Monday, December 04, 2006

Forex Markets - Trading Internationally

investments & trading

Forex Markets - Trading Internationally

Forex market trading is trading money, currencies worldwide. Most all countries around the world are involved in the forex trading market, where money is bought and sold, based on the value of that currency at the time. As some currencies are not worth much, it is not going to be traded heavily, as the currency is worth more, additional brokers and bankers are going to choose to invest in that market at that time.

Forex trading does take place daily, where almost two trillion dollars are moved every day - that is a huge amount of money. Think about how many millions it does take to bring about a total of a trillion and then consider that this is done on a daily basis - if you want to get involved in where the money is, forex trading is one 'setting' where money is exchanging hands daily.

The currencies that are traded on the forex markets are going to be those from every country around the world. Every currency has it own three-letter symbol that will represent that country and the currency that is being traded. For example, the Japanese yen is the JPY and the United Stated dollar is USD. The British pound is the GBP and the Euro is the EUR. You can trade within many currencies in one day, or you can trade to a different currency every day. Most all trades through a broker, or those any company are going to require some type of fee so you want to be sure about the trade you are making before making too many trades which are going to involve many fees.

Trades between markets and countries are going to happen every day. Some of the most heavily trades occur between the Euro and the US dollar, and then the US dollar and the Japanese yen, and then of the other most often seen trades is between the British pound and the US dollar. The trades happen all day, all night, and thought out various markets. As one country opens trading for the day another is closing. The time zones across the world affect how the trading takes place and when the markets are open.

When you are making a transaction from one market to another, involving one currency to another you will notice the symbols are used to explain the transactions. All transactions are going to look something like this EURzzz/USDzzz the zzz is to represent the percentages of trading for the percentage of the transaction. Other instances could look like this AUSzzz/USD and so on. When reading and reviewing your forex statements and online information you will understand it all much better if you are to remember these symbols of the currencies that are involved.

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Friday, November 24, 2006

Forex Trading, What The Hype Is All About

investments & trading


Forex trading, what the hype is all about by J. Foley

Forex trading is all about making big money. Some investors have found it quite easy to make a large amount of money as the forex market changes daily. Forex, is the foreign exchange market. Online and offline you will find references to the forex market as FX as well. Forex trading takes place through a broker or a financial institution often where you are able to purchase other types of stocks, bonds and investments.

When you are thinking about getting involved in the forex markets you should know you are sending money to be invested with other countries. This is done to prop up the investments of people involved in certain types of hedge funds, and in the markets overseas. The forex market could have your money invested in one market one day, and the next day your money is invested in another country. The daily changes are determined by your broker or financial institution. When reading your statements and learning more about your account, you will find that every type of currency has three letters that will represent that currency.

For example, the United States dollars is USD, the Japanese yen is JPY, and the British pound sterling will read as GBP. You will also find that for every transaction on your account listing you will see information that looks like this: JPYzzz/GBPzzz. This means that you took your Japanese yen money and invested it into something in the British pound market. You will find many transactions from one currency to another if you have money that is scattered through out the forex markets.

Forex markets trading by investment management firms are the companies you can trust with your money. You want to find a company that has been dealing with forex trading since the early seventies, and not someone just new on the block so you get the most for your hard earned money. It is important that you beware of companies that are popping up online, and often times from foreign countries that are stating they can get you involved in the forex markets and trading. Read the fine print, and know whom you are dealing with for the best possible protection.

If you are interested in trading on the forex market, you will find limits for investing are different from company to company. Often times you will learn that you need a minimum of $250 or $500 while other companies will need $1000 or $10,000. The company you are dealing with will set limits in how much you need to open an account with their company. The scams that are online will tell you, that you only need a $1 or $5 to open an account, but you need to learn more about that company and where they are doing business before investing any money, this is for your own protection while dealing in forex trading and markets online.

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Friday, November 17, 2006

Foreign Exchange Market Is Different From The Stock Market

investments & trading

Foreign Exchange Market Is Different From The Stock Market By J. Foley

The foreign exchange market is also known as the FX market, and the forex market. Trading that takes place between two counties with different currencies is the basis for the fx market and the background of the trading in this market. The forex market is over thirty years old, established in the early 1970's. The forex market is one that is not based on any one business or investing in any one business, but the trading and selling of currencies.

The difference between the stock market and the forex market is the vast trading that occurs on the forex market. There is millions and millions that are traded daily on the forex market, almost two trillion dollars is traded daily. The amount is much higher than the money traded on the daily stock market of any country. The forex market is one that involves governments, banks, financial institutions and those similar types of institutions from other countries. The

What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or often times it is actually going to be cash. From one currency to another, the availability of cash in the forex market is something that can happen fast for any investor from any country.

The difference between the stock market and the forex market is that the forex market is global, worldwide. The stock market is something that takes place only within a country. The stock market is based on businesses and products that are within a country, and the forex market takes that a step further to include any country.

The stock market has set business hours. Generally, this is going to follow the business day, and will be closed on banking holidays and weekends. The forex market is one that is open generally twenty four hours a day because the vast number of countries that are involved in forex trading, buying and selling are located in so many different times zones. As one market is opening, another countries market is closing. This is the continual method of how the forex market trading occurs.

The stock market in any country is going to be based on only that countries currency, say for example the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. However, in the forex market, you are involved with many types of countries, and many currencies. You will find references to a variety of currencies, and this is a big difference between the stock market and the forex market.

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Wednesday, November 08, 2006

FOREX : Trading Foreign Currency

investment & trading

FOREX : Trading Foreign Currency By J. Foley

FOREX trading is all about trading foreign currency, stocks, and similar type of products. The currency of one country is weighed against the currency of another country to determine value. The value of that foreign currency is taken into consideration when trading stocks on the FOREX markets. Most countries have control over the value of that countries value, involving the currency, or money. Those who are often involved in the FOREX markets include banks, large businesses, governments, and financial institutions.

What makes the FOREX market different from the stock market?
A forex market trade is one that involves at least two countries, and it can take place worldwide. The two countries are one, with the investor, and two, the country the money is being invested in. Most all transactions taking place in the FOREX market are going to take place through a broker, such as a bank.

What really makes up the FOREX markets?
The foreign exchange market is made up of a variety of transactions and counties. Those involved in the FOREX market are trading in large volumes, large amounts of money. Those who are involved in the FOREX market are generally involved in cash businesses, or in the trade of very liquid assets that you can sell and buy fast. The market is large, very large. You could consider the FOREX market to be much larger than the stock market in any one country overall. Those involved in the FOREX market are trading daily twenty-four hours a day and sometimes trading is completed on the weekend, but not all weekends.

You might be surprised at the number of people that are involved in FOREX trading. In the years 2004, almost two trillion dollars was an average daily trading volume. This is a huge number for the number of daily transactions to take place. Think about how much a trillion dollars really is and then times that by two, and this is the money that is changing hands every day!

The FOREX market is not something new, but has been used for over thirty years. With the introduction of computers, and then the internet, the trading on the FOREX market continues to grow as more and more people and businesses alike become aware of the availablily of this trading market. FOREX only accounts for about ten percent of the total trading from country to country, but as the popularity in this market continues to grow so could that number.

investment & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Monday, October 30, 2006

Investing Mistakes To Avoid

investments & trading

Investing Mistakes to Avoid By J. Foley


Along the way, you may make a few investing mistakes, however there are big mistakes that you absolutely must avoid if you are to be a successful investor. For instance, the biggest investing mistake that you could ever make is to not invest at all, or to put off investing until later. Make your money work for you – even if all you can spare is $20 a week to invest!

While not investing at all or putting off investing until later are big mistakes, investing before you are in the financial position to do so is another big mistake. Get your current financial situation in order first, and then start investing. Get your credit cleaned up, pay off high interest loans and credit cards, and put at least three months of living expenses in savings. Once this is done, you are ready to start letting your money work for you.

Don’t invest to get rich quick. That is the riskiest type of investing that there is, and you will more than likely lose. If it was easy, everyone would be doing it! Instead, invest for the long term, and have the patience to weather the storms and allow your money to grow. Only invest for the short term when you know you will need the money in a short amount of time, and then stick with safe investments, such as certificates of deposit.

