading capital in case the market moves against their trade. Trading at certain times of the day is simply not profitable and in fact is highly risky. Day trading involves taking advantage of price movements in stocks within one trading day. Day trading strategies demand the use of leveraged or borrowed money to make profits. Day trading used to be the sole preserve of financial firms and professional investors and speculators. Day trading is however a mentally and psychologically challenging activity and is by no means meant for everyone. If you can't be highly disciplined and stick by predetermined selling points, day trading is not for you.

What is Technical Analysis?

Day trading is defined as the buying and selling of a security within a single trading day and market directions based on statistical analysis of variables such as trading volume, price changes, etc., to identify patterns. Research and examination of the market and securities as it relates to their supply and demand in the marketplace. The technician uses charts and computer programs to identify and project price trends. Now technical analysis has become increasingly popular. Technical analysts use their findings to predict probable, often short-term, trading patterns in the investments that they study. It suppose markets have memory. If so, past prices, or the current price momentum, can give an idea of the future price evolution.

What is Fundamental Analysis?

Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. It is scientific study of the basic factors which determine a share's value. The analyst studies the industry and the company's sales, assets, liabilities, debt structure, earnings, products, market share; evaluates the company's management, compares the company with its competitors, and then estimates the share's intrinsic worth. More effective in fulfilling long - term growth objectives of shares, rather than their short - term price fluctuations.

The truth of the matter is that the market is a game of money flow played by the big players as they move money around from stocks, to options, to financial futures, and back and forth in a number of different ways, all in the pursuit of greed and large profits. And remember, I previously mentioned that "a good portion of that money is being made off the backs of the uninformed individual stock trader and investor who blindly trades and invests in the stock market today." The principle in the markets is "Buy when everyone else sells and sell when everyone else buys". Investors should know that when buying a stock they are simply buying ownership in the companies.

Six Steps to Start a Share Market Portfolio

2008-08-05T00:36:00.000-07:00

So you are going to start your investment portfolio and begin to invest in some shares. Here are some steps to start you in the right direction.

Get On Line.

Today the best way to stay in contact with the market is to go online. Get yourself a computer, preferably a laptop, and an internet connection. A laptop is preferable because you can bring it with you when you move around on holidays or just when you travel away from home. Most areas these days have wireless connections at fast food restaurants. This comes in handy for checking prices and moving money into or out of accounts. At home you need to have a broadband connection and some charting software. Investigate the various types and costs associated with this. Some packages you can use for free during an introduction period. So now your on line, you need to setup a brokerage account.

Account Setup.

There are many offerings given by various brokers that you can setup an account with. Look at the cost of trading fees and read the fine print behind the contracts. Most trading accounts are linked to a cash holding bank account. Some brokers allow you to link to your existing cash bank accounts while others ask you to set up and apply for new accounts. You will have to download a series of application forms, sign them and post them back to the broker. This approval period can be more than a week. You will also need to deposit some funds into the account to get it started. Most brokers will accept minimum amounts of $500 dollars or less.

Company or Sole Trader.

There are tax considerations when buying and selling shares. As an investor, buying shares is usually a longer term proposition. As a share traders, your trades could be daily and as a result you will be subject to different amounts of payable tax. Speak to your tax consultant about this. Setup as a company may not be valid at early stages in trading or investing. The amounts traded and the frequency of trading becomes the main issues.

Technical vs. Fundamental

Looking at your trading style you may wish to investigate the methods by which you choose which shares to buy and sell. There are two types of analysis you can use, and each is a valid way to pick your shares. Some investors use fundamental analysis, while some traders use technical analysis. Others use both. Learning the difference between the two is important but out of the scope of this article.

Share Types

The types of shares you should start out buying would most likely be in the ASX 100 share listings. It would be prudent to start, by choosing from these shares as they tend not to fluctuate wildly in price and have demonstrated consistent gains and dividends over the longer term. When you become more familiar with the mechanisms of entering and exiting a trade to buy and sell shares, you can then investigate a trading strategy that suits your risk tolerance and lifestyle.