Don’t put all of your eggs into one basket. Scatter it around various types of investments for the best returns. Also, don’t move your money around too much. Let it ride. Pick your investments carefully, invest your money, and allow it to grow – don’t panic if the stock drops a few dollars. If the stock is a stable stock, it will go back up.

A common mistake that a lot of people make is thinking that their investments in collectibles will really pay off. Again, if this were true, everyone would do it. Don’t count on your Coke collection or your book collection to pay for your retirement years! Count on investments made with cold hard cash instead.

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Wednesday, October 25, 2006

About On-line Trading

investments & trading

About Online Trading By J. Foley


The invention of the Internet has brought about many changes in the way that we conduct our lives and our personal business. We can pay our bills online, shop online, bank online, and even date online!

We can even buy and sell stocks online. Traders love having the ability to look at their accounts whenever they want to, and brokers like having the ability to take orders over the Internet, as opposed to the telephone.

Most brokers and brokerage houses now offer online trading to their clients. Another great thing about trading online is that fees and commissions are often lower. While online trading is great, there are some drawbacks.

If you are new to investing, having the ability to actually speak with a broker can be quite beneficial. If you aren’t stock market savvy, online trading may be a dangerous thing for you. If this is the case, make sure that you learn as much as you can about trading stocks before you start trading online.

You should also be aware that you don’t have a computer with Internet access attached to you. You won’t always have the ability to get online to make a trade. You need to be sure that you can call and speak with a broker if this is the case, using the online broker. This is true whether you are an advanced trader or a beginner.

It is also a good idea to go with an online brokerage company that has been around for a while. You won’t find one that has been in business for fifty years of course, but you can find a company that has been in business that long and now offers online trading.

Again, online trading is a beautiful thing – but it isn’t for everyone. Think carefully before you decide to do your trading online, and make sure that you really know what you are doing!

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Wednesday, October 11, 2006

Why The Smaller Investor Has Advantages Over Huge Multinational Funds

investments & trading

Why The Smaller Investor Has Advantages Over Huge Multinational Funds When It Comes To Scooping Up Higher Investment Returns By J. Foley

You would be forgiven in thinking that with all the professional managers, funds and resources.at their disposal that investment funds would win head over heels against the smaller investor like you and I. In fact this is not at all the case – smaller investors have several advantages over the big funds and have every chance of beating their returns on investments. Here’s why:

The individual investor does not have to invest millions and so they can invest in small caps (tiny growth companies) that have the potential to grow many times over. These stocks are typically far too illiquid for funds to enter.
The smaller investor can get in and out of a stock with the simple click of a mouse or a phone call (and get roughly the same sale price per share). The larger funds have to gradually sell their holdings in a company (they may have millions of shares to offload – not an easy or quick thing to achieve).
Individual investors can effectively trade positions for small gains – something that larger funds simply do not have the ability to do.

On top of this, the internet has more or less facilitated the smaller investor to have access to the same information at the same time as the big city fund managers. Arguably, the individual investor also has the added advantage of speed – a fund manager may have to get approval in order to buy into a company (not a case for the individual investor) and cannot take advantage of special situations (such as buying on breaking news and so on).

Remember however, if you really want to become a “professional investor” – one who is savvy enough to beat the market and essentially make a living from investments then you need to learn as much as you can about how the market works, how to analyse companies, the part psychology plays in driving markets and how to create an investment/trading system that’s right for you. Even the masters of investing such as Warren Buffet and Jim Slater all started from scratch. Warren Buffet once did not know what the PE of a company meant. Jim Slater once did now know how to read the balance sheet of a company. They educated themselves and discovered how to pick stocks that have excellent potential – you could be doing the same. The first step to investment is to invest in yourself and your education. To offer an overused yet apt phrase – KNOWLEDGE IS POWER!


investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Tuesday, October 10, 2006

How Much Money Should You Invest?

investments & trading

How Much Money Should You Invest? By J. Foley


Many first time investors think that they should invest all of their savings. This isn’t necessarily true. To determine how much money you should invest, you must first determine how much you actually can afford to invest, and what your financial goals are.

First, let’s take a look at how much money you can currently afford to invest. Do you have savings that you can use? If so, great! However, you don’t want to cut yourself short when you tie your money up in an investment. What were your savings originally for?

It is important to keep three to six months of living expenses in a readily accessible savings account – don’t invest that money! Don’t invest any money that you may need to lay your hands on in a hurry in the future.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have funds from another source, such as an inheritance that you’ve recently received, this will probably be all that you currently have to invest.

Next, determine how much you can add to your investments in the future. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Speak with a qualified financial planner to set up a budget and determine how much of your future income you will be able to invest.

With the help of a financial planner, you can be sure that you are not investing more than you should – or less than you should in order to reach your investment goals.

For many types of investments, a certain initial investment amount will be required. Hopefully, you’ve done your research, and you have found an investment that will prove to be sound. If this is the case, you probably already know what the required initial investment is.

If the money that you have available for investments does not meet the required initial investment, you may have to look at other investments. Never borrow money to invest, and never use money that you have not set aside for investing!

investments & trading
Article Written By J. Foley

Friday, September 29, 2006

Determine Where You Will Invest

investments & trading

Determining Where You Will Invest by J. Foley


There are several different types of investments, and there are many factors in determining where you should invest your funds.

Of course, determining where you will invest begins with researching the various available types of investments, determining your risk tolerance, and determining your investment style – along with your financial goals.

If you were going to purchase a new car, you would do quite a bit of research before making a final decision and a purchase. You would never consider purchasing a car that you had not fully looked over and taken for a test drive. Investing works much the same way.

You will of course learn as much about the investment as possible, and you would want to see how past investors have done as well. It’s common sense!

Learning about the stock market and investments takes a lot of time… but it is time well spent. There are numerous books and websites on the topic, and you can even take college level courses on the topic – which is what stock brokers do. With access to the Internet, you can actually play the stock market – with fake money – to get a feel for how it works.

You can make pretend investments, and see how they do. Do a search with any search engine for ‘Stock Market Games’ or ‘Stock Market Simulations.’ This is a great way to start learning about investing in the stock market.

Other types of investments – outside of the stock market – do not have simulators. You must learn about those types of investments the hard way – by reading.

As a potential investor, you should read anything you can get your hands on about investing…but start with the beginning investment books and websites first. Otherwise, you will quickly find that you are lost.

Finally, speak with a financial planner. Tell them your goals, and ask them for their suggestions – this is what they do! A good financial planner can easily help you determine where to invest your funds, and help you set up a plan to reach all of your financial goals. Many will even teach you about investing along the way – make sure you pay attention to what they are telling you!

investments & trading
Article Written bY J. Foley
http://travelguy.typepad.com/investments

Saturday, September 23, 2006

Choose A Broker

investments & trading

Choosing a Broker By J. Foley


Depending on the type of investing that you plan to do, you may need to hire a broker to handle your investments for you. Brokers work for brokerage houses and have the ability to buy and sell stock on the stock exchange. You may wonder if you really need a broker. The answer is yes. If you intend to buy or sell stocks on the stock exchange, you must have a broker.

Stockbrokers are required to pass two different tests in order to obtain their license. These tests are very difficult, and most brokers have a background in business or finance, with a Bachelors or Masters Degree.

It is very important to understand the difference between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow your instructions to either buy or sell stock… not to analyze stocks.

Brokers earn their money from commissions on sales in most cases. When you instruct your broker to buy or sell a stock, they earn a set percentage of the transaction. Many brokers charge a flat ‘per transaction’ fee.

There are two types of brokers: Full service brokers and discount brokers. Full service brokers can usually offer more types of investments, may provide you with investment advice, and is usually paid in commissions.

Discount brokers typically do not offer any advice and do no research – they just do as you ask them to do, without all of the bells and whistles.

So, the biggest decision you must make when it come to brokers is whether you want a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service broker to ensure that you are making wise investments. They can offer you the skill that you lack at this point. However, if you are already knowledgeable about the stock market, all you really need is a discount broker to make your trades for you.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Wednesday, September 13, 2006

Mutual Funds : Better than Individual Stocks?

investments & trading

Mutual Funds – Better than Individual Stocks? By J. Foley

Though it cannot be said in general that mutual funds are always better than individual stocks, it still cannot be denied that they usually involve lower risks, less money and generally yield lower but safe returns.