Lifestyle Choices.

Be aware that trading shares can become a daily activity and as such can tie up all your time. If you enjoy this style of trading then allow for rest breaks and exercise. Most traders and investors prefer to spend their time relaxing and not in front of the trading screens. This does become a lifestyle choice.

The Importance Of Timing In Forex And The Stock Market

2008-08-02T11:18:00.001-07:00

When we make money from the Forex we are looking for economic data which will influence the price of currencies. But when we are looking for good companies to invest in on the stock market we have been told to "Buy the blue chips." "Blue chips" are the big,reliable companies, and obviously these are listed for the most part on the New York Stock Exchange.

The Dow Jones Average is composed of blue chips, and since there are only 30 listed, at the same time that the average has been going up, it might seem a simple matter to toss a coin to see which ones should be bought out of this list of 30.

But let us get down to specific cases: Standard Oil Company of New Jersey is one of the largest, best managed and generally soundest corporations in the United States. Its earnings per share in 1958 were $2.72, in 1959 $2.91 and in 1960 $3.18. From 1957 through 1960 its dividends have been $2.25 per share each year. From the middle of 1957 to the end of 1960 the price trend of this stock was down. It declined from almost 70 to a point below 40.

Another giant on the list of 30 Dow Jones stocks is the highly successful General Electric. From a high in early 1960 of nearly 100, GE plummeted to a level of close to 60 in the spring of 1961 because of the actions of the United States government in connection with price fixing by the corporation.

There is some merit to the classical approach to the valuation of a stock by analyzing the underlying strength and prospects of the company, but this is only * An example of a high yield tax free bond is the Chesapeake Bay Bridge and Tunnel Authority 5¾% bond. In 1961 this bond could be bought under 100 to yield almost 6% and this 6% is equal to 12% for a man whose top income is taxed at a rate of 50%.

one of the elements to look at. It, of course, should not be overlooked because in the long run, earnings per share will determine the price of a stock. The only question is, "How long?" While you are holding a sound company's stock others may be moving up and you want to move up with them.

Determine the earnings trend of the company over the recent four or five years. It should be up in general, but stocks have moved up in price while earnings were declining.

Determine the position of the industry through reading the Wall Street Journal, the financial and business section of The New York Times, the Value Line Investment Survey, and the journals published by every industry and available in any library. The reason Standard Oil of New Jersey was not moving up more rapidly is due to the fact that the outlook for the petroleum industry was not as healthy as some of the other industries.

The most important piece of advice that can be given the investor in stock is that the price of a stock is the direct result of the forces which make the price of anything (stock, commodity or service) demand and supply. For a long time in the spring of 19611 thought GE was a good buy; that it might go up. I questioned a number of brokers and investment bankers about GE. There was a distinct lack of enthusiasm. Since these are the buyers and these are the people who recommend that customers buy the stock, it was evident to me that the demand was not there. It might change very quickly, but until it did I determined to buy other stocks.

It is important to emphasize this point once again: that the price of a stock is the direct result of how much of a stock is offered for sale and what the demand is. We will return later to this point with a striking example.

The next most important piece of advice is that you should buy a stock which is moving up, not one which might move up or one which is moving down and looks as though it might be a bargain. You cannot hope to buy at the bottom and sell at the top. If you try to buy at the bottom you have no assurance that the decline has stopped; and if you try to sell at the top you cannot be certain the rise will not continue. Buy just after a stock has demonstrated its willingness to rise for a few weeks, and sell after about two weeks of decline.

The most foolish piece of philosophizing that an investor can engage in is to say to himself, "I don't need to worry about the declining trend in the price of my stock. It will come back." Yes, it may, but when? And if you sold and simply held cash, you might for your cash get far more shares with which to ride the market up again. At the beginning of 1960 Shell Oil was well over 40. By the summer it was down close to 30, and by the spring of 1961 it was close to 45. The downtrend was clear and the uptrend was just as clear. A person could have sold early in the decline and bought early in the rise. My wife, being as good an analyst as I, if not a little better through"intuition," hit the low point and advised buying at that point. A profit of 50% could have been realized in one year!

Next, follow the market and follow it every few days to determine trend. The closer you are to the market the better you are informed as to what to do. Do not worry about a decline of a few days or a sudden break in the market, no matter how sharp. Worry only about the trend of your stock and the trend of the market.

Use the stop loss order to protect yourself against losses and to provide you with peace of mind. When you purchase stock after careful study and consideration, you may not want to put in an immediate stop loss order which is an order to sell if the stock reaches a particular price below the present market. In the past I have placed stop loss orders, when I bought stock, at about two points under my purchase price. If I bought a stock at 501 put in a stop loss order at 48. Very often the stock went down to 48 and I was sold out. I lost both in the price of the stock and in the commission and tax I had to pay when I bought and when I sold.

Then I had the unhappy experience of seeing my stock rise above 50 and keep on rising. If an investor followed the rule of placing a stop loss order a few points under the purchase price, he could hardly ever purchase a stock that jumps around like O'okiep Copper.

This stock jumps up and down two points during one trading session.

If a stock goes up say 10 points, you may place a stop loss order three or four points under the market. This still prevents a loss and you have already made a good profit in the stock. The strict trailing stop loss order may hurt you not only by getting you out of a rising stock on a minor decline, but the use of trailing stop loss orders by the general investing public damages the market. A slight drop in price of a stock can touch off a series of stop loss orders which lower the price of the stock needlessly.

The major value of having a stock market is the provision of a place in which to buy and a place in which to sell with little delay and at a price which can to a great extent be known in advance. For this reason stocks listed on the New York Stock Exchange and on the American Stock Exchange offer a great advantage to the investor. He knows where he stands by looking at the daily paper, and he has liquidity. He can get his money out of the stock in a matter of minutes.

With the Forex our money is just as liquid and we stand to make more money in a shorter space of time, and we can put a stop loss to protect our position.

Good software will help us predict future price movements in currencies and help us time our purchases and sales of currencies for maximum profit.

Do You Know How to Invest in Stocks?

2008-08-02T11:16:00.001-07:00

Stocks are a big part of our society today. If you are new and do not know how to invest in stocks, this article will give you the gist of it. You will be amazed at how much money you can potentially earn just by trading stocks. The key is research and understanding what you are doing.

Before getting into further details, it is important you understand what a stock is. A stock is a paper asset that various companies use to raise money. By purchasing a stock you are becoming a part owner of the business depending on how much you purchase. So how do you know how well you and your company are doing?

Each company that has stocks is given a ticker symbol to be used as an identification tag. You can then follow your company by looking for the symbol and reading up on how they are doing. When it comes to companies selling stocks, there are a couple of different stocks including blue chip and penny stocks.

If you are going to invest in stocks, typically blue stocks are the ones you want to go with. They are the best stocks and are considered the safest for you. What makes a stock a blue chip stock is that the companies stocks are financially secure. This way you know the company is not going to go bankrupt, allowing you to safely invest a little more money than usual.

When investing in stocks you have a few options. One method is to go through the company’s direct stock purchase plan. Not every company has a direct stock purchase plan, but many do. Do your research to see which companies offer one.

A second method is using a DRIP program. Many companies that do not have a direct stock purchase plan have a dividend reinvestment plan (DRIP) you can get into. This is a great tool to allow you to grow your portfolio.

A third method is purchasing a stock through a specialized service. There are a number of companies that sell individual stocks if you want to just get your feet wet first. After purchasing a few stocks, you can then buy more later.

Everything mentioned thus far does not have to do with a broker, but getting a broker is another option. Using a broker is great if you do not want to deal with stocks directly yourself. But you do have to realize that using a broker calls for you paying a commission to pay for their fees.

If you are looking to start investing in stocks, it is important you take the time to learn about trading stocks and purchasing them. There are several different methods you can use to invest in stocks whether it is through a broker or not.

Learning how stock trading works is an important part of online investment. Even if you don't plan to pursue stock trading as s full-time career, knowing when to pick stellar stock options is primarily based on knowing the ins and outs of online stock trading.