It all depends on the risk attitude of the investor. This is understood clearly by looking at the disclaimer attached with any mutual fund options that are nearly identical with that applicable to any other (kind of) stock. They have their advantages and loopholes like any other form of investment. And as in other forms of investment, one has to be fully aware of potential pitfalls and while driving high with mutual funds, has to be alert enough to avoid them.

Mutual funds are seemingly the easiest and least stressful way to invest in the stock market. Quite a large amount of new money has been put into mutual funds during the past few years.

Briefly put, a mutual fund is a pool of money contributed to by individual investors, companies, and other organizations. There will be a fund manager hired to invest this cash with a primary goal that depends upon the type of fund. The manger usually diversifies in a manner such that the net average earning is expected to be considerably positive. S/he may be a fixed-income fund manager. In that case s/he would work hard to provide the highest return at the lowest risk. On the other hand a long-term growth manager should try at least to beat the Dow Jones Industrial Average or the S&P 500 in a given fiscal year.

But that is what any successful investor attempts to do, and anyone with a similar approach can be expected to make the same earnings.

It all depends really on the overall investment climate and the sectors in which funds are flowing in. Diversification is definitely a good approach when it comes to successful investing by a reasonable investor. But with mutual funds, there is that the controllers may over-diversify.

Diversification minimizes the inherent risks of stock trading by spreading out the capital over many stocks. But over-diversification is again a bad thing.

First, an investor gets into many funds that have significant mutual implications, thereby losing out on the full benefits of risk stretching that diversification affords.

Secondly, over-diversification may decrease your overall return. By hitting too many poor through mediocre funds, the investor reduces the return by missing the potential of a few well-managed funds.

It is true that mutual funds play it safe. This is because mutual funds are actively organized by a professional money manager who keeps constant checks on the stocks and bonds in the fund's portfolio. As this is her/his primary occupation, s/he can devote much more time to choosing investments than an individual investor. This provides the investor with the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.


But on the negative side, a mutual fund, unless open-ended, must remain confined within a fixed portfolio. Even with open ended mutual funds, the range of potential is often low as compared to what is available to an investor free to choose any stock s/he likes.

Besides, mutual funds some times come as load funds in which the investor has to pay the sales commission on top of the net asset value of the fund's shares. Also, the dollar-cost averaging strategy is just the same with mutual funds as to any common stock.

Of course, fixing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.

Hence considering the stress, agony and risk that any stock may involve, mutual funds look a shade better than independent trading, if low but steady is ok for you.

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Wednesday, September 06, 2006

The Importance of Diversification

investments & trading

The Importance of Diversification By J. Foley


“Don’t put all of your eggs in one basket!” You’ve probably heard that over and over again throughout your life…and when it comes to investing, it is very true. Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified, and you should too!

Diversifying your investments might include purchasing various stocks in many different industries. It may include purchasing bonds, investing in money market accounts, or even in some real property. The key is to invest in several different areas – not just one.

Over time, research has shown that investors who have diversified portfolios usually see more consistent and stable returns on their investments than those who just invest in one thing. By investing in several different markets, you will actually be at less risk also.

For instance, if you have invested all of your money in one stock, and that stock takes a significant plunge, you will most likely find that you have lost all of your money. On the other hand, if you have invested in ten different stocks, and nine are doing well while one plunges, you are still in reasonably good shape.

A good diversification will usually include stocks, bonds, real property, and cash. It may take time to diversify your portfolio. Depending on how much you have to initially invest, you may have to start with one type of investment, and invest in other areas as time goes by.

This is okay, but if you can divide your initial investment funds among various types of investments, you will find that you have a lower risk of losing your money, and over time, you will see better returns.

Experts also suggest that you spread your investment money evenly among your investments. In other words, if you start with $100,000 to invest, invest $25,000 in stocks, $25,000 in real property, $25,000 in bonds, and put $25,000 in an interest bearing savings account.

investments & trading
Article Written By J. Foley





Tuesday, August 22, 2006

Investing Mistakes to Avoid

investments & trading

Investing Mistakes to Avoid By J. Foley


Along the way, you may make a few investing mistakes, however there are big mistakes that you absolutely must avoid if you are to be a successful investor. For instance, the biggest investing mistake that you could ever make is to not invest at all, or to put off investing until later. Make your money work for you – even if all you can spare is $20 a week to invest!

While not investing at all or putting off investing until later are big mistakes, investing before you are in the financial position to do so is another big mistake. Get your current financial situation in order first, and then start investing. Get your credit cleaned up, pay off high interest loans and credit cards, and put at least three months of living expenses in savings. Once this is done, you are ready to start letting your money work for you.

Don’t invest to get rich quick. That is the riskiest type of investing that there is, and you will more than likely lose. If it was easy, everyone would be doing it! Instead, invest for the long term, and have the patience to weather the storms and allow your money to grow. Only invest for the short term when you know you will need the money in a short amount of time, and then stick with safe investments, such as certificates of deposit.

Don’t put all of your eggs into one basket. Scatter it around various types of investments for the best returns. Also, don’t move your money around too much. Let it ride. Pick your investments carefully, invest your money, and allow it to grow – don’t panic if the stock drops a few dollars. If the stock is a stable stock, it will go back up.

A common mistake that a lot of people make is thinking that their investments in collectibles will really pay off. Again, if this were true, everyone would do it. Don’t count on your Coke collection or your book collection to pay for your retirement years! Count on investments made with cold hard cash instead.


investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Tuesday, August 15, 2006

Forex Trading : Should You Invest?

investments & trading

Forex Trading - should you invest? By J. Foley

Forex trading is all about putting your money into other currencies, so you can gain the interest for the night, for time period or the difference in trading money all around. Forex trading does involve other assets along with money, but because you are investing in other countries and in other businesses that are dealing in other currencies the basis for the money you make or lose will be based on the trading of money.

Constant trading is done in the forex markets as time zones will vary and the markets will open in one country while another is near closing. What happens in one market will have an effect on the other countries forex markets, but it is not always bad or good, sometimes the margins of trading are near each other.

A forex market will be present when two countries are involved in trading, and when money is traded for goods, services or a combination of these things. Currency is the money that trades hands, from one to another. Often times, a bank is going to be the source of forex trading, as millions of dollars are traded daily. There is nearly two trillion dollars traded daily on the forex market. Should you get involved in forex trading? If you are already involved in the stock market, you have some idea of what forex trading really is all about.

The stock market involves buying shares of a company, and you watch how that company does, waiting for a bigger return. In the forex markets, you are purchasing items or products, or goods, and you are paying money for them. As you do this, you are gaining or losing as the currency exchange differs daily from country to country. To better prepare you for the forex markets you can learn about trading and purchasing online using free 'game' like software.

You will log on and create an account. Entering information about what you are interested in and what you want to do. The 'game' will allow you to make purchases and trades, involving different currencies, so you can then see first hand what a gain or loss will be like. As you continue on with this fake account you will see first hand how to make decisions based on what you know, which means you will have to read about the market changes or you will have to take a brokers information at value and play from there.

If you, as an individual want to be involved in forex trading, you must get involved through broker, or a financial institution. Individuals are also known as spectators, even if you are investing money because the amount of money you are investing is minimal compared to the millions of dollars that are invested by governments and by banks at any given time. This does not mean you can't get involved. Your broker or investment advisor will be able to tell you more about how you can be involved in forex trading. In the US, there are many regulations and laws in regards to who can handle forex trading for US citizens so if you are searching the internet for a broker, be sure you read the print, and the information about where the company is located and if it is legal for you to do business with that company.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Thursday, August 10, 2006

What Is Your Investment Style?

investments & trading

What Is Your Investment Style? By J. Foley


Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only three specific investment styles – and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.

Naturally, if you find that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing – but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style.

Conservative investors want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts.

An interest earning savings account is very common for conservative investors.
A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won’t take. They invest higher amounts of money in riskier ventures in the hopes of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.

Again, determining what style of investing you will use will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should carefully research that investment. Never invest without having all of the facts!

investments & trading
http://travelguy.typepad.com/investments
Article Written By J. Foley

Wednesday, August 02, 2006

Who Is Participating In The Forex Market Trades ?

investments & trading

Who is participating in forex market trades? by J. Foley

The forex market is all about trading between countries, the currencies of those countries and the timing of investing in certain currencies. The FX market is trading between counties, usually completed with a broker or a financial company. Many people are involved in forex trading, which is similar to stock market trading, but FX trading is completed on a much larger overall scale. Much of the trading does take place between banks, governments, brokers and a small amount of trades will take place in retail settings where the average person involved in trading is known as a spectator. Financial market and financial conditions are making the forex market trading go up and down daily. Millions are traded on a daily basis between many of the largest countries and this is going to include some amount of trading in smaller countries as well.

From the studies over the years, most trades in the forex market are done between banks and this is called interbank. Banks make up about 50 percent of the trading in the forex market. So, if banks are widely using this method to make money for stockholders and for their own bettering of business, you know the money must be there for the smaller investor, the fund mangers to use to increase the amount of interest paid to accounts. Banks trade money daily to increase the amount of money they hold. Overnight a bank will invest millions in forex markets, and then the next day make that money available to the public in their savings, checking accounts and etc.

Commercial companies are also trading more often in the forex markets. The commercial companies such as Deutsche bank, UBS, Citigroup, and others such as HSBC, Braclays, Merrill Lynch, JP Morgan Chase, and still others such as Goldman Sachs, ABN Amro, Morgan Stanley, and so on are actively trading in the forex markets to increase wealth of stock holders. Many smaller companies may not be involved in the forex markets as extensively as some large companies are but the options are stil there.

Central banks are the banks that hold international roles in the foreign markets. The supply of money, the availability of money, and the interest rates are controlled by central banks. Central banks play a large role in the forex trading, and are located in Tokyo, New York and in London. These are not the only central locations for forex trading but these are among the very largest involved in this market strategy. Sometimes banks, commercial investors and the central banks will have large losses, and this in turn is passed on to investors. Other times, the investors and banks will have huge gains.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Thursday, July 27, 2006

Determine Your Risk Tolerance

investments & trading

Determine Your Risk Tolerance By J. Foley


Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is. Then, they should work with you to find investments that do not exceed your risk tolerance.

Determining one’s risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

For instance, if you plan to retire in ten years, and you’ve not saved a single penny towards that end, you need to have a high risk tolerance – because you will need to do some aggressive – risky – investing in order to reach your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.

Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would want to sell out… if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!

Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Friday, July 21, 2006

Swing Trade : How To Profit From Swing Trading ?

investments & trading

Swing Trading – How to Profit from Swing Trading? By J. Foley

Swing trading is a trading strategy where you hold stock positions for a short duration of time, but longer than a day trade. Swing trade positions can last anywhere from 2 to 30 days, and generally try to take advantage of short and mid-term movements in stock prices.

This is also quite risky though may seem to be less so than day trading. Since it is not even mid-term and you don't wait for long a time, it is possible that that stock falls as you wait and as you come to the pre-fixed end of your target holding period, you have to sell at a trough. It is also possible that the stock makes a turnaround immediately after you exit, and you either narrowly miss a huge profit or avoid a withering loss.

Before going in for swing trading, one needs to understand the difference between swings and stock market cycles.

A cycle is longer than a swing. A cycle is made of many short swings, up and down. There are swing trading firms making lucrative promises and publishing tall advertisements. Watch out or you may get into some disastrous mistake.

The general principle for winning is the same for all stock market entrants: sell the losers and let the winners ride! Longer term investors make profits by selling their appreciated investments, but they hold on to stocks that have declined, hoping for a rebound. Swing traders often do not have that long a time to get into rebound. They have to infer accurately when it is time to give up a stock within their projected time range.

A personal policy to sell after a stock has increased by a certain pre-fixed multiple often pays off in swing trading. But that way it may never fully ride out a winner. Therefore it is wise to allow for some degree of flexibility within this swing trading period.

It is best not to underestimate a well performing stock by sticking to some rigid personal rule. If you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting. Hence before entering this type of trading, do extensive research on the behavior of your selected sample of 'good' stocks.

On the other hand, it's equally important to be realistic about investments that are performing badly. That a stock will bounce back after a lingering decline can never be guaranteed. Hence the best time to sell has to be chosen wisely also, and the wisdom has to be carefully based on research. A standard strategy is to wait till the upswing goes on within the period you remain in the market, and then sell at the end of your chosen end time.

Being an active investor involves knowing the in-s and out-s of buying and selling stock. But for becoming a successful swing trader, there is no substitute to working hard watching and analyzing your personal portfolio. In order to obtain the gains and rewards from swing trading, you need to master the science of timing.

investments & trading
Article Written By J. Foley

Saturday, July 15, 2006

Tools You'll Need : Day Trading Must Haves

investments & trading

Tools you'll need: Day Trading Must Haves
 
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.  
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So  a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Thursday, July 06, 2006

Training Basics For The Beginners

ivestments & trading

Trading basics for the beginners by J. Foley
The Share market immediately conjures up stories of fortunes made and lost. A share makes the holder a partial owner of the company and different types of shares have different rights associated with them. If you are able to sell off your share at a price higher than your buying price, you make a profit but you also run the risk of incurring a loss if the share price falls. The business you invested in makes profit and they provide you part of it as dividend.
In the share market you are an anonymous player and many have made a reasonable profit. There is no unique formula to ensure consistent gain but before you venture into this market you should know the basics of stock trading.
 
What does trading stocks mean?

Buying and selling of stocks is referred to as trading in the financial market.

You have to approach a broker in order to trade. You can trade either electronically or on the exchange floor. Exchange floor scene must be familiar to you; the NYSE has been on television as part of news coverage innumerable times. It is here that your broker arranges for your shares to be ordered. . The floor clerk   locates the floor trader from whom the shares can be bought. Once the price is agreed upon, the deal is finalized. 

Electronic transaction is very common today. It is an efficient and fast method of stock trading. Here too you require a broker but you receive confirmations almost immediately .In online investing your broker will connect to the exchange network and search for a buyer or seller according to your order.
How are the stock prices determined?
The stock prices cannot be predicted, they depend on various factors like political unrest, if there is a huge demand for a particular share at a given time, prices can fluctuate, any event that could adversely affect the company will also cause the share prices to drop. 
 
Before you decide on which stock to buy you must answer the following questions.
 
Do you know the company well enough? 
What is the company's reputation in the market?
Have you gone through their annual report?
Do you have the confidence to invest in this company?
Is some negative news about the company circulating?
How are analysts predicting the future?
How is the management of the company?
What are their growth prospects?
Am I aware of the insider activity?
Is it an internationally renowned company?
How is their marketing strategy?
Have there been any changes in the management recently?
How consistent has been their performance?
Has there been a sudden shift in their production?
  Whenever you invest you should be aware of your limits and remember not to exceed them. Share market involves a lot of risk , risk taking could either  lead to fortunate gains or to  bankruptcy.
You should avoid investing money more than you can actually afford.
Know about your investment well and do not blindly depend upon your broker.
Follow regular stock market quotes to keep yourself abreast of the market swings.
 
The share provides you with an earning power, gives you partial ownership of a company and the freedom to buy or sell at any moment. But if you are a novice in stock trading you need to play safe and equip yourself with a lot of information. Unless you are a seasoned player you should invest only after surveying   all the alternatives and never go beyond your risk tolerance.

ivestments & trading
Article Written By J. Foley

Saturday, July 01, 2006

Know The Language : Trading Room Jargon

investments & trading

Know thelanguage: Trading room jargon  by J. Foley
So you are considering taking the big plunge in to the trading market? You have done a lot of research on how to be successful in the market; what are the necessary hardware items and software platforms you have to have; what are the risks you are taking as you embark on the new profession. That's all good, but you can definitely do with a bit of knowledge about the regular trading room jargon that you will soon come across pretty regularly. And if you can't make sense of what you are hearing there is little chance you will go much further. So following is a list of terms that are regularly used in trading rooms which will help you to get at least initiated in the language. 
Blue-chip stock
a reference to the blue chips used in the game of poker, such stocks are of established companies which have performed well regularly over a considerable period of time. Stocks of companies like IBM, GE are considered to be blue chip stocks. 
Bottom fishing
to fish or buy stocks that have suffered significant decline in their prices or are continuing to do so. 
going long
to buy and hold a stock for some length of time. 
Going short
To sell stocks short, i.e., to borrow and sell stock which you do not want to own for the moment but intend to do so later on for a comparatively lesser price. 
Uptick
Uptick means the next trade is at a price higher than the previous trade. However for certain transactions to be executed you have to do it on an uptick. 
Downtick
Downtick means exactly the opposite of an uptick, i.e, the next trade is at a price lower than the previous trade. 
Elves index
a much trusted index, Louis Rukeyser makes an  index of the opinions on the general stock market for the coming 6 months. He polls 10 respected analysts every week (they are the same ones every week), to know what they assume the general trend will be, either bullish (+1), neutral (0), or bearish (-1). Obviously, the index range is -10 to +10. 
Call money rate
Also known as the broker loan rate, this is the interest rate that banks lay on brokers to finance margin loans to investors. The broker in his turn charges the investor the call money rate plus a service charge. Investors who are willing to buy on margin will pay this rate. 
Hope the above guide helps you in your future dealings with the stock market. It is always advisable to learn the language of the trade. The more comfortable you are the more easily would you be able to communicate, grasp and analyze what actually is going on in the market.  
The above guide is only a sample and space here is too short to provide you with an extensive glossary. However there are other websites which are exclusively dealing on this matter which you can have a look at. But we would suggest you to keep a business dictionary near for ready reference as however much you know you can always come up against a new term which would make little sense to you.