For beginners like you, it is essential to have a working background on online stock trading, or, instead of learning how to pick stellar stock, you might be the one being taken for a ride. The best way to learn all about online stock trading rests in your choosing a reliable and reputable online trading firm.

When picking an online stock trading firm, you may start by surfing one that offers free account registration, with a beginner level. Many stock firms would say that you don't need to learn the ropes to pick stellar stock on the floor; all you need to do is sign up and type in your credit card information and they'll do the rest --- beware of such statements.

It is essential for you to learn how online stock trading works, so that you'll know where your money is going and if it's working for you, and not for the online trading firm. Be clear about what you want, and go for it. Don't rely on sites and traders who state all you have to do is sign up and they'll do all the rest. Fraud works by making you feel like you don't have to worry about anything else, at all. An online site with beginner levels is one way of knowing that that site cares about its investors, and not just the profit.

Another key feature of a reliable online stock trading firm is its ability to give you access to real-time and delayed stock quote news, updates, tips, picks and stock analysis that will help you pick stellar stock options. Many online stock trading sites offer beginners with information that would help them learn how to manage their investments, and how to pick stellar stock using stock reports, day trading stock tip updates and information. This is essential, because the key to making great buy offers is information.

Many online brokerage sites offer real-time day trading stock tip and stock quotes to keep you informed of the shifts and movements on the floor. Some may even offer after hours stock tip and updates for your mutual fund options and stock investments. Just to be on the safe side, try searching for sites that offer the best ways for you to get firsthand information from the market. These sites offer day trading stock tip developments, stock quote data, and other stock trading information. Getting real-time stock information is essential especially for day trading and direct stock investments.

On the other hand, delayed stock quotes are often used for after hours trading on mutual fund stock options, as well as stock analysis and market projections. You can also use these information in developing your own stock trading strategy, while earning the experience to make the best day trading stock tip.

As a beginner, you may be handling relatively solid stock options just so you can get a feel of buying and selling stocks. Soak in as much information and experience you can. After some time, you'll be able to move on to bigger and more volatile stocks, and your learning experience will make the difference between being able to pick stellar stock and mediocre ones.

Selecting the Best Stock Trading Software

2008-08-02T11:13:00.000-07:00

Since the advent of the internet and more powerful personal computers, many stock players have been looking for the best stock trading software that the market can offer. After all, what a better way to analyze the market with an online stock trading software? Capable of calculating all the important indexes and show you, in a single screen and at full color, which shares should you be considering. But, are they worth your time and money?

Let's dig in to find more.

Stock Trading Software

Right now, there are more than 200 hundred stock exchange markets in Earth. These organizations trade the shares of thousands of companies around the planet. Ergo, they produce huge quantities of information. If you really want to be connected to the world, how are you going to master all this data?

If you try to do it, you will find that it is an impossible task. There are too many variables to consider, and the human mind isn't prepared for that level of information. The only way to do it is with a online stock trading software. Today, personal computers have enough power for processing these amounts of information. So, for the first time in history, people can look at stock markets of any part of the world and analyze it's movements.

Benefits Of Stock Trading Software,/b>

The main benefit is that you are going to save enormous amounts of time. You will not have to spend hours behind the Yahoo or Google stock pages, or with the newspaper, interpreting the data. A stock trading software will download all the information that you need and in no time you will find yourself with all the processed data that you require for making the right choice.

The second benefit is that it will show you cold numbers. That means that you won't be a victim of your emotions. We are humans, and there is no way in which we can detach our emotions from our decisions. Since the stock trading software package doesn't have emotions, it will tell you nothing but the truth.

The final benefit is that you will be able to broaden your portfolio, making it more secure. That way, if the stock market of a determined country falls down, you won't be very affected. With the best stock trading software you can invest in fishmeal at Chile, in mining at Peru, in biotechnology at China and even software companies at Korea (a very interesting market considering the amount of people that play Massively-Multiplayer Online Role-Playing Games).

So far, we've uncovered some interesting facts about stock trading software, stock trading robot, stock, automatic buying selling stock, stock automation. You may decide that the following information is even more interesting.

Tips For Choosing The Best Stock Trading Software

The most important tip for choosing the best software stock trading package is that you feel comfortable with it. There isn't something more frustrating than having to use a software that you don't like. If that is the case, sooner or later you will uninstall it, feeling that you have paid unnecessary money for a lemon.

Do not place yourself into that position. Use the trial-periods offered by the different stock market trading software companies. It is the only way in which you are going to find out if there is a good chemistry between you and the product. After all, a practical software stock trading package is what you should be looking for.

The second tip is to look for a company that has been some time in the market. This is a proof that they offer a good product and that you will receive support for your acquisition. There are many stock and trading software companies that come and go, specially those that make free stock trading software.

Finally, do not trust stock trading software that promises you to make you rich, or that it can predict the future movements of stock. If that really was the case, would you sell it at $50 a copy instead of using it for making yourself filthy rich? This kind of programs are nothing but a scam so do not spend your time with them.

Remember that a stock trading software isn't the only thing that you need for making yourself rich. These programs are tools, not decision makers. It is you, the investor, the one who has to interpret that information and decide if it is worth using it or not. After all, the computer can't known how much is going to affect a company to have a backlog, or if their operations are on the brink of being nationalized by a foreign country.

You can't predict when knowing something extra about stock trading software, stock trading robot, stock, automatic buying selling stock, stock automation will come in handy. If you learned anything new about stock trading software, stock trading robot, stock, automatic buying selling stock, stock automation in this article, you should file the article where you can find it again.

Practice Stock Trading With an Online Stock Game Simulator

2008-08-02T11:10:00.000-07:00

Stock trading is often likened to gambling. But it isn't. Developing a good trading strategy is the key to making it in the stock market. Even newbies like you can learn stock trading and do it well. One way of developing your own strategy is to practice stock trading using online stock game simulators.

A stock market simulator, is an online game application that duplicates aspects of real-life stock markets. But no real money is involved; play money is used, so you can practice stock trading without the financial risk. Read on and know more about how you can learn and practice stock trading with an online stock game simulator.

Two Types: There are two types of online stock game applications for you to be able to practice stock trading skills and strategies: Financial and fantasy stock game simulators. A financial stock market online game application allows you to practice stock trading through a fictional portfolio based on real stock entries.

The Use of Play Money - Your financial stock simulator portfolio uses play money, so there is no risk involved at all. To prevent any collusion, or abuse of the game and the system, most online trading websites that offer these free stock games use a delayed data feed. Such a system ensures that the information and data may not be used to do actual stock trading using these information. A financial stock online simulator is a great way for you to practice stock trading scenarios and strategies, and gain experience before you move up to the real thing.

Hypothetical Stock Trading - On the other, a fantasy stock market online game simulator lets you practice stock trading through thoroughly hypothetical yet amusing settings. Unlike financial stock game applications, fantasy online simulators feature imaginary fantasy stocks that, while representing real items, would never be actually traded in actual practice stock trading setting.

The Stocks - Some items being traded in fantasy free stock market game applications include the longevity of certain books on the bestseller list, the success of certain movies at the box office, antics of infamous celebrities, sports teams and games, and more. What fantasy stock market game applications do is show how the principles in an actual stock trading setting may work.

By making use of the fantasy analogy, this type of stock market simulator is an ideal way for anyone with no background in trading, to be able to understand how the stock market works, because these often use items that are familiar to a lot of people. This is one way where you get to practice stock trading techniques and strategies while having fun.

Practice - Playing on an online stock market simulator lets you practice stock trading with play money in a real-world stock market scenario. Getting the hang of how shares are bought and sold, what affects your investments and the other principles are all part of the practice stock trading experience with a stock market simulator. It will just be a matter of time between simply playing practice stock trading on an online stock market simulator and doing the real deals yourself.

Are You Interested In Stock Investing?