investments & trading
http://travelguy.typepad.com/investments

Friday, June 23, 2006

What Is EPS ?

investments & trading

What is EPS? Comprehensive information by J. Foley

EPS is the abbreviated form of 'Earnings per Share'. Of course there are other terms clipped as EPS: 'Extended Portfolio System' is one, for example. Those are not our concern here. In issues concerning the stock market, the direct concern is earnings from stocks. We take up EPS as Earning per Share and try to understand what it is.

In this sense, EPS is clearly a measure of average earning from shares transacted. Here's a simple formula for calculating EPS: divide the earnings available to common shareholders with the weighted average number of common shares outstanding during the year. The resulting quotient is called basic (or simple) EPS.

Often EPS is taken to be the single most important factor in the financial statement. Conventionally it is known as the "bottom line" indicator of financial performance. Other commonly used ratios such as P/E and dividend payout are also calculated on the basis of EPS numbers.

Basic EPS is shown in the income statement of a company when it has no outstanding securities convertible into common stock. When outstanding convertible securities are there, more complex rules are followed, which try to make EPS reflect the potential of such securities to dilute potential earnings of common shareholders.

The kind of importance popularly attached to EPS by users of financial statements is perhaps due to the fact that they are disclosed in the financial statements of public companies, and are liable to be scrutinized by auditors.

But then EPS is tedious and cumbersome to creators and scrutinizers of financial statements. Complex provisions of APB 15 and a host of amending pronouncements make it further complicated. The burden is worsened by SEC stipulation that 10-K reports include a supplementary schedule explaining the computation of EPS whenever it is not apparent in the financial statements.

A serious problem with ongoing standards is that basic EPS is subject to replacement on the income statement by two hypothetical EPS numbers: primary EPS, and fully diluted EPS.

Primary EPS is computed assuming that common stock equivalents were converted to common stock on the first day of the reporting period. The fully diluted EPS is computed assuming that all dilative securities, including the common stock equivalents, were converted.

When fully diluted EPS is less than 97% of basic EPS, these two EPS are the only per-share disclosures required under current accounting standards.
Concerns about the usefulness of dual EPS reporting are not limited to the relative merits of historical and proforma disclosure. Some of the specific rules governing the computation of primary and fully diluted EPS have also been questioned. The test used to identify common stock equivalent securities is among the most controversial of those rules.

Changing prevailing market conditions in relation to terms of particular securities are not considered in the computational rules for EPS. It implies that the appeal of a conversion feature relative to other security characteristics will vary, in different circumstances.

But then the meaning of common stock equivalent status and primary EPS remain confusing and questionable. There are other sophisticated methods that are also questionable, such as Options, Warrants, and the Treasury Stock Method.

So EPS is a popular method of measuring how things are going in the stock market, but the dependability of the measure is not too high because of the complicated procedures and unrealistic assumptions used for its derivation.

There are more comprehensive statistics and formulae that make life in the stock market simpler: the track of P/E ratio for example. Hence though as a primary indicator of performance one can use EPS to get an initial impression, you shouldn't depend much on it for a deep understanding of what's happening in the stock market.

investments & trading
Article Written By J. Foley
http://travelguy.typepad.com/investments

Friday, June 09, 2006

Day Trading : Tools You'll Need

investments & trading

Day Trading : Tools you need by J. foley
 
Day trading previously had been only for the trading firms or the brokers who dealt in the physical market. But with the advent of the internet and a general advance of communication technology day trading has entered the homes of any interested individual who might have not visited the markets in person ever. But to be a successful day trader from your home you need to have the right gear. And by that we mean you need to have the proper hardware and software to build yourself a platform that could help you stay competitive against the market makers and other day traders. Following is a guide to the proper equipment you must have to do well.
Hardware
When you are trading online all you need is a good computer. You need to have only the basic items of hardware installed. But don't compromise on what you get yourself. Remember that while trading you would have to deal with a lot of numbers and figures and so you would require your computer to handle the data well. Get yourself a decent processor (anything above 1GHz) and plenty of memory. A 100GB hard disk drive is suggested as you would need to stack a lot of information. Higher memory also means better speed. Get yourself at least 1024MB of RAM as it would be necessary when you are crunching those numbers. You will of course need a modem to stay connected and a high quality video card would help you get the live feeds better.  
As you would be dealing with a lot of data you should get yourself at least a 19" monitor. You can even go for split screen and use two monitors for a single screen shot.
Connection Speed
While you are day trading you are doing business real time. So you can't allow for any time lag. You would be placing your orders and quotes and you have to get them done on time or else you might miss out on good trading opportunities. So  a dial-up connection isn't the best choice you have. To be a serious day trader it is always advisable to get a cable or DSL connection. That way you will get real-time data in your hand and can trade effectively.
Software
To make full use of the hardware you have got yourself you would also need the necessary software platforms to go with it. If you are in day trading you can go no where without the proper data in your hand. And even if you have the data you need to get the proper tools to store them well and have an easy access to them. The trading software platforms not only help you in getting the necessary data like the stock quotes, market indices, market stories and price alerts in real-time but they also store and present the data for you in an organized way so that it becomes much easier for you to make sense of it all when you read the spread sheets. You can buy these software platforms online or you can even get them from a few stores if you want to. You should however note that you may have to pay separately for access to the data that you need to download.

investments & trading
Article Written By J. Foley

Monday, June 05, 2006

Small Cap Stocks

investments & trading

Smallcap Stocks By J. Foley

Small-cap stocks do not involve large amounts of money, and can avoid very high risk at initial stages. Even if you lose, you lose a small amount. Hence starting with small caps is not a bad idea.

Small-cap stocks are stocks with a relatively small market capitalization. Classifications such as 'large cap' or 'small cap' are only approximations that change over time. In fact, the definition of 'small cap' can vary among brokerages, but generally it involves a company with a market capitalization of between $300 million and $2 billion.

Below this, companies having a market capitalization between $50 million and $300 million, are called 'micro cap' stocks.

Even these aren't the smallest breeds. Nano-cap stocks are even smaller, and involve small public companies having a market capitalization of below $50 million. You may start with these also. But they escape the state regulatory oversight and there is no point in sticking to them.

The methods of learning the stock market apply to wider situations when you come out to penny cap, mid cap and large cap stocks. With rational research, dependable brokerage and your own attentive analysis, it is actually beyond the small cap stocks that you start exploring long-drawn high-return potentials.

One of the biggest advantages of initially investing in small-cap stocks lies in the opportunity to beat institutional investors. The institutional investors are not allowed below a certain minimum value quite high in relation to small cap stocks. Hence it is possible to avoid quite a few legal constraints while keeping up watchful learning of the pitfalls.

Secondly, it is good to initially trade in these stocks because you may want to put in small money in expectation of relatively high returns. If this is the case, case you must get to know the companies they represent thoroughly, before you take a single step.

The stocks that are traded at extremely low prices, sometimes even for under $1, may be considered small caps by nonstarters. In that sense even penny stocks are small cap stocks. But actually the term officially refers to low-capitalization companies ranging over a specified capitalization value.

And you have to be on the alert, small cap or not. Though traded at very low prices, they can be quite risky. Brokers and analysts often have cautioned about sudden unprecedented rises in the prices of small-cap stocks in recent times.