2008-08-02T11:08:00.000-07:00

In our investment work when we get involved in stock investing, we do hands on stock research. Here are 12 basic stock investing rules that you may follow for successful trading. The stock market is driven by earnings, and a good stock investing course will teach you to judge the emotional state of the stock market.

Basic concept behind stock investing before getting involved in the stock trading, you should be well versed with its concept as this will help you in achieving success every time you trade. Now with all these information presented to you, it is now your choice whether you will get involved in penny stock investing. With ETF investing, you get the best of stock investing (ease of trading) and the best of mutual fund investing (built-in diversification) all in one investment vehicle.

When taking a stock investing course you may learn a few things that your broker may not even be aware of. Unlike stock investing, you need strong credit to use other people's money to finance investment property. As you might imagine, the ads under stocks generally (which includes broad search terms like 'stock investing') are seen the most, because most searchers begin with generic inquiries.

So if you are new to investing in the stock market take some time and learn how to by taking a stock investing course. Stock investing is relatively volatile and full of uncertainty. The more forex stock investing trades you make with a high probability of success, the more successful you will be.

Stock investing takes a great deal of research however if you make good investing decisions, it can have a high rate of return. Stock investing is a popular tool that many use for creating wealth. It is not difficult at all to succeed in stock investing.

They don't know anything about stock investing and they often lose a few thousand dollars very quickly. You have to weigh both the pros and the cons of small cap stock investing before you sink any of your hard earned money into anything. In the real world, the world of stock investing, you should always put money after your best ideas.

It is also the hardest part to master in stock investing. Penny stock investing is a junior level course at least. Fraudsters don't think twice before developing stock investing, commodity or option trading courses to make a little extra money for themselves regardless of whether or not what they teach helps their students.

Also, online stock investing has opened the door wide for overseas stock trading, giving you more investment opportunities than ever. In this manner, stock investing is much like surfing: spotting when or when not to ride the waves. So, before putting any money into stocks, the first question you should ask is what do you want to achieve with stock investing.

The second richest man in the world, Warren Buffett, has made his millions from stock investing. Social networking has been intergraded into many stock investing courses. When you take a closer look, the alternative means of extra income via stock investing is just a spin-off of earning from a business.

Online stock investing has helped a lot in saving time and money by enjoying the thrill of trade at your convenience in the ambience of your home. What any 'vexed' shareholders are forgetting, and he is not, is that Rule 1 in stock investing is, don't lose money. Penny stock investing can be profitable.

This is a good exercise in building wealth in the unstable world of stock investing. It's throwing in the towel, and you don't want to get involved with stock investing with companies that have that attitude. Online stock investing can be a great way for anyone to get involved in the market.

Contrary to the short term perspective of most investors today, all the big money is made by catching large market moves - not by day trading or short term stock investing. Fraudsters don't think twice before developing stock investing, commodity or option trading courses to make a little extra money for themselves regardless of whether or not what they teach helps their students. If penny stock investing is a junior level course then day trading is a senior level course that most seniors will fail.

We are looking for titbits of information, what we call the scuttlebutt method of stock investing. Now stock investing can be a crap shoot at best. In 1998 he was shouting out to the world to 'get out' of the stock market but now he is shouting to everyone that it is time to 'get in'. The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing.

They don't know anything about stock investing and they often lose a few thousand dollars very quickly. The second richest man in the world, Warren Buffett, has made his millions from stock investing. This way of stock investing or trading is called the Darvas strategy.

In our investment work when we get involved in stock investing, we do hands on stock research. What any 'vexed' shareholders are forgetting and he is not, is that Rule 1 in stock investing is, Don't lose money. As mentioned earlier, stock investing is not only knowing the companies but also knowing the timing of investment.

Since I am an advocate of stock investing, let me make the case for stock investing. Penny stock investing can be profitable. Also, online stock investing has opened the door wide for overseas stock trading, giving you more investment opportunities than ever.

Well, one of the oddities of stock investing is that stocks do not necessarily behave according to the company's condition. The new book, 'Sensible Stock Investing', describes in detail the relatively simple techniques that the individual investor can use to sidestep large losses such as not using margin, not selling short, and controlling losses with sensible sell-stops. Penny stock investing is a junior level course at least.