Most brokers dealing in this category do not have strong financial credentials. There are informal brokers also who come to help you. You get them in the neighborhood of the trading spot. They often look for you. Careful! As you are a beginner, you may easily be cheated. As these brokers do not have to abide by any authority control, frauds are rampant.

However, wise financial investors avoid them and their wares, though it is fully possible to make a profit in this market.
Another source of the high risk of this market is the wildly fluctuating prices. Hence the first tip is: try not to go on investing in these stocks for too long.

investments & trading
Article Written By J. Foley

Wednesday, May 31, 2006

Protect Your Stock Market Investments

investments & trading

Protect Your Stock Market Investments By J. Foley

It is very easy to lose the entire stock market investment unless you have a rational approach to protecting them. Losing can be smooth and fast through misreadings and mistakes. Protecting your stock market portfolio is synonymous with being able to steer clear of these errors.

To protect your stock market investments, it is imperative that you limit the losses on adverse stocks. Accept that it is impossible to know for sure which way the stock is headed next. Hence a disciplined trading strategy is a must for limiting losses on stocks that don't go your way.

Taking a system of disciplined research for understanding your errors is necessary for protecting your stocks. Never indulge in too much risk taking. Investing is synonymous with taking risks; but the risks have to be calculated in relation to the potential returns. Every reasonable investor has a limit to his/her risk tolerance, and to be smart you have find out and respect your personal limit.

Straying past the tolerance limit can be disastrous. This may lead to bad decisions spiraling out of control, involving the pumping in of more and more money in stocks that don't even seem to be very good prospect.

Investors can avoid these problems if they will simply know where their level of risk tolerance is. It is easy to find. Just listen to your inner call for a caution.

Invest in anything unless you understand it thoroughly, will make your stock market investment insecure. There is nothing foolish in not understanding an investment prospect. If you don't understand it, call a pass. If you find you have made a wrong choice, accept that bad things happen and take a little loss rather than allowing it to become big by dragging it further.

Try to form an idea of the fair price and buy at that, and ignore market hysteria. Similarly, if nothing has fundamentally changed with the company you possess stocks of, except that the stock is dropping along with the market, good investors will not be frightened off a good price and prefer sitting tight to selling for a loss.

It is wise not to jump in or out reacting to any hot price signal. Experienced investors do that occasionally but that is likely to drag you to buy high and sell low, a position contrary to the collective wisdom on winning.

Everything that can lead to win-win spots in the stock market can protect your stock market investment. Buying low and selling high is, of course, a standard win-win proposition. To achieve that, one has to be serious, meticulously research-oriented and needs to document every move and the perceived reason behind it.

Avoid penny stocks, day trading and swing trading unless you are an expert in those areas. Analyze every wrong step you have ever taken, and figure out what would have been the best move, so that in similar future scenarios you are in a better position to take the right decision.

investments & trading
Article Written By J. Foley

Tuesday, May 23, 2006

Option Trading Strategy That Works !

investments & trading

Option Trading Strategy That Works! BY J. Foley

An option is a contract conferring to the owner the right to buy or sell a specific stock at a specific price in the future.

'Call options' give the right to BUY the stock at a certain price, and 'put options' give the right to SELL the stock at a certain price. That particular price is called the 'strike price', and owner is allowed to buy or sell at that strike price at any time before the expiration date of the option.

Being an active investor in option trading requires knowing the in-s and out-s of buying and selling options. To win the gains and rewards from option trading, you will have to learn the basics of various trading methods. You need to get up to speed with various strategies and learn to use them efficiently, in order to survive in the options market. If you're averse to this kind of hard labor, you had better follow a mutual fund manager who will do this for you.

You should note that option stocks have some differences with share stocks or bonds. An option stock may consist of commodities or any marketable product. Option trading strategy involves taking contingent plans of action to buy and sell these options in a manner that entails maximum expected profit.

The profitability in this trade comes from the volatility (a measure of shift potential in prices) in the prices of these options. In general, when you experience very high option implied volatility (meaning downfall is highly imminent), selling should get priority over buying, because in these situations options become quite expensive.

What kind of strategy should you follow in options trading? Which stock do you invest in – should you just follow a tip, or quality, or analyze trends in the market to get the best deal?

For making profits in option trading, you must have a measure of volatility and your strike price at the right time. For beginners or those who have little time to spare, it is often wise to get a membership of agencies with expert trading advisers. They alert you when they see great trading opportunities, and also remain for you in their trading room to answer your questions. There are plenty of them these days.

Besides, there are good dependable software programs that analyze and measure volatility with acceptable accuracy. As for example, the OptionVue 5 options analysis software helps you survey all options according to specified criteria such as implied volatility and statistical volatility levels. It also helps to identify markets that might be tradable using a ratio writing strategy. Many different kinds of market are included in these programs, and trends are worked out on the basis of past six years' information.

'High implied volatility' is a situation when options are expensive in terms of historical average levels. Since option implied volatility eventually returns to its historical mean, it would make good sense to sell at this high volatility when it is at the extreme levels (say the 99th percentile).

Another strategy is to work out your contingent plan of action through your own analysis of volatility and the expected range of strike prices using software and detailed stock information.

By mixing and matching various options trading strategies cleverly, you can sometimes even profit from stocks that have little or no movement over time. This is not a very easy thing to achieve, though.

Sometimes even when there are consistent bull and bear debit spreads and high implied volatility, buying strategies are often very poorly priced. When it reaches a trough, the collapse in high-priced options right after a sharp drop in implied volatility takes out much of the profit potential.

So, as has been pointed out time and again, even if you are correct in timing a market bottom, there may be little to no gain from a big reversal move following a capitulation sell-off. There are strategies for avoiding this. One needs to learn these strategies from professionals or academics studying this sector, or from quality agencies. Option trading is a big money game, provided you play it right.

investments & trading
Article Written By J. Foley

Saturday, May 20, 2006

Mutual Funds - Better Than Individual Stocks ?

investments & trading
Mutual Funds – Better than Individual Stocks? By J. Foley

Though it cannot be said in general that mutual funds are always better than individual stocks, it still cannot be denied that they usually involve lower risks, less money and generally yield lower but safe returns.

It all depends on the risk attitude of the investor. This is understood clearly by looking at the disclaimer attached with any mutual fund options that are nearly identical with that applicable to any other (kind of) stock. They have their advantages and loopholes like any other form of investment. And as in other forms of investment, one has to be fully aware of potential pitfalls and while driving high with mutual funds, has to be alert enough to avoid them.

Mutual funds are seemingly the easiest and least stressful way to invest in the stock market. Quite a large amount of new money has been put into mutual funds during the past few years.

Briefly put, a mutual fund is a pool of money contributed to by individual investors, companies, and other organizations. There will be a fund manager hired to invest this cash with a primary goal that depends upon the type of fund. The manger usually diversifies in a manner such that the net average earning is expected to be considerably positive. S/he may be a fixed-income fund manager. In that case s/he would work hard to provide the highest return at the lowest risk. On the other hand a long-term growth manager should try at least to beat the Dow Jones Industrial Average or the S&P 500 in a given fiscal year.

But that is what any successful investor attempts to do, and anyone with a similar approach can be expected to make the same earnings.

It all depends really on the overall investment climate and the sectors in which funds are flowing in. Diversification is definitely a good approach when it comes to successful investing by a reasonable investor. But with mutual funds, there is that the controllers may over-diversify.

Diversification minimizes the inherent risks of stock trading by spreading out the capital over many stocks. But over-diversification is again a bad thing.

First, an investor gets into many funds that have significant mutual implications, thereby losing out on the full benefits of risk stretching that diversification affords.

Secondly, over-diversification may decrease your overall return. By hitting too many poor through mediocre funds, the investor reduces the return by missing the potential of a few well-managed funds.

It is true that mutual funds play it safe. This is because mutual funds are actively organized by a professional money manager who keeps constant checks on the stocks and bonds in the fund's portfolio. As this is her/his primary occupation, s/he can devote much more time to choosing investments than an individual investor. This provides the investor with the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.


But on the negative side, a mutual fund, unless open-ended, must remain confined within a fixed portfolio. Even with open ended mutual funds, the range of potential is often low as compared to what is available to an investor free to choose any stock s/he likes.

Besides, mutual funds some times come as load funds in which the investor has to pay the sales commission on top of the net asset value of the fund's shares. Also, the dollar-cost averaging strategy is just the same with mutual funds as to any common stock.

Of course, fixing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.


Hence considering the stress, agony and risk that any stock may involve, mutual funds look a shade better than independent trading, if low but steady is ok for you.

investments & trading
Article written By J. Foley

Wednesday, April 26, 2006

Making Money From Stocks - Useful Tips

Investments & Trading
Making Money from Stocks – Useful Tips By J. Foley

Making money from stocks doesn't involve a magic trick. It happens through maintaining consistent goals and sticking to them. We know of many 'successful trader' legends who purportedly made amazing amounts of money from stocks in a fairly short period of time. Remember, legends are legends and reality is reality. There is no magic formula for getting rich on stocks. You have to work hard, as in any other honest trade.

It is imperative to have a can-do attitude. The time to start creating wealth is right now, not next week or next year or after that vacation. Do not keep postponing. Good solid investments that you stick with for the long term are your best bet for creating lasting wealth. This takes discipline. Here are some common and ready tips.

Develop a system of disciplined stock trading and strictly follow it.
Avoid playing too much in the short term, and take a mid- to long-term approach.
Keep with a trend-following trading style.
Go for fully planned trades. Be ready for all scenarios in advance with a pragmatic and cool approach equally to bad times and good times.
Try to cut losses early, but do not panic over this.
Avoid fear and greed, the two greatest enemies of the honest stock trader.

All these rules are violated everyday by common traders who know no better, and who pay very little attention, if any, to money management.

The most important component of a trading system is money management. Even more than a good entry-exit strategy, one needs good money management – that is, the ability to solve rationally the most important question of a trading system: how much to invest and how many positions to trade at the same time.

An active investor has to know the in-s and out-s of buying and selling stock. In order to obtain the gains and rewards from trading, one must be ready to learn the basics of different trading methods. Otherwise it will be better to follow a mutual fund manager who does.

In that case also, it is usually said that the first step is to understand mutual fund expenses and the next step is to avoid them! Mutual funds are meant for people looking for minimizing the costs inherent in buying and selling stocks and minimizing risk and volatility in investments, and for maximizing purchasing power by pooling their resources with others.

But surprisingly, not all mutual funds have low expense ratios: many of them charge exorbitant fees. The common sense investor needs to be aware of the fees and expenses involved in any mutual fund investment.

Understanding the different ways to buy and sell stock in the market is the first step to make money from stock investments.

Dollar cost averaging is a good investment strategy for the reason that you are not overexposing your investment to the risks involved in timing the trading while you consistently invest on a regular, periodic basis.

Consistent investment is the route to take for becoming a winner, which is possible through dollar cost averaging. This actually takes advantage of market volatility so that you buy more stock when the price is low and less stock when the price is high.

Another important tip is you should generally avoid companies with high P/E (price-earnings) ratios.

A company's P/E ratio is a very common means for comparing and understanding the value of a company's stock. It is calculated by dividing the previous day's closing price by the adjusted EPS (earnings per share). But high P/E may be deceptive and it is wise to avoid being guided by this ratio.

Investors in stock who have turned wealthy know all this, because they have all developed their own disciplined approaches. A wealthy future with money from stocks is closer than you think if you keep with these tips.

Investments & Trading by J. Foley

Sunday, April 23, 2006

How To Choose The Right Broker

Investments & Trading
How to select the right broker? By J. Foley
A stockbroker is your agent in the stock market and he is licensed to buy and sell shares. Against this service he will charge a fee and this fee varies from broker to broker depending on the nature of service provided. Brokers provide you with the market research on domestic and foreign trends, help you plan your investment and regularly update you and advice you on shares, government bonds and other listed and non-listed investment opportunities.
 
What kind of broker am I looking for? 
There are two main categories of brokers: full-service brokers and discount brokers. 

A full-service broker provides step-by-step guidance to the customer. He will advice you on the purchase of shares, plan your financials, analyze your investment and provide full customer support. Because of these services full-service brokers charge more than discount brokers. 

A discount broker on the other hand shall not advice you  on the investment trends or provide you with detailed market research. He will carry out transactions according to your specifications. Discount brokers charge lower fees but you lose out on customer support. The success of the dealings will depend on how well you are informed about the market. Before you settle on a broker it is recommended that you survey   different companies for their brokerage and decide which is best for you. 

Investors, who are stock savvy and capable of deciding which stocks they want to buy, approach discount brokers. But if they are not well informed about the company in which they wish to invest they will approach a full-service broker.      Where do I look for a broker? 
If you have friends dealing in stocks they can recommend you some names. Market survey will also provide names of brokers with good reputation. Broker Referral Service maintained by The Australian Stock Exchange will provide you with the list of brokers. You can search for brokers online and commence trading.   
What information should I gather from my discount broker? What are the charges for buying and selling shares? How will the broker be available to me: over the net of telephone? You need to clarify any doubts regarding their subscription fee. Sometimes brokers offer discounts if you are trading quite often with them. It is an incentive they offer as trader discounts. You should always enquire about perks offered to customers. Though you are aware of the nature of their services you should enquire if they provide any company research or market research data.
 
What information should I gather from my full-service broker?   
Know about their charges. As they provide customer support and personal attention their charges will vary according to the nature of services provided.  You should survey the market for their research capabilities. The advice you on investment strategies which is largely dependent on their market research skills.  

Know how they intimate their clients about the latest investment trends. Many companies have regular updates that they mail their clients. Information is the key here; you must clarify these points before deciding on a broker.
   
Another important consideration before you open a brokerage account is that of minimum opening balance and maintenance fees. The minimum opening balance required by some companies is quite high. Some brokerage firms also charge a maintenance fee if your balance falls below a specified amount. Know the company policies in detail before finalizing your choice.

Each brokerage type has its advantages and disadvantages therefore you need to be well informed and sure about what kind of brokerage would be ideal for you.

Investments & Trading by J. Foley



Friday, April 21, 2006

How To Choose A Stockbroker

investments & trading
How to Choose a Stockbroker By J. Foley

A stockbroker is a person who mediates buying and selling of stocks and shares. S/he is specifically trained to do this for investors in exchange for a fixed commission.

This commission, a percentage of the invested capital charged for the service, varies from broker to broker, or the firms they represent.

The stock market does not require buyers and sellers to assemble directly. Transactions are made mostly through these agents who charge a fee known as brokerage.

In general, the brokerage is determined at a flat rate per trade. But if you trade over a set limit, it may be charged as a percentage – for example, 0.11% for all online trades over $30,000 in value.

In most cases of buying or selling shares, you must use a broker who holds an authorized of Financial Services License, or is an authorized representative of such a license holder. But you have to know what type of broker suits your need. How do you locate the person and exactly what services shall you need as a share market investor?

You may need full-service or advisory brokers. These brokers ask for higher brokerage, because in addition to their normal handling services, they also make recommendations and give advice based on their own in-house research. They analyze your investment needs, help you to decide on short- and long-term goals, assess the risk tolerance you're prepared to take, and allocate your share portfolio accordingly.

Then there are discount brokers. These brokers do not offer advice or make recommendations. They only buy or sell the shares that you select. Their brokerage is expectedly lower than that of full-service brokers. You can buy or sell shares through a non-advisory broker online or by phone.

An advisory broker is of a great help if you're just starting out or have hardly any knowledge or time to research on investment possibilities. Some brokers do not charge for advice explicitly, but you can be sure that the fee is included in the higher brokerage they get from you each time you buy or sell shares.

Fees also vary according to the service you want. If you go for high-end services like ongoing portfolio management, you'll likely be charged ongoing management fees. If you only have small money to invest, it may be difficult to find a full-service broker accepting you as client.

You can find a broker to buy or sell shares by phone or online. For full service broker you have to move beyond the phone and go through an elaborate contract. Both full-service and online discount brokers can offer you a range of online tools charting portfolio management, and access to live market data.

It is best to take a rational position in choosing a broker. Compare the benefits and costs associated with different brokers and go for the one who generates maximum expected net benefit based on plausible turns of events over a relatively longer period of time.

Read a broker's Financial Services Guide (FSG) before your first meeting. Services offered can vary widely. Most online brokers offer shares, options and warrant trading but many of them don't trade futures, margins or international shares. Work out what services you really need. Do not pay for a service that you never want like trading international shares.

Choose a broker who offers automatically updated data known as real-time/dynamic market data, or at least instant (but not automatically updated) data known as live data. Some only offer 20-minute delayed updates.

Some discount brokers will charge a fee to access extra services like interactive charting or independent research. Work out the maximum expected net benefit for exactly the services you need. This is the best way to choose your broker.

investments & trading by J. Foley

Tuesday, April 18, 2006

How To Be a Successful Day Trader

investments & trading
How to be a successful day trader? by J. Foley
For many people day trading is too intimidating a thing. That day trading is not everyone's cup of tea is true. But many just stay away from it due to the misconceptions they have regarding day trade. But if they had known better they might have considered investing more time and money on day trade. Because although the risks are high the rewards are also great. And the emotions you go through during a successful trade are rare. 
It is a fact that not everyone can be a day trader. One needs  to have a specific set of skills and a few character traits to be successful at this. One needs to have an analytical mind, he needs to be good at problem solving and should have the patience to learn from his mistakes. He should also know how to use  his profits wisely and how to bounce back after a serious loss. Following are few of these basic character traits that we discuss in detail. 
Confidence: If you plan to be a successful day trader you have to be confident. There are no two ways about it. Day trading means that you have to decide, and decide quickly. If you are not sure about your decisions, if you are plagued by self-doubt chances are you might miss out on the best trading opportunities of the day. You have to believe in your decisions and go ahead with them. And if you are generally an indecisive person it would be advisable for you to try out a different career.
 
Discipline: To be successful at day trading you need to have the discipline to make a plan for yourself and then stick to it. When you are dealing with stocks there is always the possibility that you may win big or lose big. But if you are a disciplined person you would know what your limits are and when you should stop. You would never let the emotions of greed and fear take control of you. Instead you should have the ability to leave the market as soon as you have reached your objective.
Decisiveness: People good at day trading never hesitate. They trade at the first opportunity they think is right. Being tentative would mean losing out on the best trading opportunities of the day.
 
Passion: Day trading generally involves a lot of analysis and understanding of the market. For which you have to closely follow the daily business news, you have to interpret various charts, crunch numbers and make sense of the quote screens. And you have to do all this in an extremely fast environment. So for someone who doesn't feel that passion for it, things can get extremely difficult.
 
Dealing with failures: When you start day trading you should get one thing clear in your mind – you can never expect to win every time here. You will lose from time to time. The only thing you have to make sure is that you win more than you lose over a period of time. If you are able to accept this fact then you can go ahead and be a day trader, but if you are terrified about losing then it's better for you not to venture in the markets.
 
Concentration: While you are at day trading you have to assimilate a lot of data which you have to analyze, arrive at decisions and then carry out them. And all this happens in real quick time. So you got to be able to concentrate and concentrate hard. You should have the stamina to do so throughout a day and if you are good at avoiding distractions you will make a good day trader.

investments & trading by J. Foley

Friday, April 14, 2006

Forex Trading Tips

investments & trading
Forex Trading Tips By J. Foley

Forex trading is buying and selling the foreign currencies of different countries. It has a similarity with stock trading in that the foreign currencies behave like shares of the currency institutions of the countries. Like stock prices, these also move up and down with time-dependent volatility.

It is possible to buy a currency low, buy long and sell short another high currency. It needs meticulous pursuit of the exchange rates of currencies you want to trade. One needs to keep up a continuous scrutiny of the trajectory every particular currency vis-à-vis the other currencies, pair-wise.

It often has leverage enough to induce highly profitable arbitrage and hedging. Each internationally accepted currency has a market and the Forex market is the superset of all these markets taken together. Traders make their own basket or inventory of Forex and trade according to their anticipation of movements.

For example, the primary Forex statistics for the euro in relation to the German mark prior to 1999 reveals a lot of interesting features and profit potential of dollar or German Mark in relation the euro.
From the evidence it appears somewhat surprisingly that the euro lost ground against the US dollar in Forex spot trading, and in quite a few dimensions did not match the international transaction role of the German mark.

The euro changed the structure of the Forex market and increased market transparency through currency elimination. This exposed the dealers to higher inventory risks as their respective inventory imbalances became exposed easily to other dealers.

The increased inventory costs were recovered by the dealers in the euro markets through higher spreads. This made the euro a less attractive transaction medium than the German mark. This shows how trading in Forex involves both risk and profit potentials.

Earlier, the forex market was the trading ground of millionaires and billionaires only. Now with the introduction of online Forex trading, the average person is able to create amazingly large amounts of wealth from safe online investments in foreign currencies. Online forex trading is nothing but Forex trading transacted through internet links and email through a competent broker.

No technical know how, big "risk", or large investment, hard work is needed. Online forex trading investment lets you use your dollar to control an investment two hundred times as high, $1 to control an investment worth $200, $1000 to control $200,000 and so on and on worth of investment.

Through online forex trading, you are now able to invest your money to fetch more money for you like the millionaires and billionaires, instead of you laboring hard for your money.

Online Forex trading is real fun. It is often the most striking and profitable internet investing opportunity because you can do it from your PC or connected laptop from any place in any country in the world.
You don't need any stocks or big inventory in this trading. In online Forex trading, all you do is, just open an account with one of the brokers with as little as $300 or so. Of course, the larger your initial investment, the faster you stand to gain wealth.

Then you simply have to follow simple instructions to purchase and sell the currencies. You buy when the price of the currency is low. Within a few seconds or minutes, the price may go up, and you may sell it and make a profit. This way, by just buying, selling and trading these foreign currencies for about 3 or 4 hrs in a day, you can easily make $500-$1000!

Forex trading is easy money. Especially with the introduction of online trading, it is virtually a continuous upward money spiral for any alert person with a competent broker.

investments & trading by J. Foley

Sunday, April 09, 2006

Day trading strategies - What Works ?

investments & trading
Day Trading Strategies – What Works? By J. Foley

Day trading is a trading strategy where investors buy and sell a stock in the same trading day. That is, you will not hold a stock overnight because you are always in and out of positions within the day.

Day traders buy and sell stocks very fast over the day in the hope that their stocks will continue climbing or falling in value for the short duration during which they own the stock, enabling them to grab quick profits. Day traders usually work with borrowed money, with the expectation that they will reap higher profits through leverage, and at the same time they bear the risk of greater losses too.

To look for tips on what works, you have to look into the negatives and take precautions against them.

As day traders are usually the 'fast buck' type of guys, they often have a tendency to get swayed by tall talks from advertisers. This is where serious pitfalls keep looming. It is never a wise thing to believe in advertising claims that promise quick and sure profits from day trading.

Before starting day trading with a firm, you must gather hard statistics on how many clients have actually lost or made profits dealing with them. If the firm does not have this information, or refuses to give it to you, take a pause because you are in for extreme risks through ignorance.

Secondly, some websites claim to have earned good money from day traders by providing them hot tips and stock picks for a fee. Once again, don't take them at face value. Sounds that trumpet easy profits from day trading are often disastrously misleading. Check out these sources thoroughly before you take them on your side if you will.

It will be wise to check out day trading firms with your state securities regulator. As it is with all broker-dealers, day trading firms have to register with the SEC and the states in which they operate. Confirm the registration of the firms under your focus by calling your state securities regulator. Find out whether the firms have records of troubles with regulators or their customers.

Any day trader should be able to read ahead how much they need to make to cover expenses and break even. As this type of business is extremely risky, most investors often lack the time, wealth or the endurance necessary for making money along this line. Anybody intending to plunge in has to be prepared from the very beginning.

Day traders have to pay for the computer time and for the tips and advice from the day trading firms. The firms start earning the moment you enter but you are likely to end up losing unless you yourself watch out against the risks.

You may want to ride the momentum of the stock and get out of the stock before it changes course. But you do not know for certain how the stock will move. It is a freaky thing, and you have to be on continuous alert. It is often better to pick a mixed strategy of waiting till your earning increases by a certain multiple of your investment, and terminating whenever a reverse turn starts in the stock price.
To move out within seconds is another strategy you may follow, though even that short interval may generate huge amounts of money had you chosen the right stocks and the right length of interval. The best way to make it work is to work everything out for yourself in the painstaking old-fashioned way, instead of putting your sole trust in the day trading firms.

investments & trading by J. Foley