Combined, the return on your investment here is massive compared to regular stock investing. I want to emphasize that CAPM is based on the notion that the stock market efficiently translates all information known about the stock market into stock prices for stock investing purposes. What do I need do stock investing.

Even the stock investing pro needs tips now and again and is on a path of continuous daily learning. Beyond that, however, online stock investing does have a lot of perks that make it accessible to virtually anyone. So if you are new to investing in the stock market take some time and learn how to by taking a stock investing course.

Nowadays, stock investing can already be done by the man on the street. Everyone from retirees to school children, have managed to get involved in online stock investing for a whole host of reasons.

NSE

2008-02-13T21:36:00.000-08:00

The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It was set up in 1993 to encouragestock exchange reform through system modernization and competition. It opened for trading in mid-1994. It was recently accorded recognition as a stock exchange by the Department of Company Affairs. The instruments traded are, treasury bills, government security and bonds issued by public sector companies.

The Organisation: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.

NSE Group:
1. India Index Services & Products Ltd. (IISL)
2. National Securities Clearing Corporation Ltd. (NSCCL)
3. NSE.IT Ltd.
4. National Securities Depository Ltd. (NSDL)

Taxation

2008-02-13T21:35:00.000-08:00

Investment strategies

One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.

Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).

Taxation

According to each national or state legislation, a large array of fiscal obligations must be respected regarding capital gains, and taxes are charged by the state over the transactions, dividends and capital gains on the stock market, in particular in the stock exchanges. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the state, or that tax free stock market operations are useful to boost economic growth.

crashes in stock market

2008-02-13T21:32:00.000-08:00

the stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic. Often, stock market crashes end up with speculative economic bubbles.

There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000. But those stock market crashes did not begin in 1929, or 1987. They actually started years or months before the crash really hit hard.

One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, Canada lost 22.5%, Hong Kong lost 45.8% and Great Britain lost 26.4%. Names “Black Monday” and “Black Tuesday” are also used for October 28-29,1929, which followed Terrible Thursday – starting day of the stock market crash in 1929. The crash in 1987 raised some mysticism – main news or events did not predict the catastrophe and visible reasons for the collapse were not identified. This event had put many important assumptions, of modern economics, under uncertainty, namely, the theory of rational conduct of human being, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange's computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve system and central banks of other countries to take measures to control the spreading of worldwide financial crisis. In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

importance of stock market

2008-02-13T21:31:00.000-08:00

Importance of stock market

Function and purpose

The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via banks' traditional lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 per cent of households' financial wealth, compared to less than 20 per cent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another.

The stock market, individual investors, and financial risk

Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtalking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett.^[1] Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st.

basics

2008-02-13T21:28:00.000-08:00

The Definition

The expression 'stock market' refers to the system that enables the trading of company stocks (collective shares), other securities, and derivatives. Bonds are still traditionally traded in an informal, over-the-counter market known as the bond market. Commodities are traded in commodities markets, and derivatives are traded in a variety of markets (but, like bonds, mostly 'over-the-counter').

The size of the worldwide 'bond market' is estimated at $45 trillion. The size of the 'stock market' is estimated at about $51 trillion. The world derivatives market has been estimated at about $480 trillion 'face' or nominal value, 30 times the size of the U.S. economy…and 12 times the size of the entire world economy. must be noted though that the value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. (Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.)

The stocks are listed and traded on stock exchanges which are entities (a corporation or mutual organization) specialized in the business of bringing buyers and sellers of stocks and securities together. The stock market in the United States includes the trading of all securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges include the Paris Bourse Euronext), the London Stock Exchange and the Deutsche Borse.

Trading

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

The New York Stock Exchange is a physical exchange, also referred to as a listedspecialist, who goes to the floor trading post to trade stock. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading". exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a

The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock. .

The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.

From time to time, active trading (especially in large blocks of securities) have moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant [

Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions